The ups and downs of raising hourly wages
If there’s one thing everyone seems to want or need more of, it’s money.
So, raising the minimum wage might seem like a favorable solution.
However, a closer look into President Barack Obama’s proposed federal minimum wage hike from $7.25 to $10.10 reveals cause for concern for both state and federal lawmakers.
Assemblyman Andy Goodell, R-Jamestown, recently wrote a letter to Hon. Peter Rivera, commissioner of labor, and made two arguments against the proposal.
First, he said studies performed at both the University of California at Irvine and the Board of Governors of the Federal Reserve System predicted negative impacts of raising the minimum wage.
Second, the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger unemployment effects, Goodell said, adding that the studies showed a loss of more than 20,000 jobs in New York state.
“As you raise the price of labor, the amount of people who can afford to buy that labor goes down and you’ll see a significant reduction in overall employment,” Goodell said. “Raising the cost of labor results in stores looking at self-serve check outs and things of that nature. When labor is less expensive, it doesn’t make financial sense to do so.”
Rather than raising the minimum wage, New York needs to maintain a competitive tax structure, Goodell said.
“We are wrestling with this right now after ConAgra closed two major companies and moved them to another state where they believe that the cost of doing business is lower,” he added. “If you want more people with lower skills to have more jobs, you have to keep the entry level wage rates competitive as well as maintain a competitive tax structure.”
Goodell said changes within the state budget this year will benefit the tax climate, pushing New York up on the list of business-friendly states.
Proponents of raising the minimum wage believe it would boost the economy.
A February report from the Congressional Budget Office stated that increasing the minimum wage would have two principal effects on low-wage workers.
“Most of them would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold,” stated the report. “But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially and the share of low-wage workers who were employed would probably fall slightly.”
However, reductions in real income would affect business owners and consumers facing higher prices if the minimum wage was raised, the report found.
According to James Sherk, senior policy analyst in labor economics for The Heritage Foundation, supporters of the minimum wage intend it to lift low-income families out of poverty.
“Unfortunately, despite these good intentions, the minimum wage has proved ineffective at doing so,” Sherk said. “Indeed, it often holds back many of the workers its proponents want to help. Higher minimum wages both reduce overall employment and encourage relatively affluent workers to enter the labor force. Minimum wage increases often lead to employers replacing disadvantaged adults who need a job with suburban teenagers who do not.”