Tags: minimum | wage | economy | workers

Minimum-Wage Increase Too Insignificant to Help Economy

By    |   Friday, 07 Nov 2014 08:06 AM

Ongoing debate about raising the minimum wage is a diversion from real economic solutions. Let's start by assuming the proponents are correct and the minimum wage should immediately be increased to $10.10 an hour.

Currently, the Bureau of Labor Statistics estimates there are 3.3 million minimum-wage workers. Assuming they each work full time, giving each of them a raise from $7.25 an hour would shift $18.8 billion from small business owners to their employees. This represents 0.11 percent of the U.S. economy. This is an overly optimistic amount since many do not work full time.

At least some of the employees receiving raises would see a reduction in government benefits. This means some of the increased wages would be needed to offset the loss of benefits. That portion of the minimum wage increase would not have any impact on economic growth.

At least some small business owners would have to increase prices to pay the higher wages. This would also be a drag on the economy. Price increases can take on a life of their own and the full impact of higher prices can never be determined in advance. Higher prices to fund higher wages could end up hurting the economy, and low-wage workers, more than it helps.

These factors are hidden from the debate as proponents argue for higher wages. It is a typical economic debate where the unknown risks are ignored and the potential benefits are oversold.

In 2009, President Obama said a $1 trillion stimulus was needed to boost economic growth. It's difficult to see how shifting less than $20 billion in private-sector funds to low-wage workers could have an impact when even $1 trillion failed to deliver significant results.

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MichaelCarr
Ongoing debate about raising the minimum wage is a diversion from real economic solutions. Let's start by assuming the proponents are correct and the minimum wage should immediately be increased to $10.10 an hour.
minimum, wage, economy, workers
283
2014-06-07
Friday, 07 Nov 2014 08:06 AM
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