More bad news for the unemployed, particularly the young and undereducated: the federal minimum wage increases from $6.55 to $7.25 today.
The boost will raise the income level of many Americans who are currently employed in minimum-wage, often entry-level positions, but unfortunately will also have several unintended consequences, according to the Heritage Foundation:
- Increased unemployment: As the price of labor increases, employer demand for labor decreases. The increase in the minimum wage will be felt most heavily in the fast food, hotel and independent retailing industries. “A 10 percent increase in the minimum wage is associated with a 1 percent decline in retail trade employment,” Heritage quotes Dr. Joseph J. Sabia, of American University.
- Reduced opportunity: Minimum wage jobs provide individuals the chance to gain work experience, which can eventually lead to increased productivity and higher wages. As minimum wage positions are reduced because employers can’t or won’t pay the higher rate, more entry-level workers go without opportunities. The majority of these are individuals under 25 years of age, according to Heritage.
“Raising the minimum wage will only decrease these workers access to entry-level positions, and deprive them of the opportunity to increase productivity and wages in the future,” Heritage writes.
About 6,000 people – mostly janitors, teenagers in fast-food jobs or unskilled laborers – in South Carolina earn minimum wage, according to the U.S. Bureau of Labor Statistics.
College of Charleston economist Frank Hefner told the Charleston Post and Courier that raising the minimum wage is more harmful than beneficial.
“Anytime you raise the minimum wage, you are going to create unemployment,” he said. “It drives other salaries up. Driving up salaries in the middle of a recession is not a good idea.”
Hefner told The Post and Courier that President Franklin D. Roosevelt tried it in the 1930s. “It drove the unemployment rate higher.”
By raising the minimum wage, employers also have to pay extra in federal taxes and workers’ compensation, he said.
“What if by raising the minimum wage, a person doesn’t get hired?” Hefner said. “It’s ambiguous as to how many people will lose their jobs. The theory tells us some will. …
“It’s feel-good legislation,” he added. “They think it’s a good idea. If it’s such a good idea, why don’t they raise it to $50,000?”