February 23, 2013

Another View: Minimum wage does not help lift workers from poverty

Personal experience shows that raising the minimum wage ultimately results in lower wages.

By BETH A. O'CONNOR

Does the minimum wage lift individuals from poverty? It seems that our compassionate president thinks it does. History, however, does not paint such a picture.

I worked in a factory making costume jewelry in 1976. When the minimum wage went up, I was tickled pink, until my hours were cut. Soon the company closed its doors.

A 1976 survey by the American Economic Association found that 90 percent of its members agreed that increasing the minimum wage raises unemployment among young and unskilled workers.

In 1989, the nonpartisan Congressional Budget Office reported to the House Labor Committee that a proposed increase in the minimum wage, then $3.35, to $5.05 would result in the loss of 250,000 to 500,000 jobs.

In 1990, another survey found that 80 percent of economists agreed with the statement that increases in the minimum wage cause unemployment among the young and low-skilled.

In all three cases, knowing that its actions would kill jobs for the poor and unskilled, Congress raised the minimum wage anyway.

Political rhetoric aside, today's result would be no different. An increase from $7.50 to $9 per hour will harm the least-skilled workers and hit minorities especially hard.

Mandated benefits such as employer payments for Social Security, Medicare, unemployment insurance and workers' compensation programs add about 30 percent to the cost of the wage, exacerbating the harm.

Raising the minimum wage is a feel-good gimmick for politicians who reject the reality of basic economics.

When the cost of human capital elevates to a level where it outweighs its value, an employer must either cut hours, raise prices or close up shop.

The end result hurts the very people the minimum wage is proposed to help.

Beth A. O’Connor of Berwick is chairman of Maine Taxpayers United.

 

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