Hiking Minimum Wage No Silver Bullet

Member Group : PA Chamber of Business and Industry

Many lawmakers and would-be elected officials view the call for a minimum wage increase as a political safe bet.

After all, who in the voting public doesn’t want to earn more money, and who could be against an elected official who promises to make sure that will happen? (And while they are at it, if it is such a good idea, why stop at $9 or $10 or $15 an hour?)

The reality, however, is that those who call for increasing the minimum wage ignore key factors and real-world impacts on all levels of workers that ultimately diminish their argument.

Naturally, they hope that policymakers, the media and the general public will ignore those facts as well.

The first is that the majority of minimum wage earners simply do not fit the demographics that supporters use in their narrative. If they did, the discussion would be about helping college students make more money, or helping people who live in households with incomes that are greater than the average small business owner increase their earning potential.

This doesn’t exactly lend itself to dramatic campaign literature and headline-making sound bites; but it is closer to reality than what supporters would have you believe.

Yes, increasing the minimum wage means some people will have more money in their pockets. But others will lose their job or see their hours reduced.Minimum wage earners represent just 3 percent of all employees in Pennsylvania. According to a 2012 state Department of Labor and Industry report, nearly three quarters of the jobs paying the minimum wage are part-time.

Included in this data are workers who are full-time students or who have other jobs/sources of income. Nearly 80 percent don’t have children; more than half live in households in which income is greater than $50,000 – the average annual income of a small business owner – and a third live in households in which income is more than $75,000. In addition, the majority of minimum wage earners are younger than 24.

Supporters of government mandated wages also overlook the purpose of a minimum wage. It is specifically designed as an entry level wage.

Employers that are forced by the government to pay higher wages will expect more qualified employees. This will squeeze out low-skilled workers. In turn, those individuals will miss out on the all important opportunity to get their foot in the workforce door and gain the skills and experience that can lead to better employment options in the future.

Yes, increasing the minimum wage means some people will have more money in their pockets. But others will lose their job, see their hours reduced or never have a chance to be considered for a job that could have been created. We know this from studies and news accounts from the last minimum wage debate.

In fact, the last time the minimum wage made headlines in Harrisburg, the PA Chamber issued a press release documenting numerous examples of the steps businesses took after that state increase, from eliminating workers and cutting back work hours to raising prices and reducing openings for a job apprenticeship program.

In addition, the Philadelphia Daily News ran an article about a Philadelphia lawmaker who supported that wage hike and then sought nearly $820,000 in state funds (i.e. taxpayer dollars) to help a nonprofit summer jobs program that had to eliminate an estimated 1,100 positions because of the consequences of the increased wage.

Increasing the minimum wage could also lead to higher pressure on wages across the board. This cost pressure could force some employers to look at incorporating technological changes that eliminate jobs or simply freeze hiring and ask existing employees to do more.

That’s because of perhaps the most ignored, yet most fundamental fact in the debate: government mandated wages don’t take into account what a particular business – a small business in particular – can afford to pay its workers, nor do they consider all the cost burdens that threaten a business’ livelihood and very existence.

It should be stressed that there are programs – the Earned Income Tax Credit or Tax Forgiveness to name a few – specifically designed to help people in low wage jobs that need to support a family.

Placing yet another costly mandate on employers at a time of tremendous uncertainty with regard to the economy and the pending implementation of the federal healthcare law, just to name a few, is not doing what is best for job creators, workers or working families.

The Pennsylvania Chamber welcomes the opportunity to work with elected officials to bring economic prosperity to Pennsylvania through the creation of a better business climate, one that is conducive to private-sector job growth.

Doing so will benefit all Pennsylvanians. Unfortunately, too many politicians see increasing the minimum wage as the silver bullet, ignoring some people’s jobs or prospects for employment, not to mention the viability of many small businesses, in the process.

Gene Barr is president and CEO of the Pennsylvania Chamber of Business and Industry.