Minimum wage hikes sound great on the surface, but as we’ve been reporting here at LI, such hikes tend to do the opposite of their proponents’ stated intention. From forcing businesses to fire employees, cut hours, and find technological replacements for workers, minimum wage hikes are counter-productive, even destructive to low-income workers.
For example, a new study from Seattle shows that “there was almost no effect on workers’ average total earnings” due to a combination of factors including fewer hours and a more difficult time finding a second job to make up those lost hours.
[T]he actual benefits to workers might have been minimal, according to a group of economists whom the city commissioned to study the minimum wage and who presented their initial findings last week.
The average hourly wage for workers affected by the increase jumped from $9.96 to $11.14, but wages likely would have increased some anyway due to Seattle’s overall economy. Meanwhile, although workers were earning more, fewer of them had a job than would have without an increase. Those who did work had fewer hours than they would have without the wage hike.
Accounting for these factors, the average increase in total earnings due to the minimum wage was small, the researchers concluded. Using their preferred method, they calculated that workers’ earnings increased by $5.54 a week on average because of the minimum wage. Using other methods, the researchers found that the minimum wage hike actually caused total weekly earnings to drop — by as much as $5.22 a week.
An increased minimum wage costs employers more and necessitates reducing margins and/or charging customers more. Wages may increase for some, but the cost of goods and services rises as well . . . effectively eating into whatever gains workers lucky enough to keep their jobs and not have too high a reduction in hours might have experienced.
The Washington Post continues:
Increasing the minimum wage increases the costs of hiring workers. As a result, employers must accept reduced margins or customers must pay steeper prices.
If employers cannot stay in business while paying their staff more, they will either hire fewer people or give their workers fewer hours. As a result, even if wages per hour increase, workers’ total earnings could decline.
Jacob Vigdor, an economist at the University of Washington and one of the authors of the report, speculated that technology could limit the benefits of increasing the minimum wage. If it becomes easier for employers to replace their workers with machines, they will be more likely to respond to wage hikes by making fewer hires.
Overall, there was almost no effect on workers’ average total earnings, but Vigdor pointed out that the average could be misleading. The consequences for many individual workers — both positive and negative — could have been more significant.
Workers employed by thriving businesses who did not lose any hours could have enjoyed welcome gains. On the other hand, workers who had a hard time finding a second job to make up for their lost hours might have been earning much less.
In Obama’s flailing economy, black workers have arguably suffered the most. This fact has been foregrounded by both the right and by the progressive left, and has yet to be addressed effectively by this administration. Indeed, the Obama administration and Democrats are the most vocal proponents for pushing minimum wage hikes that have a demonstrably disproportionate negative effect on America’s black youth.
— Larry Elder (@larryelder) July 29, 2016
Yes, Obama and Democrats are aware of this, and no, they do not develop policies that address the reality of minimum wage hikes and their measurable failure; instead, they focus on “feel good, sound good” policies that appease the masses, harm businesses, and displace workers.DONATE
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