Eager to change the conversation from the disastrous roll-out of the healthcare law, Senate Democrats and President Obama have rallied behind a proposal to create a $10.10 minimum wage—a nearly 40 percent increase over the current $7.25. (The proposal would also raise the minimum wage for tipped employees by over 230 percent.)
Here are the facts on $10.10.
- Most of the employees affected by a $10.10 minimum wage do not work at large corporations with 1,000+ employees. In fact, an Employment Policies Institute analysis of Census Bureau data show that 46 percent work at very small businesses with fewer than 100 employees—where the impact of the wage hike proposal will be felt most.
- A $10.10 minimum wage means fewer job opportunities. Forty-three percent of affected employees work in either retail or restaurants & accommodations—both industries with single-digit profit margins, and little room to absorb a dramatic minimum wage increase without reducing costs by opting for automated, self-service alternatives. Eighty-five percent of the most credible economic studies from the last 20 years confirm that lost jobs are associated with a higher minimum wage. That consensus has only grown stronger in recent years. Recent studies claiming to overturn this consensus have been roundly refuted in a 70-page report from economists at the University of California-Irvine and the Federal Reserve Board, forthcoming in Cornell University’s labor economics journal.
- A $10.10 minimum wage will not reduce poverty. Proponents argue that a higher minimum wage will help lift families out of poverty. We’ve heard this rhetoric before, yet the 28 states that raised their minimum wages prior to the last federal minimum wage hike saw no associated reduction in poverty rates. One reason was poor targeting—a problem that still plagues the $10.10 proposal. According to Census Bureau data, sixty percent of the individuals covered by the President’s proposal are in households earning $30,000 or more per year, and thirty percent are in households earning $60,000 or more per year.
Across all employees, the average family income is $52,396. The family income is so high because 57 percent of covered employees are either married with a spouse who also works, or living at home with family or relatives.
Another reason a $10.10 minimum wage won’t reduce poverty is that 59.7 percent of the working-age poor don’t have employment and thus can’t benefit. These individuals don’t need a raise—they need a job. Unfortunately, a nearly 40 percent increase in the minimum wage—and a 232 percent increase in the tipped wage—would put a job further out of reach for both less-skilled adults and young people.