What Raising The Minimum Wage Will Cost You

We are a country of about 317 million people. Of that, approximately 70 million are under the age of 18 and are presumed to be living with their parents and off their parent's incomes.  So, essentially, there are roughly 250 million people who should be receiving some form of income. That's how many would be affected by higher prices that would be passed on by raising the minimum wage by $2.85 an hour to the proposed $10.10/hour.

According to the Congressional Budget Office (CBO), raising the minimum wage for the 1.6 million workers who earn that wage would actually result in a total of 16.5 million workers seeing their incomes increase. The reason for this is that when you increase the bottom salary level by an extraordinary 41% (as this increase would do), all the salaries above that level will have to be adjusted upwards in order to maintain equity in any typical company's pay scale ladder.  The head of Obama's National Economic Council, Gene Sperling, predicts an even higher number with as many as 28 million seeing their incomes increased.

Now, if we use the 34.2 hours that the Bureau of Labor Statistics says the average American works each week, and we assume the CBO's 16.5 million number that a $2.85 per hour increase results in, an annualized cost of  almost $85 billion will be passed on to us in higher prices.  Divide that by the 250 million people who pay the bills and that's a per person cost of $350 year; or, $700 per family.  If you use the Sperling's 28 million, you're talking about almost $600 a year per individual or $1200 per family.  Obviously, Obama and the Democrats don't seem to think you'll miss all that cash. 

Like it or not, after the minimum wage is increased, 250 million of us will be $350 to $600 poorer each year; and, on an ongoing basis.  For many, that extra cost may have just wiped out any raise they may have received. Especially hurt are the unemployed; the poor; people on fixed incomes; and, those 2 million workers who aren't even paid a minimum wage.

What does that say about Obama's pet topic de jour: Income Inequality?   The simple fact is that when prices are pushed up by wage inflation, the majority of Americans will only get poorer.  It has just the opposite effect of  minimizing poverty.  Job creation and low unemployment are the real means by which poverty is reduced.  When there are too few workers competing for far too many jobs, employers are necessarily forced to pay higher wages in order to fill openings and keep good people. That's how it has worked for years.

We currently have the highest minimum wage in decades and, at the same time, median incomes are down almost 8% with still high unemployment and we have a record number of Americans -- 46.5 million -- who are in poverty.  And, let's not forget, the recession ended nearly 5 years ago. I personally believe that the reason this has been one of the worst recoveries in our history is because or economy is still trying to recover from increases in the minimum wage that took place during the heart of this last recession.  I also believe that our slow growing economy will be even worsened further by another massive increase in the minimum wage.  It is just folly to believe that forced wage increases won't have serious economic consequences.

References:

Raising the minimum wage would help 16.5 million workers but could cost 1/2 million jobs: http://www.washingtonpost.com/business/economy/minimum-wage-hike-could-kill-500000-jobs-but-help-alleviate-poverty-cbo-reports/2014/02/18/d171c130-98de-11e3-80ac-63a8ba7f7942_story.html

Increasing the nation's minimum wage to $10.10 per hour would help between 24 million and 28 million people: http://politicalticker.blogs.cnn.com/2014/03/05/obama-frames-minimum-wage-fight-in-global-terms/

Characteristics of a Minimum Wage Worker: http://www.bls.gov/cps/minwage2012.htm

Average Weekly Work Hours: http://www.bls.gov/news.release/empsit.t18.htm