Yet another study has found that increasing the minimum wage increases unemployment.
The Empire Center for Public Policy and the American Action Forum think tanks have studied New York State’s proposed $15 an hour minimum wage, and concluded it could cost at least 200,000 jobs.
The report notes that the federal minimum wage has been set at $7.25 an hour since July 2009. In recent years, some American policymakers and labor advocates have argued for further increases in the wage at the federal, state, and local levels. On the federal level, the Obama administration and top congressional Democrats have rallied behind a proposal to raise the federal minimum to $12 per hour by 2020. Under another proposal championed by, among others, Sen. Bernie Sanders, the federal minimum would rise to $15 per hour, a level now in the process of being implemented in Seattle and a handful of other localities.
“Our report shows that a massive increase in the minimum wage would actually hurt the very low-wage, low-skill workers it is supposed to help,” said E.J. McMahon, president of the Empire Center. “The impact on job creation and employment opportunities would be substantial in every region of New York, especially upstate.”
“Pay increases for millions will come at the expense of lost employment opportunities for hundreds of thousands of people,” McMahon said. “That’s an unacceptably high price to pay for a policy that will significantly disrupt labor markets and business conditions throughout the state.”
The report notes the findings are consistent with the preponderance of economic research, which has long indicated that higher minimum wages are associated with a decline in employment.
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The American Legislative Exchange Council reached a similar conclusion.
“Increasing the minimum wage may seem like a tool to raise low-income workers out of poverty, but it inevitably hurts the very people policymakers intend to help. When the government imposes a higher minimum wage, employers face higher labor costs and are forced to respond by decreasing other production expenses. As these employers cope with the increased costs of a mandated wage raise, they often respond by cutting the jobs available to less-experienced and less-educated employees. The result is that these individuals, who already have few employment options, find it more difficult to get a job.
“Increasing the minimum wage benefits those who already have a job at the expense of the unemployed. However, even those workers who see an increase to their wages may not feel the full benefit of higher pay, as businesses raise prices to compensate for the increase in labor costs. In particular, food prices tend to increase when the minimum wage is increased, exacerbating the problem for those who cannot find work and offsetting gains for those who can. States considering raising their minimum wage risk alienating business and harming their citizens.”
While raising the minimum wage is not a viable tool to address the problem of workers receiving wages that don’t allow for fiscal stability, the problems facing those workers remains. A more viable solution would be for governments on the federal, state and local levels to remove the numerous impediments to an expansion of economic activity, including high taxes and excessive regulations. This would encourage business growth, increasing demand for workers, and the competition for those workers would result in markedly high wages.