March 20 2014
Yesterday a fight broke out on Twitter between White House Spokesman Jay Carney and top aides to Republican House Leadership over raising the minimum wage.
In a heated 140-character back and forth, Carney tried to get the House aides on the record as saying Republican leaders like Eric Cantor support some level of higher minimum wage. The Republicans relented in trying to get the White House to acknowledge data about the negative effects of a minimum wage hike on the labor market. But it’s a debate that rages on.
.@rorycooper What does Rep. Cantor think the min wage should be? $5.15, as in 2007 when he voted NO to raising it? Lower? Zero?— Jay Carney (EOP) (@PressSec) March 19, 2014
.@PressSec Thanks for conceding on the surveys. We'd like to restore 40 hr work week that Obamacare cuts by 25% (coincidentally your MW ask)— Rory Cooper (@rorycooper) March 19, 2014
We’ve examined what happens when the minimum wage rises, but a new survey of over 1,200 business owners and HR professionals nationwide (20 percent of whom reported paying their employees the current minimum wage) confirms what economic principle and history have told us: Employers will lay off workers in response to a forced minimum wage hike because their labor costs rise.
According to the survey, if the minimum wage was raised to the $10.10 an hour level that President Obama and Congressional Democrats have been pushing, 38 percent of employers who currently pay employees minimum wage say that they would have to let some employees go to cover the cost. Among the same group, 54 percent say they would reduce hiring, and 65 percent say they would raise prices on their goods and services.
Employers who don’t pay minimum wage will also react. Of those who do not currently pay the minimum wage, 19 percent say they would lay off employees, 39 percent would reduce hiring, and 51 percent would raise prices.
The survey findings reveal that costs can increase even for companies that don’t currently pay the minimum wage because it puts pressure on employers that pay minimum wage and those who don’t. This unintended consequence argument is one we don’t hear often. However, it’s not surprising that those who earn slightly more than minimum wage will seek pay raises to ensure that they continue to make more than minimum wage when it rises.
The CEO of Express Employment Professionals which conducted the survey noted:
“There’s been a lot of debate and speculation about the impact of a minimum wage increase on job creation,” said Bob Funk, CEO of Express, and a former chairman of the Federal Reserve Bank of Kansas City. “At Express, we decided to go directly to the employers who make those decisions to find out what a minimum wage increase to $10.10 would mean for them specifically and for the economy in general.
“As with any such policy change, there are upsides and downsides. But based on this survey, there’s no denying that raising the minimum wage will result in layoffs, reduced hiring, and higher prices at a large chunk of American companies. How severe will those effects be? That remains to be seen, but policymakers will certainly want to be mindful of this reality as they legislate.”
Debate about policies is healthy and even funny when it happens through just 140 characters.
What’s not so comical is the fact that policymakers in Washington will ignore economic hardship to gain brownie points with their base. Raising the minimum wage is a strategy progressives are using to energize their political base in advance of the 2014 midterm elections. However, the resulting layoffs and reductions in hiring are risks that are too costly for American workers to pay now or ever.