Opinion: $15 minimum wage proposal is too high, too fast
There are some things in life that fall in the “be careful what you wish for” category. A $15 minimum wage might be one of them.
Last week, the U.S. House of Representatives approved a bill to more than double the federal minimum wage, taking it from $7.25 to $15 an hour by 2025 and then adjusting the rate annually. The bill would also increase the minimum wage for tipped employees, teenagers and employees with disabilities until they all equal the regular minimum wage rate.
Most Democrats voted for the increase and most Republicans opposed it. Democrats are now licking their chops, seeing it as a great wedge issue for the not-so-distant 2020 general election.
Democrats may be right that an increase is “long overdue,” but they are ignoring basic economic principles and numerous economic studies that have shown these “feel good” policies often lead to reduced employee hours, job losses and higher prices for products and services.
In fact, the nonpartisan Congressional Budget Office (CBO) report has indicated that this 107 percent increase of the federal minimum wage would have disruptive impacts on employers, particularly small businesses, as well as negative effects on the job opportunities for first-time and lower-skilled workers. The report stated that, when fully implemented, a $15-per-hour minimum wage could result in as many as 3.7 million workers losing jobs and total real family income dropping by $9 billion.
Put another way, it’s true that this proposal could bolster the take-home pay of some workers — but it also could bring the paychecks of another 3.7 million down to zero, hurting entry-level and low-skill workers the most.
States like Michigan have taken steps to increase their minimum wage, choosing a rate that is manageable for employers and appropriate for their state’s economy. They’ve carefully studied what businesses can absorb without tipping the balance too far and creating scenarios that push employers to cut or automate jobs or reduce hours or benefits.
At $9.65 an hour (and increasing to $12.05 an hour over the next several years), Michigan’s minimum wage is already well above the $7.25 “federal floor.” However, there are serious questions about how much more Michigan job providers, especially small businesses and those operating in small or rural communities, can afford or absorb. A $15 an hour minimum wage may work for New York City, San Francisco and Chicago, but will it work for Escanaba, Pentwater and Port Huron?
Congress should heed the CBO’s warning signs that, as written, this proposal is too high, too fast and will have a devastating impact on businesses large and small and negatively impact our state and nation’s economic progress. An alternative would be for Congress to double down on efforts to create a vibrant economic climate, leading to organic job creation and growth. Ultimately, a competitive job market is the best way to grow wages and create increased economic opportunities for all.
Wendy Block is vice president of business advocacy for the Michigan Chamber of Commerce.