Last week, Democratic Presidential candidate Martin O’Malley called for an increase in the federal minimum wage, from $7.25 to $15 per hour. Doing so, he argued, would lift millions of families out of poverty and create better customers for American businesses.
This is nothing if not bold. And in theory, higher wages for the lowest earning Americans sounds great. But is it a good idea?
First things first: a minimum wage hike has the potential to lift upwards of five million Americans out of poverty (45 million Americans currently live at or below the poverty line). Here’s the problem: it would destroy upwards of 300,000 jobs per year, as businesses would be forced to cut labor costs to compensate for the mandated rise in wages. Almost all of those lost jobs would be at or near minimum wage levels. So what of the remaining 40 million Americans who live in poverty?
Minimum wage jobs are, at their core, learning jobs. They teach inexperienced workers basic skills to make them more productive and enable them to earn raises or move to better jobs. In fact, over half of minimum wage workers are between the ages of 16 and 24, and two-thirds of that group work part-time.
In the event of a minimum wage increase, hundreds of thousands of these important, ground-level jobs would disappear, in some cases overnight, robbing an equal number of Americans the opportunity to get started in the workforce. The disappearance of these important jobs would cost the economy $40 billion per year, but the long-term effects on people who aren’t able to even start working might be far worse.
What do you think? Should the government potentially help lift five million people out of poverty while very likely hurting another 40 million of America’s neediest? Share your thoughts on our Facebook page.