Minimum Wage and Damage For Probable Growth
In 2013, bills to raise the minimum wage were introduced in more than 30 states and Washington, D.C.
Low wages encourage turnover which costs an employee making making less than $30,000 16% of their annual salary. Fast food workers have a turnover rate of 47%.
Democrats propose raising the present federal minimum of $7.25 an hour to $8.20 this year, $9.15 in 2015 and $10.10 in 2016. Assuming no job losses, the Economic Policy Institute (EPI) estimates almost 28 million workers would benefit by 2016. That’s about 17 million who now make less than the proposed minimums, plus 11 million slightly better-paid workers who would get increases to keep them above the minimum.
Someone working 40 hours a week at the minimum wage would see annual wages increase almost $6,000 in 2016. Today’s annual wage is about 20 percent below the federal poverty line for a family of three, while the 2016 wage would be above the line for a family of three. Not all workers would receive big increases for 46% of part time workers don’t stay for a full year or already are above the minimum.
The minimum wage increases enacted in states on January 1st are expected to add 4,600 full time jobs and increase the GDP of those states by $619 million. The ten states that increased their minimum wage in 2013 added the equivalent of 1,580 full time jobs
It should be noted that the top five states, plus the District of Columbia, with the highest unemployment rates all have minimum wages above the federal level: Rhode Island, Nevada, Michigan, Illinois, the District of Columbia, and California.
If lawmakers were to raise the minimum wage from $7.25 an hour to $10.10 an hour, the economy would grow by $22 billion in the initial phase in period, according to the EPI. A $1 hourly wage increase would increase consumer spending $2,800 in one year.
However, up through 2012, only 3.7 million Americans reported earning $7.25 per hour or less. That is 2.9% of all workers in the U.S. Almost 60% have no higher than a high school diploma. Just 4% of minimum wage workers are single parents working full time.
More than 500,000 employees of federal contractors make less than $12 an hour. When more than 500 federal contractors working in service-industry type jobs (sewing military uniforms and driving trucks specifically) were interviewed, more than 70% made less than $10 an hour. In 2011, if the now proposed $10.10 minimum waged had been enacted, 58% of the nation’s ten million working poor would have been elevated out of poverty. Increasing the minimum wage is estimated to create 85,000 new jobs. Company owners surveyed last year by the advocacy group Small Business Majority supported increasing it. Two-thirds wanted the wage increased from the current federal minimum with annual adjustments for inflation. 85% said they paid their employees above the minimum.
Moreover, about 60% of the poor don’t work, and 53% of workers who would benefit from a higher minimum wage come from families with incomes above $35,000, including 22% with incomes exceeding $75,000. A Congressional Budget Office study issued last year found that a single parent with one child earning between $15,000-$25,000 experiences almost no financial benefit from working additional hours or getting a raise. Earnings would have to exceed 150-200% of the poverty level to compensate for lost social welfare programs.
Conversely, two-thirds of minimum wage workers earn a raise within one year. Raising the minimum wage makes such entry level positions less available.
Increasing the minimum wage is estimated to create 85,000 new jobs. Company owners surveyed last year by the advocacy group Small Business Majority supported increasing it. Two-thirds wanted the wage increased from the current federal minimum with annual adjustments for inflation. 85% said they paid their employees above the minimum.