Opinion: Columnists

Raising minimum wage hurts young people

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Diana Furchtgott Roth,Columnists,Analysis

Calls to increase the minimum wage are rising.

Financial Times columnist Edward Luce wrote that raising the minimum wage “would inject a much-needed stimulus into the anemic recovery without involving a dollar of taxpayer money.”

The New York Times has published columns by Princeton professor Paul Krugman and University of Massachusetts professor Arindrajit Dube on the advantages of raising the hourly minimum wage from its current level of $7.25.

These commentators and others suggest a $10.10 minimum wage, a 39 percent increase for minimum wage workers, even for the worst-performing employees.

Here are their talking points:

– Raising the minimum wage helps the economy because low-wage workers have more money to spend.

But when the higher wages are passed on to consumers in the form of higher costs, they have less to spend elsewhere. So they may spend more on fast food or retail, but less on other activities. Higher minimum wages can redistribute earnings, but cannot raise gross domestic product.

If higher minimum wages could raise GDP, then why not raise minimum wages to $24.10 an hour, the U.S. average? Low-income workers would have even more to spend.

– Raising the minimum wage reduces turnover. As Dube puts it, “If McDonald’s is required to pay a higher wage, fewer of its workers will leave to take other jobs.”

But if employers want to reduce turnover, they are free to pay above minimum wage. Ninety-seven percent of American workers earn above minimum wage, not because employers are saints, but because firms need to pay higher wages to attract and retain workers.

– Everyone wants to raise the minimum wage. According to Luce, “By large margins, both Republican and Democratic voters support higher minimum wages.”

Now it does not take a neurosurgeon, or even a McDonald’s cook, to know the right answer when pollsters ask whether you are in favor of raising the minimum wage. Practically everyone is in favor of raising wages as long as higher wages are paid by someone else.

No pollster asks whether a person would be willing to pay 39 percent more for a service. The answer to such a question is generally no, and not politically acceptable.

Still, it does not hurt to try to influence public opinion, so fast-food workers, who constitute 44 percent of minimum wage workers, have their own public relations firm, Berlin Rosen.

In July, I appeared on NPR with Terrance Wise, a fast-food worker in Kansas City. He was represented by Danny Massey of BerlinRosen.

Massey and Laura Brandon are organizing strikes at fast-food restaurants in 100 cities on Thursday. According to their media advisory, “the fight for $15 an hour and the right to form a union without retaliation continues to grow.”

Imagine that. BerlinRosen believes that a 39 percent wage increase to $10.10 is inadequate. BerlinRosen wants a more than 100 percent wage increase for even the weakest of workers.

BerlinRosen’s clients include the Service Employees International Union, which is organizing Thursday’s strikes, as well as the United Food and Commercial Workers International Union and the Communications Workers of America.

Those who would be harmed by increasing the minimum wage are young people. Half of minimum wage workers are younger than 25, and 24 percent are teens. This group’s unemployment rates are already higher than the 7.3 percent average rate. The teen unemployment rate is 22 percent, and the African American teen unemployment rate is 36 percent. The youth unemployment rate is 12.5 percent.

These workers' employment prospects would be harmed if the hourly minimum wage rose to $10 or $15. No first job, no career -- despite the orchestrated talking points of the PR firms.

Examiner Columnist Diana Furchtgott-Roth (dfr@manhattan-institute.org), former chief economist at the U.S. Department of Labor, is a senior fellow and director of Economics21 at the Manhattan Institute for Policy Research.
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