Increases punish low-skilled workers and do nothing to alleviate poverty, says NFIB
LINCOLN, Neb., Feb. 11, 2019—It is the ultimate good-intention-harmful-reality piece of public policy afflicting legislatures across the country, and this afternoon a committee of the Nebraska Legislature heard why.
Testifying before the Business and Labor Committee against two measures, Legislative Bills 383 and 400, NFIB’s Nebraska State Director Bob Hallstrom reminded committee senators that, “When state government tells small business owners that they must raise wages, the small business owner has few choices. He or she can either pass on these increased costs through higher prices, reduced wages, or the elimination of jobs. The bottom line is that small business owners must find the resources to offset these wage increases.”
Hallstrom urged the committee to reject Legislative Bill 383, which calls for annual adjustments in the state’s minimum-wage rate to reflect changes in the Consumer Price Index for the most recent five-year period.
“The losers are those workers who may be disadvantaged in terms of marketable skills who lose their jobs and those who may not be hired in the first place … Increases in the minimum wage in the past have increased, rather than reduced poverty.”
A report by economist David Neumark for the Federal Reserve Bank in San Francisco supports Hallstrom’s point. Neumark writes, “… evidence simply does not provide a strong case for using minimum wages to reduce poverty. Similarly, recent research does not provide conclusive evidence that a higher minimum reduces government spending on welfare and other programs to support poor families, with the possible exception of food stamps.”
Hallstrom also noted in his testimony that, “The proposed increase won’t just serve to raise the entry-level wage costs for small businesses. It will raise the workers’ compensation costs of small businesses, their unemployment insurance costs, and Social Security and Medicare taxes.”
The same detriment to jobs and opportunities is contained in Legislative Bill 400, which would raise the minimum wage rate for tipped employees. “Tipped employees in most instances earn far more than the general minimum wage when wages and tips are combined,” testified Hallstrom before the same committee. “We do not believe that any changes in the minimum cash wage are warranted in the absence of similar changes in the federal minimum wage, for such individuals.”
According to a U.S. Bureau of Labor Statistics report, Characteristics of the Minimum Wage Worker, “ … workers with wages at or below the federal minimum made up 2.3 percent of all hourly paid workers. Minimum wage workers tend to be young. Although workers under age 25 represented only about one-fifth of hourly paid workers, they made up about half of those paid the federal minimum wage or less. Among employed teenagers (ages 16 to 19) paid by the hour, about 8 percent earned the minimum wage or less, compared with about 1 percent of workers age 25 and older.”
Reports Michael Saltsman of the Employment Policies Institute, “Multiple studies confirm that a majority of minimum wage employees–who are disproportionately young and less-educated–earn a raise within one to 12 months on the job.”
NFIB is the state’s leading small-business association. To learn more, visit www.nfib.com/NE and follow @NFIB_NE on Twitter.
For more than 75 years, NFIB has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. NFIB is nonprofit, nonpartisan, and member-driven. Since our founding in 1943, NFIB has been exclusively dedicated to small and independent businesses and remains so today. For more information, please visit nfib.com.
National Federation of Independent Business/Nebraska
233 South 13th St., Suite 700
Lincoln, NE 68501-0008