According to a report released Monday by the American Action Forum and the Manhattan Institute, increasing the minimum wage can actually hurt the very people it is meant to help.
The report, titled, “Counterproductive: The Employment and Income Effects of Raising America’s Minimum Wage to $12 and to $15 per Hour,” looked at income, employment and the impact on the workers themselves. In each category, the report finds increasing the minimum wage to $12 or $15 an hour is likely to result in adverse consequences. For income, the report argues, raising the minimum wage will actually lower total national income levels.
“The earnings gained for those who would keep their jobs would be outweighed by the earnings lost by those who would become jobless,” the report detailed. “As a result, the net income gains tend to be smaller or more negative when using the annual earnings approach than when using the wage approach.”
Likewise, when it comes to employment, the report found problems well. The reason total income levels fall on the national level is because there are less jobs opportunities. This is because the increased costs of labor under an increased minimum wage makes businesses less likely to hire as many employees.
“While a minimum-wage hike would benefit millions of workers with higher earnings, it would also hurt millions of others who would lose earnings because they cannot attain or retain a job,” the report argued. “Our estimates show that raising the federal minimum wage to $12 per hour by 2020 would affect 38.3 million low-wage workers.”
Finally, for the workers themselves, the report argues low skilled and entry level workers will be the ultimate victims. Such workers will be the least likely to keep or get a job under such a policy. This is because they don’t have the skills to be able to make the business as much money as an more skilled worker could in an hour. Such an outcome will be particularly troublesome considering such workers are usually the ones minimum wage increases are supposed to help.
“Workers who tend to become jobless are the low-skilled, low-wage workers whom the policy intends to help,” the report noted. “While many minimum-wage advocates hope that employers pay for the additional cost with their own profits, the evidence suggests that the vast majority of low-wage workers are in industries that have razor-thin profit margins, such as retailers and restaurants.”
Nevertheless, the minimum wage has becomes one of the more popular worker rights issue. While advocates push for federal increases, states and even cities have already done it themselves. With its findings, the report argues that though the policies may seem good on the surface, lawmakers should look at it more closely.
“Now, lawmakers are proposing to raise the federal minimum wage to $12 per hour by 2020, or even to $15 per hour by 2020—which would more than double the current federal minimum,” the report continued. “Several cities, such as Los Angeles, Seattle, and San Francisco, have already approved raising the local minimum wage to $15 per hour.”
From rallies to media marketing campaigns, Fight for $15 has led much of the effort to raise the minimum wage in the past year. Though claiming to be a grassroots workers movement, the group is highly influenced and funded by the Service Employees International Union (SEIU).
“We estimate that 3.3 million to 16.8 million fewer low-wage jobs would exist in 2020 if policymakers increased the federal minimum wage to $15 per hour,” the report also noted.
The SEIU has been criticized by some, like Worker Center Watch (WCW), for using the Fight for $15 protests as a way of bypassing labor laws to more easily unionize fast food workers. Additionally, according to a report from the Center for Union Facts, a minimum wage increase would benefit the SEIU directly while hurting non-unionized SEIU competitors.
Those cities that have led the way in passing a $15 minimum wage have already seen some businesses having to close because of the increased cost of labor.