The Problem with Giving America a Raise
by Amy Payne, Heritage Foundation, February 20, 2014
In his State of the Union Address, President Obama told Congress to “give America a raise.” But as the job forecasts are revealing, he might as well have told them to “kill some American jobs.”
Why? Heritage experts forecasted months ago that a proposed minimum wage hike would kill the very jobs it’s supposed to support. But when the Congressional Budget Office (CBO) said the same thing this week, it forced the White House and congressional liberals to defend their calls for the increase.
The CBO estimated that the wage hike Obama and his allies champion would cost 500,000 jobs.
The White House looks like it’s in denial. Jason Furman, chairman of the White House’s Council of Economic Advisers, countered the CBO report by claiming: “Zero is a perfectly reasonable estimate of the impact of the minimum wage on employment.”
Furman might not like the way the minimum wage affects hiring, but that doesn’t make it any less true.
>>> FACT SHEET: Facts About the Minimum Wage
There’s another problem with “giving America a raise”: Two-thirds of people making the minimum wage right now will be getting a raise within the next year.
And the reason this happens is much better than a government mandate—these workers are gaining skills and work experience, which lead to higher-paying positions.
But if the federal minimum wage is the source of their “raise,” it reduces the opportunities for these workers to get that experience and learn those skills. James Sherk, Heritage’s senior policy analyst in labor economics, explains:
Raising the minimum wage reduces the availability of these entry-level jobs, making it harder for less-skilled employees to acquire the experience necessary to move up. A minimum-wage increase would hurt the very workers Congress wants to help.
America’s workers are getting raises—and new entry-level applicants are moving into their jobs as they move up. We need more of these jobs, not fewer.
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