Economic output would shrink by $2 trillion according to NFIB study
Washington, DC (October 18, 2016) – Raising the federal minimum wage to $12 per hour could reduce private sector employment by 1.8 million jobs over 10 years and cut economic output by $2 trillion, according to a new report released today by the National Federation of Independent Business (NFIB).
“Both candidates for president have expressed support for raising the minimum wage, and it’s important for voters to understand the consequences,” said NFIB President and CEO Juanita Duggan. “Raising the minimum wage to $12, without any connection to the economy or business conditions, has the potential to devastate small businesses and wipe out nearly two million jobs.”
Duggan pointed out that neither Donald Trump nor Secretary Clinton has been asked about raising the minimum wage in any of the presidential debates so far. The candidates will meet tomorrow night for their final nationally televised exchange before the election on November 8th.
“This is a very important issue that deserves more serious treatment from all of the candidates running for federal office this year,” she said.
The NFIB report assumes an increase in the federal minimum wage to $12 per hour phased in by 2019, and then increased every year thereafter based on inflation. Secretary Clinton has already called for a $12 minimum wage. Mr. Trump has also publicly said that he would support a federal increase, although he hasn’t been specific on how high the rate should be raised.
According to the Bureau of Labor Statistics, 3.3 percent of all hourly workers currently earn the federal minimum wage of $7.25. Raising the wage to $12 would increase the cost of labor for those workers by 65 percent.
Small businesses would be affected disproportionately. According to the NFIB research, 57 percent of the jobs that would disappear would come from small businesses.
“Small businesses rely heavily on entry-level, hourly employees. They will bear the brunt of the cost, and their employees will pay the price in the form of fewer jobs and fewer job opportunities,” said Duggan.
Raising the minimum wage to $12 per hour would also limit economic output, according to the research. Fewer jobs mean fewer workers producing goods and services. Economic output would be lower by trillions of dollars as a result of a $12 minimum wage, the study predicts.
“Economic growth has been dismally low for years,” said Duggan. “A 65-percent increase in labor costs for small employers could push the economy over the edge. This is a very big issue, and it deserves a much brighter spotlight before voters go to the polls next month.”