Tags: Sawhill | minimum | wage | jobs

Brookings Institution's Sawhill: Americans Need More Than a Minimum Wage Hike

By    |   Wednesday, 26 February 2014 12:28 PM

Raising the minimum wage is the subject of extensive research and political wrangling, but workers need more than a minimum wage hike to succeed in today's labor market, argues Brookings Institution senior fellow Isabel Sawhill.

The Obama administration's proposal to raise the minimum wage from $7.25 to $10.10 over three years is a temporary solution at best, Sawhill writes in an article for Fortune.

The real problem is the lack of quality workers, says Sawhill, calling that shortage an "indictment of our education and training system."

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"We have to choose between being a society of low-productivity, low-wage workers or a society of high-productivity, high-wage workers," she argues.

"A higher minimum might just nudge us in the latter direction, but it would be a pyrrhic victory if it allowed us to ignore the essentials: The need for a better educated and trained workforce capable of adding real value to the economy's output."

Reforming public benefits would encourage people to work.

A full-time worker making minimum wage earns less than $15,000 a year. With pay so low, they may decide not to work and turn to public benefits, increasing costs for welfare, food stamps and housing assistance, Sawhill explains.

"Wage subsidy programs, like the earned income tax credit, have increased employment and sending money to the states would enable them to experiment with policies that are tailored to local needs," she writes.

The Congressional Budget Office estimates increasing the minimum wage would cost 500,000 jobs. Still, raising the minimum wage would be worth it, Sawhill asserts. It would lift about a million people out of poverty and increase earnings for 16.5 million.

"There is no free lunch but this lunch is pretty cheap. The ratio of winners to losers is high; whatever the effects on jobs, they are likely to be small."

The New York Times calls the CBO report "almost entirely positive" on raising the minimum wage. The report actually says there's a two-thirds chance that the increase would cause job losses anywhere from almost zero to a million, according to the Times. It picked 500,000 as a midpoint. In other words, it's just guessing.

"That means the job-loss figure needs to be regarded skeptically, as a careful reading of the report shows, while the benefits are undisputed."

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Economy
Raising the minimum wage is the subject of extensive research and political wrangling, but workers need more than a minimum wage hike to succeed in today's labor market, argues Brookings Institution senior fellow Isabel Sawhill.
Sawhill,minimum,wage,jobs
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2014-28-26
Wednesday, 26 February 2014 12:28 PM
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