In an op-ed for the Las Vegas Sun, President Obama gave his argument for supporting the proposed minimum wage increase, which would increase the federal minimum wage rate by nearly 40% from the current rate of $7.25/hr to $10.10/hr.
In the article, the President made claims that are false. According to him, a full-time employee making $7.25/hr would be living in poverty. By the federal government’s own poverty threshold, a single person household working 40 hours a week at minimum wage is making nearly 20% more than the poverty threshold.
Second is the effects that this would have on education. A teacher in Mississippi who graduated with a bachelor’s degree will be earning an insignificant 15% more than an unskilled employee working as a drive-thru clerk or Quik Stop cashier. With this law, there will be convicted rapists and even murderers (there are thousands of convicted rapists and murderers released from prison each year), many of whom have no skill at all, earning nearly as much as the people who educate our children. While it is true that most minimum-wage workers are not convicted felons, it is a fact, however unpleasant it may be, that a vast majority of them are unskilled workers.
What incentive is there for someone to go to college? The average bachelor’s degree costs a student over $30,000 and four years of their lives. The only way people are going to get out of poverty is to become a skilled worker rather than an unskilled one, and that is done through education, not minimum wage increases. This legislation removes the incentive to go to college. If all someone had to do to raise a family is flip burgers or wash dishes, those jobs would be in much higher demand. But there’s a reason employers don’t want to pay unskilled workers wages as high as skilled workers.
Third, Obama is ignoring the harm done to the very same low-wage workers he wishes to help. Imagine a customer support call-center with 20 full-time employees, a set-up that many companies have today. This legislation will cause the business to spend over $100,000 more per year to keep all of them employed at the same hours. A smart business owner will immediately find a way to get that money back, and that means getting rid of 25% of his call center staff. Even then, it will cost them more to pay 15 employees the proposed rate than it would cost to pay 20 employees the current rate.
Also, those 5 workers would then apply for and receive the never-ending unemployment benefits, costing the federal government even more money, which it now can’t afford due to ObamaCare. The only other option the owner would have is to increase his prices, thereby causing inflation and rendering the increase useless.
Finally, why not take a look at history? The largest increase in the federal minimum wage in the last 25 years was 12%, during the Bush administration. I’m sure Republicans in Congress are far more willing to at least consider a regular increase, as the average increase since 1970 has been about 10%. The currently proposed 40% increase is ridiculous, and as has been proven multiple times would actually harm the economy.
The nonpartisan Congressional Budget Office released their study of what the proposed legislation would do to employment, and their median estimate is a loss of 500,000 jobs, and possibly up to a million. The loss of jobs would then result in less overall taxes paid to the federal government and higher benefit program costs. They also estimated that such a legislation would move at most 2% of the people currently living in poverty above the poverty line. When a 40% increase in the minimum wage only helps remove 2% of those above poverty, it becomes clear that minimum wage increases are not the solution to reducing poverty.