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June 3 2014

Minimum Wage Hike Feels Good Now, But Will Lead to Long-Term Pain

Forbes
Sabrina Schaeffer

Monday the Seattle City Council unanimously agreed to increase the minimum wage to $15/hour, a 61 percent increase over what was already the highest state minimum wage in the country.

Certainly a raise of this magnitude sounds compassionate. News stories profiled the likes of Somali immigrants and working mothers who were excited about this wage hike.  But while boosting the minimum wage is promoted as a way to alleviate poverty and makes many of us “feel good,” it’s likely to backfire on the very workers it’s intended to help.

Of course we all want to solve the very real problem of people living on the brink – especially unmarried mothers who are at greater risk of financial insecurity. But the real reason people live in poverty is not because they’re forced into low-paying jobs at fast-food restaurants or as home health care aids. It’s because they don’t have those job opportunities. Those living in poverty too often don’t have access to consistent, paid employment, which provides both income and a first step up the economic ladder.  And setting the wage higher in Seattle will simply add to that problem.

The Bureau of Labor Statistics finds that among workers who are 16 and older living in poverty, less than 9 percent had full time work year round. Similarly 67 percent did not work at all. And we know that less than a quarter of minimum wage earners live in households below the poverty line. The reason is because more than half of minimum wage earners are young – between 16 and 24 years of age – and most are also enrolled in school.

Finally, minimum wage earners are generally not primary breadwinners. They may be students trying to make some extra spending money or a spouse with a part-time job so she can also be home to care for her children. This isn’t to diminish the need many families have for more resources; but too often lawmakers make it sound as if minimum wage earners are the sole supporters of a family when it simply isn’t the case.

But these are the very workers who are likely to suffer under this new wage hike. Too often we forget that minimum wage jobs are entry-level positions, which are worth more than simply the take-home pay they provide. Jobs at fast food restaurants or working in home-care assistance provide valuable work experience that can help individuals start a career, learn basic employment skills, and ultimately earn more. And the reality is that most minimum wage workers receive pay raises within one year.

Seattle has now made it illegal for an employer to offer someone a job for less than $15/hour, even if the individual’s education or work experience doesn’t warrant more, and even if it means putting the business at risk. The result is employers will simply consolidate work, many employees will be asked to do more for less, and even more workers will find that they are priced out of the labor market altogether.

If we really want to help the workers of Seattle – and across the country – we need to focus on sensible policies to grow the economy and create plentiful job opportunities. We ought to reduce the tax burden on businesses so they can invest more in hiring new workers; rein in burdensome regulations like mandated leave policies and health care mandates that eat up valuable resources and limit the ability for businesses to expand; allow the market rather than government to determine our energy supply so businesses have access to more affordable energy; and encourage state legislatures to pass educational freedom bills so more Americans can have an opportunity at self-improvement. These are just a few ways government can truly help working Americans.

Raising the minimum wage might feel good in the short term, but it’s apt to lead to long-term pain. Far better for states and communities to focus on targeted assistance programs to help those who are truly in need and then get out of the way to ensure greater economic growth and job creation for all.

 

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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