Politicians Push Minimum Wage Hikes, But Data Paints Different Story

Date: August 04, 2016 Last Edit: August 17, 2016

As Presidential Candidates Talk Wage Boosts, Studies Show Increases Do Little For Workers, Raise Business Costs

As the 2016 presidential campaign heats up, politicians are capitalizing on issues that will draw voters to the polls, such as an increase of the minimum wage. Forbes contributor Jeffrey Dorman noted that Democratic presidential nominee Hillary Clinton is pushing for a large minimum wage hike, possibly as much as $15 per hour, while Republican presidential nominee Donald Trump recently suggested increasing the minimum wage to $10 per hour.

While presidential candidates are seeking to lure voters with attractive headlines like “minimum wage increase,” data shows the ill effects of wage increases on both employees and employers. As Dorman explained in his column, Bureau of Labor Statistics data shows just 1.1% of workers over 25 are minimum wage earners, and Congressional Budget Office data indicates just “19 percent of the benefits from raising the minimum wage to $10 per hour would go to households in poverty.” In a Washington Times op-ed, Heritage Foundation Founder Ed Feulner pointed out that the minimum wage is designed for entry-level workers typically lacking in an extensive resume or real-world job skills, meaning “employers are taking a chance on them.” Employers will have less incentive to gamble on entry-level job seekers the higher the potential costs of wages. Additionally, boosting the minimum wage to $15 per hour would actually mean an increase to $18.61 per hour for the employer – “$15 for the employee, plus 19 cents in unemployment insurance taxes, $1.15 in payroll taxes, and $2.27 in Obamacare penalties.”

Taking a look at real-world implications of a recent minimum wage hike, the Washington Post reported that a new study commissioned by the City of Seattle examining its 2015 minimum wage increase to $11 per hour found that “the actual benefits to workers might have been minimal.” Although minimum wage workers saw their hourly wages rise from around $9.96 to $11.14 on average, the free market of Seattle’s booming economy was poised to incentivize much of this increase already. Additionally, “although workers were earning more, fewer of them had a job than would have without an increase,” and workers who were working “had fewer hours than they would have without the wage hike.” Depending on the method of calculation, the economists found that “workers’ earnings increased by $5.54 a week on average because of the minimum wage,” or actually fell up to “$5.22 a week.”

What This Means For Small Businesses

Small business owners have seen labor costs soar. Additional pressures on labor costs would force many small business owners to cut hours, reduce staff, or freeze hiring. As NFIB Media and Communications Director Jack Mozloom explained to The Hill, “Business owners that are required to pay a higher hourly wage will have to find other ways to offset that expenses. Sometimes that results in fewer jobs.”

Additional Reading

NFIB previously noted evidence of the negative effects of wage hikes in cities across the US.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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