Tags: Amadeo | minimum wage | poverty | wages

About.com's Amadeo to Moneynews: Raising Minimum Wage Could Increase Poverty

By    |   Friday, 27 Sep 2013 01:02 PM

Raising the minimum wage, now $7.25 an hour, could actually worsen the poverty situation, says Kimberly Amadeo, economic analyst for About.com.

The problem is that small businesses don't have room to raise their prices to pay for higher wages, she told Newsmax TV in an exclusive interview. And large businesses are unwilling to raise their prices. So businesses across the board would cut back on jobs, Amadeo says.

A big company like McDonald's, where protesting workers seek $15 an hour, could easily raise its prices, Amadeo says.

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"What it would mean for McDonald's if they agreed to this is they would change their Dollar Menu to $1.17, and they would change the price of a Big Mac from $3.99 to $4.67," she said.

Editor’s Note: Weird Trick Adds $1,000 to Your Social Security Checks

"I don't know about you, but if I were asked, I would be willing to pay $1.17 instead of $1, so the person behind the counter doesn't have to try to live on $15,000 a year."

McDonald's is reluctant to raise wages, because it doesn't want to see its profit margins slide, Amadeo says.

"And they won't want to say, well, now our Dollar Menu's $1.17, because that's not good marketing. They're trying to compete with dollar stores and so forth."

So what would McDonald's do if the minimum wage increased?

"They would let people go, and it would hurt the workers," Amadeo said. But, "most Americans are decent, and they would be just as happy to pay $1.17. If McDonald's did a survey of their customers, they'd be surprised at what they would find."

At Wal-Mart, workers want $12 an hour, or $25,000 a year, Amadeo says. "But here you have the same problem," she said.

"Wal-Mart, just like McDonald's, prides itself on low prices. And, particularly, with all of the competition from Dollar Tree and other dollar stores, they've really got to watch their margins to stay in business."

So Wal-Mart too would lay off workers if the minimum wage was boosted, Amadeo says.

Job seekers are finding out just how tough the labor market is, she says. "The long term unemployment rate is really turning into kind of a structural unemployment problem where people are not getting the skills that they need to be able to get back into the workforce."

Income inequality is another major problem Amadeo says. "If the minimum wage had kept pace with inflation over the last 40 years, it would be $10.43 instead of $7.25," she said.

"But if it had kept pace with executive pay, it would be $23."

Editor’s Note: Weird Trick Adds $1,000 to Your Social Security Checks

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Raising the minimum wage, now $7.25 an hour, could actually worsen the poverty situation, says Kimberly Amadeo, economic analyst for About.com.
Amadeo,minimum wage,poverty,wages
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2013-02-27
Friday, 27 Sep 2013 01:02 PM
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