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Why Poor States Reject a Minimum Wage Hike

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Why Poor States Reject a Minimum Wage Hike

May 19, 2014

How odd that the states most affected by the minimum wage are a group of Republican states, namely Alabama, Arkansas, Florida, Idaho, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, Texas, and West Virginia.

In these 11 states, more than a quarter of workers earn below President Obama’s proposed $10.10 an hour minimum wage. They have the lowest wages in the country. 

If the minimum wage helped low-income workers, it is to be expected that Members of Congress representing these states would be vociferous in their support for a minimum wage.  But no, these Members are against such an increase.

This is because raising the minimum wage has unintended consequences.  Well-meaning people push for minimum wage hikes because they see them as a way to lift the poor out of poverty. But arbitrary wage floors keep low-skill, inexperienced workers from getting jobs. Minimum wage jobs often act as a stepping stone to a better career and higher wages – typically, minimum wage workers do not stay in their jobs for long periods of time before moving up to better employment.

For example, the minimum wage in American Samoa’s canning industry is $4.76 an hour. The Fair Minimum Wage Act of 2007 required the minimum wage to be raised by 50 cents a year until it reached the mainland minimum wage, but President Obama has signed bills into law postponing the annual increases first until 2012, and then until 2015. It is likely that he will sign another bill delaying the increases still further, because everyone knows that raising the minimum wage in American Samoa would decimate the island’s fishing industry.

In the 12 states with the lowest incomes, hourly wages of income earners at the the 25th percentile all wage earners in the state are below $10.10. Mississippi would be the hardest-hit, with a 25th percentile hourly wage of $9.34.

 

 

 

 

 

In every state but one, at least 10 percent of workers would be affected by a $10.10  minimum wage. According to the Bureau of Labor Statistics, Alaska is the only state in which the 10th income percentile wage is above $10.10 an hour.

With vast differences in wages across the country, a one-size-fits-all minimum wage at the federal level makes little sense. States and cities have not been reluctant to pass minimum wage increases on their own: 21 states have minimum wages set at hourly rates above the federal level. Just four states have rates below the federal minimum, while five additional states have no state minimum wage laws. In practice, employers in these states must still pay the federal minimum wage in spite of the lower state laws.

In February, the nonpartisan Congressional Budget Office estimated that 500,000 employees would lose their jobs if the hourly federal minimum wage rose to $10.10, although the report included the possibility that up to 1 million workers could become unemployed. For various statistical reasons, the report was actually less dire on the effects of the minimum wage than it should have been.

Labor unions advocate minimum wage increases because many union contracts are tied to the minimum wage.  With increasing frequency, unions, under the guise of worker centers, are invading non-unionized workplaces and organizing strikes and protests in favor of increasing the minimum wage by more than 100 percent. 

Unions and the worker centers they support held a global day of strikes on May 15, demanding a $15 an hour minimum wage for fast food workers. As harmful as a $10.10 an hour minimum wage would be, a level of $15 would be much worse. 

Labor unions have tried to claim these protests are part of a grassroots movement, but the central planning and public relations behind the protests, as well as the small number of workers who take part, suggest otherwise. 

A $15 an hour minimum wage might not affect workers in affluent Seattle, where less than 8 percent of employment is in food preparation and the median hourly wage is $22.43. Other areas are different. Myrtle Beach, South Carolina has a completely different economic situation: food preparation is the largest major employment group, and the median hourly wage is only $11.52, just barely higher than half of Seattle’s. Both cities should not be forced to have the same minimum wage.

The federal government allows cities and states to raise their minimum wages above the federal floor. Why not drop the federal minimum wage and allow states and cities to set whatever wage floors they desire? Some might choose a $4.76 minimum wage, like American Samoa. The mayor and city council members of Myrtle Beach know the needs of their constituents better than does President Obama. Minimum wages inflict harm wherever they exist, but a federal minimum wage floor is the most economically-destructive.

 

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