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February 20, 2014

Minimum Wage Increase Decreases Employment

No matter what Democrats say, the minimum wage will always be $0.

Conservatives have argued for years that raising the minimum wage leads to a decrease in employment among those on the bottom rung of the economic ladder, an argument leftists vehemently deny. But a report from the Congressional Budget Office (CBO) projects that a proposed minimum wage increase to $10.10 an hour by 2016 would eliminate 500,000 jobs despite the prospect of enhanced economic activity overall. While that’s a bad scenario, even the best number the CBO could come up with was the increased minimum wage would lead to a “very slight decrease” in employment. Their worst case projection is that one million jobs may be lost.

It’s also worth considering that the increased economic activity, once losses from those who were furloughed, business owners making less profit, and overall higher costs due to the inflationary effects of an artificial wage hike are factored in, would result in a paltry $2 billion increase in real income overall. In part, this is because just 19% of these additional earnings would accrue to families below the poverty line; meanwhile 29% would go to families who make three times the poverty level. In other words, many of those workers who actually make minimum wage – representing less than 2% of the workforce – are those just entering the workforce, meaning they most likely still live with their parents and supplement a far larger household income. The CBO estimates just 2% of those who live in poverty will be lifted out of it by a minimum wage increase. But how many non-minimum wage earners will be forced into poverty by the increased costs?

So why would we engage in what commentator Charles Krauthammer called “a transfer of wealth from some low-income earners to other low-income earners”? Simple – it’s an election year and goodies have to flow freely to those who typically vote Democrat. Either they’ll get a raise or they’ll be enjoying many months’ worth of unemployment payments, a win-win for the lazy and statists everywhere.

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