Our Views: Raising minimum wage would do more harm than good
Gov. Scott Walker says he isn't focused on raising the state's minimum wage but rather on boosting wages for family-supporting jobs.
That's good to hear, particularly when a bill introduced in January would push Wisconsin's minimum from $7.25 to $10.10 per hour and when President Obama approved a $10.10 minimum wage for government contractors and wants to spread that to all workers.
Much evidence suggests raising the minimum harms rather than helps the poor. A new survey shows that while 53 percent of Wisconsinites favor the increase, support drops to 39 percent when they learn it would cost the state 27,000 jobs.
The Tarrance Group of Virginia conducted that survey for the Wisconsin Manufacturers & Commerce. The 27,000 figure comes from a study by the nonprofit Employment Policies Institute and is consistent with findings of a recent Congressional Budget Office report that predicted 500,000 jobs lost nationwide if the minimum rose that much.
When its costs rise, a company can get creative. They might be the financial incentive that business needs to further automate work.
“The fact is, a small business can't just come up with the money to pay for a mandated wage increase out of thin air,” Ed Lump, president and CEO of the Wisconsin Restaurant Association, said at a news conference last week with WMC and the Wisconsin Grocers Association. “The increased wages can really only come from two places—price increases and cuts in employee hours and jobs. In this economy, the potential for price increases is very limited, so hours will be cut and jobs will be lost. It's that simple.”
Calls for raising the minimum make great political theater. Democratic gubernatorial candidate Mary Burke and her party's legislators are clamoring for the boost. How can you claim to care about job creation when you're willing to sacrifice so many jobs?
Sure, raising the minimum would lift some people out of poverty, but it's a small minority. Economists at the Federal Reserve Board and the University of California-Irvine say most empirical research shows increasing the minimum reduces employment for the least skilled while having little to no effect on poverty rates.
Boosting the minimum encourages more people to enter the labor market. Employers will choose skilled applicants over those with few skills.
It's a myth that employees are stuck in minimum-wage jobs and need legislation to earn raises. These are starter jobs. Anyone with gumption, ambition and intelligence won't stay at such a wage long. A study shows the vast majority of workers who start at the minimum get raises within a year.
Besides, 28 states raised their minimums between 2003 and 2007, and Cornell and American University economists found no associated reductions in poverty. The Congressional Budget Office says only 19 percent of benefits from a minimum wage hike would help households in poverty. Most gains go to households above the poverty line. Households already earning more than three times the poverty level capture 29 percent of total gains. Census Bureau data show the average family income of a beneficiary from the last federal increase was more than $47,000 a year.
Wisconsin has worked hard to improve its business climate and position itself for job growth. Still, stories or rumors about a business closing or idling workers are frequent. Soaring heating costs this winter have left more businesses teetering on the brink.
Raising the minimum would deal a similar blow to job prospects for low-skill workers.