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Raising Minimum Wage Will Hurt Workers

Date: June 04, 2014

June 3, 2014, Harrisburg, Pa – As many gather at the capitol today rallying for a higher minimum wage, most don’t understand the damage such legislation will do to both workers and small businesses. A coalition of small businesses groups and supporters of a prosperous Pennsylvania economy caution against a move that could end in the loss of thousands of jobs. The coalition includes: NFIB, PMA, PA Food Merchants Association, PA Chamber, PA Restaurant and Lodging Association, PA Retailers Association and the Commonwealth Foundation.

A recent National Federation of Independent Business Research Foundation report projects the effect that three Pennsylvania minimum wage bills will have on jobs and economic activity in the commonwealth. The findings forecast the loss of as many as 28,000 to 119,000 jobs over a 10-year period when the wage is increased to $8.75 or $9.00, as those increases are tied to cost-of-living adjustments. The report uses a widely accepted regional economic model that is also used by the federal government, local governments and universities created by REMI, Inc. (see www.remi.com). Earlier this year a Congressional Budget Office report on raising the national minimum wage to $10.10 projected 500,000 jobs lost in the U.S.

Many small business owners operate on such a thin profit margin that an increase will cause them to hire less and use technology to replace some current labor costs. The study reveals that more than half of the jobs would disappear from the small-business sector in Pennsylvania. This likely would happen because at the higher minimum wage rate small firms ultimately will hire a more skilled employee rather than pay higher wages to someone with no skills and no experience.

Employers also are likely to absorb the higher cost of labor by cutting hours and reducing hiring. Companies may invest in technology to replace low level jobs. It will become even harder for the unemployed or teenagers to find an entry level job. Business owners may also be forced to raise prices which will negatively affect all consumers, especially the poor.

The minimum wage of $7.25 in many industries is considered a starting wage, primarily for youth and training purposes. A 2012 report from the Bureau of Labor Statistics shows people under age 25 fill just over half of the minimum wage jobs and their average household income is about $66,000 a year. Of those over 25, 75% have household incomes above the poverty level. Only 16% of minimum wage workers are sole income earners with dependents.

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