Minimum Wage = Maximum Harm to Jobs

By, Stephen Bloom
State Representative, 199th District

Everybody deserves a chance to work for a living. Having a job, any job, is the most important factor in keeping people from falling into poverty and dependency. Jobs are the life-saving escape route for those who are poor or at risk of becoming poor.

Activists are now trying to force a minimum wage hike in Pennsylvania with the well-intentioned hope of "helping the poor." But the sad economic reality is that minimum wage hikes kill jobs.

Boosting minimum wage may appear compassionate, but killing the jobs people need to help themselves and their families break the cycle of poverty is not compassion. Instead, it is destructive policy that hurts the people it is supposed to help.

When government imposes minimum wage hikes, basic laws of economics and real world business yield the same painful results.

With operating margins cut to the bone and prices already squeezed, artificially jacking up the costs of an employer’s payroll means he or she simply can’t hire as many workers or can’t give the ones they have as many hours of work. In short, job opportunities are lost.

We should be trying to grow jobs, not kill them. All we have to do is take a look at history. After Pennsylvania’s last minimum wage hike, businesses began laying off employees. Settled economic science confirms minimum wage hikes have a consistent job-killing effect on low-skill workers.

We are fooling ourselves if we think government can keep driving up the cost of entry-level jobs without damaging consequences.

A soon-to-be-released study conducted by the NFIB Research Foundation calculated the potential economic impact three minimum wage hike bills now pending before the General Assembly would have on Pennsylvania’s small businesses and their employees.

Under all three legislative scenarios, the study found the number of jobs lost ranges from 28,000 to 119,000, as a result of increased labor costs.

Take the case of a local sandwich shop owner who actively manages and employs a dozen workers earning an average of $8 per hour. Her total wage expense is about $160,000 per year for those employees and she earns for herself, after subtracting other costs, about $50,000.

If government pushes minimum wage to $10 per hour, as some propose, her wage expense rises to $200,000 and her take-home earnings shrink by 80 percent. Rather than continue to confront the future risks and challenges of running a small business at such an unsustainable, low rate of return, she will likely close down the shop.

When she shuts her doors, 13 people immediately lose employment and the other small businesses from whom she buys supplies may end up laying people off too.

We are fooling ourselves if we think government can keep driving up the cost of entry-level jobs without damaging consequences. Many of those jobs will vanish forever. But employees and job-seekers are not the only ones who will be hurt by this misguided imposition of government-mandated wage hikes.

Consumers will also be hurt, especially the poorest consumers, those who can least afford to suffer another economic hit.

While many jobs will be lost, employers in some industries will be in a position to pass along their increased costs of labor directly to the consumers, by increasing the prices of their goods and services.

As jobs disappear in some sectors, prices will be rising in others, negating the imagined economic benefits of minimum wage hikes even for those who were able to keep their jobs.

When these hikes spike inflation, everybody pays more for everything, nobody wins and the poor get hurt the most.

We must not allow ourselves to be fooled again by the misinformed judgment of minimum wage increase advocates who argue that steep wage hikes will give people more money to spend and stimulate our economy.

Their conclusions are dangerously wrong. Don’t forget, the federal minimum wage was incrementally increased in 2007, 2008 and 2009; the same years the country suffered an enervating recession, from which the national unemployment and underemployment rates have never recovered.

Hiking the minimum wage is a feel-good, phony government-imposed "fix" that will raise the cost of living for all Pennsylvanians, stunt our economic opportunities and put more people out of work. And the worst impact will be on those who are least able to afford it.

This guest post was originally published by the Harrisburg Patriot News.