The Right Doesn’t Want You To Know These
Minimum Wage Myths Have Been Debunked
By Justin Acuff
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| For more cartoons by Barry Deutsch, click here. |
In 1968, minimum wage
was $10.86. Since then, it has decreased by 32 percent, resulting
in millions of Americans working full-time hours and yet being unable to feed
their families without assistance. Escaping poverty became, and is, a struggle.
Of course, that isn’t true — the minimum wage in 1968 wasn’t $10.86. It was $1.60. However, $1.60 doesn’t have as much buying
power as it used to, and when adjusted for inflation (as of today, May 1, 2014), that
number is $10.86.
Minimum wage was designed to keep workers out of
poverty. It has not done so. Note that minimum wage follows inflation, not the
other way around. Even if businesses were impacted and needed to raise prices
(you’ll see below that businesses are not adversely affected by a minimum wage
increase), the people making more money would need less government aid — if
they can’t make enough money to live, the community will pay for it one way or
another.
The miserable poverty being inflicted
on those at the lowest rung of working income (note that these people are working,
being productive!, and yet are still in poverty) hampers competition.
There is no question
these people need the extra money. Nobody is saying that. However, there are
many that repeat the same tired myths again and again; a minimum wage increase
will kill jobs by raising costs, will hurt young workers, or would hurt small
business. None of those hold water with careful examination, and that’s
why we’ve compiled debunkings for each of those myths here.
The Myth: A Minimum Wage Increase Will Cause Job Loss
It sounds plausible,
right? After all, employers, by definition, have to pay their employees, so of
course the minimum wage being raised would increase their costs. That’s
logical. The problem is, that’s segmented logic — it doesn’t take into account
the extra revenue coming back to businesses because of the increased spending
power of the working poor. Back in February, famed economist Paul Krugman said
similar in a piece for the New York Times:
Now, you might argue
that even if the current minimum wage seems low, raising it would cost jobs.
But there’s evidence on that question — lots and lots of evidence, because the
minimum wage is one of the most studied issues in all of economics. U.S. experience,
it turns out, offers many “natural experiments” here, in which one state raises
its minimum wage while others do not. And while there are dissenters, as there
always are, the great preponderance of the evidence from these natural
experiments points to little if
any negative effect of minimum wage increases on employment.
Why is this true?
That’s a subject of continuing research, but one theme in all the explanations
is that workers aren’t bushels of wheat or even Manhattan apartments; they’re
human beings, and the human relationships involved in hiring and firing are inevitably
more complex than markets for mere commodities. And one byproduct of this human
complexity seems to be that modest increases in wages for the least-paid don’t
necessarily reduce the number of jobs.
The
left-leaning nonprofit Media
Matters For America has also compiled a list of academic
studies disproving the myth that minimum wage increases cause job
loss, and, in some cases, actually has a small positive effect on net jobs. See
below:
CEPR: Hiring
Response To Minimum Wage Hikes “More Likely To Be Positive Than
Negative.” In a March 2011
report, the Center for Economic and Policy Research concluded that wage
increases are more likely to result in more, rather than fewer, jobs: [PDF]
They go on to cite the
Center for American Progress:
Multiple
Studies Found Either No Effect On Employment Or An Increase In Employment
Resulting From Minimum Wage Increases. From the Center for American Progress:
University of
California, Berkeley, economist David Card and Princeton economist Alan
Krueger’s seminal study of the effect of the New Jersey 1992 minimum wage
increase comparing fast food industry employment in New Jersey and Pennsylvania
found no negative employment effect. In fact, it found stronger employment
growth in New Jersey. While there was no national recession at the time, New
Jersey’s unemployment rate was 8.7 percent in parts of 1992. … [6/7/11]
Another study cited, this one from UC Berkeley, specifically targeted the
restaurant industry, although the authors argued that their findings were
applicable in other industries as well.
The Myth: A Minimum Wage Increase Will Hurt Young Workers
Another one. This one
is, really, just an extension of the job loss one, because it’s thought that
anything adversely affecting low-wage workers will disproportionately affect
young workers.
Underlying that is the belief that a large percentage of low-wage
workers are the youth in the workforce. That’s somewhat true, although in
reality, we have to account for the 75 percent of people in the minimum wage workforce
that aren’t teenagers,
as well, and face the fact that $7.25 simply isn’t livable.
Not that it really
matters what percent of minimum wage workers are teens — multiple studies have
shown a negligible effect on youth employment after a minimum wage increase
[Institute for Research on Labor and Employment PDF].
The ability of states to independently raise
their minimum wages has allowed for easy study for economists, making this one
of the most-reviewed topics of all time, and to quote Paul Krugman again, “…just
about everyone except Republican men believes that the lowest-paid workers
deserve a raise. And they’re right. We should raise the minimum wage, now.”
You know what really hurts
youth employment? Economic recessions and other broadly negative phenomena, as
also mentioned by Media Matters.
Figure B illustrates
how teen employment is driven far more by larger labor market employment trends
than by any effects of minimum wage changes. The black lines in Figure B mark
times when Congress increased the minimum wage to keep up with inflation. The
two-step increase in 1990 and 1991 occurred during a period of deterioration in
the labor market, and the teen employment share dropped. The two-step increase
in 1996 and 1997 occurred during a strong labor market, and the teen employment
share increased. The three-step increase in 2007, 2008, and 2009 occurred
during a weak labor market, and the teen employment share fell.
Myth: A Minimum Wage Increase Will Hurt Small Businesses
The simple truth about
this myth is that the opposite is true. States with minimum wage increases have
actually seen employment by small businesses rise, as the
impoverished in the area, with purchasing power increased, usually spend
locally. The Center for American Progress [PDF], Fiscal Policy Institute [PDF], and New York Times have
all published evidence that minimum wage increases are good for small
businesses.
The Center For American
Progress specifically was considering what a minimum wage increase would mean
in Ohio. Their summarized findings:
§
Employment in small businesses grew more (9.4 percent) in states
with higher minimum wages than federal minimum wage states (6.6 percent)
or Ohio.
§
Inflation-adjusted small business payroll growth was stronger in
high minimum wage states (19.0 percent) than in federal minimum wage
states (13.6 percent) or Ohio.
More data became
available in 1998, allowing further analysis. Between 1998 and 2003:
§
The number of small business establishments grew more in higher
minimum wage states (5.5 percent) than in federal minimum wage states (4.2
percent) or Ohio.
§
Small business retail employment grew more in higher minimum
wage states (9.2 percent) than in low minimum wage states (3.0 percent) or
Ohio.
§
Retail payroll grew more in higher minimum wage states (12.3
percent) than in low minimum wage states (6.4 percent) or Ohio.
§
States with high and low minimum wages had similar growth in
number of restaurants, restaurant payrolls, and restaurant employment.
Let’s face it, America.
The minimum wage is no longer what it was supposed to be — it hasn’t even kept
pace with inflation, much less worker productivity. A case could be made for a
much higher minimum wage, in fact; Senator Elizabeth Warren and others have repeatedly asked where
gains in productivity are going to, while purchasing power of the working class
remains stagnant.
To those still
questioning the wisdom of a minimum wage increase, know that even conservative think
thanks have advocated
for a higher — up to $12 — minimum wage. It’s only because President Obama has
endorsed a wage increase that the rhetoric is being molded by partisanship
rather than concern for our citizens.
Author: Justin Acuff - I'm a millennial with an
attitude, and I'm tired of a left wing that won't rise up and fight for the
rights of the people. In my short career, I've published hundreds of articles
on many topics. You can follow me on Google Plus, Facebook, Twitter, Tumblr, Instagram,
or join my email
list here.
