Plans to raise the minimum wage, like President Obama's goal of adding $1.75 to the current $7.25 an hour rate, are a job killer, according to a new analysis from a top member of the Federal Reserve Board and two scholars.
What's more, wrote the Fed's William Wascher and University of California economists David Neumark and J.M. Ian Salas, new-styled studies that suggests the minimum wage doesn't cut jobs have "serious problems" and are just plain wrong.
Their January report, "Revisiting the minimum wage-employment debate: Throwing out the baby with the bathwater?" was published by the nonpartisan National Bureau of Economic Research and heralded by Harvard University which noted that the same three authors previously reported that "in the short run, minimum wage increases both help some families get out of poverty and make it more likely that previously non-poor families may fall into poverty."
The trio conclude in the new report that the overall evidence "still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage."
The Harvard research paper from its Shorenstein Center that highlighted Wascher's paper also confirmed fears that a wage hike would prompt some businesses, still struggling to make ends meet, to cut staff. Harvard explained why raising the minimum wage can hurt workers:
"At the ground level, this all suggests that a small firm in a low-wage region might, for example, respond to an increase in the minimum wage by having the owner pick up more hours herself and cut back on an employee's overtime hours. A large firm might likewise try to squeeze more work out of its salaried managers and hire more part-time workers, to avoid benefits obligations."