No, Raising the Minimum Wage Will Not Create Unemployment

No, Raising the Minimum Wage Will Not Create Unemployment

Seventy-five economists signed a letter from the Economic Policy Institute (EPI) to Congress and the Obama Administration endorsing a raise of the federal minimum wage. One of the main arguments that conservatives pose against raising minimum wage is that they believe a wage increase will damage employment. But studies indicate their largely unfounded opinions.

On the contrary, raising minimum wage could strengthen the job market. An EPI study indicated that the Miller-Harkin bill, which would increase the federal minimum wage to $10.10, would boost the economy by $22 billion and create 85,000 new jobs. The bill would also make the federal minimum wage’s buying power comparable to that of the late 1960s, when minimum wage kept a family of three above the poverty line.       

States that have increased their minimum above the federal rate have experienced no adverse fluctuation in their job market. For example, the states of Illinois, Washington, and Connecticut increased the state minimum wage, but the state employment rates largely reflected the national unemployment rate.  

The Center for Economic and Policy Research conducted an examination of the federal minimum wage and its relationship with inflation, corporate expense, and employment since the 1990s. The study illustrated that companies would actually benefit from a minimum wage increase because of reduced employee turnover: “a higher minimum wage makes it easier for employers to recruit and retain employees, lowering the cost of turnover.”

Increased minimum wage would increase market demand for good and services as the wage increase would encourage economic stimulus. According to the study, “a minimum-wage rise could spur consumer spending. This increase could potentially compensate firms [businesses] for the direct increase in wage costs.”  

After examining many more parameters surrounding the implications of minimum wage increases, the study concluded that “since the early 1990s, . . . minimum wage has little or no discernible effect on the employment prospects of low-wage workers.”

Low minimum wage ripples out to other parts of the nation’s economy outside of market demands and company overhead. Congressional Democrats released a report last May pointing out that the government allocates over $900,000 in welfare to workers of one, single Walmart in Wisconsin. The reason? Employee undercompensation. Walmart pays it employees an average 28 percent less than other large retailers.

Opponents, mainly conservatives, persistently argue the raising the minimum wage would detrimentally affect, in not “destroy,” American employment. They insist this notion even though any evidence supporting their claim is lacking. And once again, their ideology falls out of step with America as 63 percent of Americans support the Miller-Harkin bill.

Josh is a writer and researcher with Ring of Fire. Follow him on Twitter @dnJdeli.

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