Prominent Economists’ Address the Reality of Raising Minimum Wage

Several prominent economists have recently expressed their concerns surrounding the latest union-backed protests to raise the minimum wage. In his Op-Ed published on December 4, Douglas Holtz-Eakin, president of the American Action Forum and former Chief Economist of President George W. Bush’s Council of Economic Advisers, addressed the recent discussion surrounding minimum wage. Holtz-Eakin argued that raising the minimum wage will further slow the nation’s economic recovery, prevent job creation and ultimately harm those who continue to struggle.

According to Holtz-Eakin, raising the minimum wage will perversely affect the unemployed and low-skilled workers, broadening barriers and further stifling job growth. “Great distress and good intentions, however, are not the same as sensible policy.” he wrote.

He goes on to explain that, “80 percent of minimum wage workers are not actually in poverty, increasing the federal minimum wage to $10, as some have proposed, wouldn’t benefit 99 percent of the people in poverty.” Holtz-Eakin’s position on economic recovery is not destroying jobs but rather creating them, and “imposing a $5 to $15 billion price tag on small and new businesses that dominate minimum-wage job creation would simply get in the way”

On December 5, protesters led by the Service Employees International Union (SEIU) picketed several quick service franchise restaurants throughout the country while advocating for an increase in the federal minimum wage. These union-driven, minimum-wage protests disregard that the federal minimum wage was made for entry-level, low-skilled positions. For franchise small business owners, increasing the minimum wage would substantially decrease bottom line. With lower earnings, businesses would be less able to hire new employees and be forced to reduce training and management opportunities for existing ones.

Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute and former Chief Economist of the U.S. Department of Labor, also voiced her opposition to raising the minimum wage in her Op-Ed entitled Make It Easier to Create Jobs, “Rather than raising the minimum wage, Congress and the president need to make it easier for firms to create jobs so labor would be in greater demand and workers would have more ways to move up.”

Increasing the cost of labor in the current economy will result in higher prices for consumers, lower foot traffic and ultimately loss of entry-level jobs. As Holtz-Eakin illustrates, a better way to help people, especially those in need, “is to improve the economy and the job market, and empower workers with the skills they need for better jobs.”