Report on the Minimum Wage Increase

Feb. 20, 2014
The recent CBO report on the minimum wage increase is consistent with what Alan Beaulieu has been saying all along: most public policies help some and hurt others. The minimum wage increase is one such policy.

The Congressional Budget Office, CBO, issued its report on the President’s plan to boost the minimum wage from $7.25 to $10.10.  The impact of such a move has been a popular question while talking to groups around the country.  The CBO report is consistent with what I have been saying: it will help some and hurt others in that it will keep some people from getting a job at all.

The Report is compelling in its appraisal in that it puts people into the equation and the numbers of people that will be helped and hurt.  The estimate is that 16.5 million people will get a boost in income.  900,000 people will be moved out of poverty by this wage increase.  If true, that is certainly good news.  $2.85/hr increase multiplied by whatever hours a person is working will lift them from just below the poverty line to just above the line. 

What about the 500,000 (estimated) that won’t get a job because of the wage increase?  Half a million under-educated and under-experienced people will not get an opportunity to work, learn a skill, and get ahead.  Instead we will keep them on entitlement programs and sentence them to chronic unemployment. 

Most public policies help some and hurt others, what seems particularly strange to me is to do it under the banner of “fair”, egalitarianism, or helping people.  I believe that deeper down this is about a fundamental belief that businesses don’t want to pay people appropriately and that businesses are greedy and want to hoard their profits.  I can tell you that the thousands of people I talk to a year don’t behave that way.  They care about their employees, are compassionate about their wellbeing, and pay them according to skill level and contribution to the corporate good.  An increase in the minimum wage will not work a great benefit on the economy, nor will it wreak havoc on the economy, but it does send a message that people need to be helped because they are not capable of making their lives better through education and effort.  Sorry, but I do not think that is true.

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