Minimum Wage Hike Would Backfire

Member Group : Americans for Prosperity-PA

The current issue du jour in Harrisburg, something that comes up every year, is raising the minimum wage. Governor Wolf put a spotlight on the issue in his proposed budget, which once again includes raising the wage. Introduced proposals range from 8.75, 10.10, and as high as 15 dollars. Wolf’s plan is $12 per hour. As a reminder, the federal minimum wage is currently $7.25 an hour.

Republicans who overwhelmingly control the General Assembly usually do not support the minimum wage increase, and for good reason. However, this year, there is a sense that a minimum wage increase, though not as large as what the governor is demanding, could be traded for a yet-to-be-determined issue that Republicans want.

The governor’s office has estimated that this could net the state budget an additional 95 million per year in boosted income tax revenue. He also asserts that it would create jobs, and help businesses. Unfortunately, statistics and facts tell a different tale.

Let’s break down the Governor’s recent arguments for the minimum wage:

1. To start, the governor’s budget counts on $95 million in personal income tax revenue. If you use a magic wand to increase wages, and keep all other factors the same, this number may be correct. However, this is a dynamic world, and every decision has unintended consequences. I doubt this $95 million includes the number of people who will not pay income taxes because they lost their job because the business owner really couldn’t afford to pay them $12 an hour.

2. Which brings me to the governor’s second point, that a raise in the minimum wage would create jobs. The last time the wage increased, because of federal legislation increasing the federal minimum wage, there wasn’t a business and job creation boom. It was a bust. While the narrative is that many people work for big box stores whose CEOs are rolling high profit margins, it isn’t reality. The reality is that many people making the minimum wage are working for a small business owner, someone who makes, on average, $50,000 a year. These small business owners have razor thin profit margins and while they do not want to fire an employee, they may have to do that to keep the business afloat and pay all their other employees.

3. This brings me to another example the governor has been using. Here is the quote: "Pennsylvanians who work full time at minimum wage earn $15,080 annually, leaving them below the poverty level for a family of four and often unable to afford basic necessities," end quote.

Here is reality: According to the Bureau of Labor Statistics, only 3.3 percent of working Americans earn the minimum wage. Of those 3 percent, almost 50 percent work in food service and preparation. This is why so many restaurants close or must let employees go when cities around the nation have increased the minimum wage locally. Additionally, legally employed workers in jobs that pay less than the minimum wage often earn tips, and, by federal law, employers are required to make up the difference if the tips to not bring their wage up to the minimum. Many business owners, including those in the food service industry, use the minimum wage as a starting wage, and quickly increase workers’ salary the longer they remain employed.

Here is more demographic information about the people earning the minimum wage, and allow me to reiterate, contrary to the picture Governor Wolf paints of a family of four, with one parent making minimum wage: 50 percent are workers under the age of 25. 11 percent are ages 16-19. Only 2 percent of minimum wage earners are over the age of 25. BLS does not collect data on whether the minimum wage worker has children, but a 2012 Pennsylvania Department of Labor and Industry report did, and found that 77 percent of minimum wage workers do not have children.

So, while Governor Wolf’s example is heartbreaking when it occurs, it is not a representative picture of those making minimum wage. Here is some final data from that PA Department of Labor and Industry report: More than half of Pennsylvania’s minimum wage workers live in a household where income is over $50,000. A third live in a household where the median income is over $70,000. 75 percent are not working full-time, they are working part-time, and includes many children living at home with their parents, and college students who work on the side.

This is not an anti-worker diatribe. The next time a business owner or legislator expresses concern that artificially inflating the minimum wage would not help the economy, you’ll know they aren’t anti-worker. They probably believe the best way to help the economy – and give more people the chance to make a wage much higher than the minimum – is to get Pennsylvania government out of your pocket. Maybe we should stop spending $800 million per year of your tax dollars on corporate welfare with very little return on investment. To lower tax rates, reduce regulation, get out of the way of economic growth and lift all ships. That seems really pro-worker to me.

I’m Anna McCauslin with Americans for Prosperity – Pennsylvania. Visit us online at, on Facebook by searching for Americans for Prosperity – Pennsylvania, and on twitter @AFPPennsylvania.