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The Daily Wildcat

The Daily Wildcat

 

    Loss of jobs outweighs gains for low-income workers

    As much as we’d all like to make a few extra dollars an hour, an increase in federal minimum wage would hinder the United States economy a lot more than it would help it.

    During President Barack Obama’s State of the Union address in January, he proposed an increase in the federal minimum wage from $7.25 to $10.10 an hour. According to the Washington Times, Labor Secretary Thomas Perez said the executive order would go into effect Jan. 1, 2015.

    In the address Obama stated this as an opportunity to increase costumer spending, strengthen the economy and help low-income households. There are also many campaigns, like raisetheminimumwage.com, which claim that minimum-wage increases will allow low-wage workers to spend more money in their local communities.

    Since the money to support this federal minimum wage isn’t going to come out of thin air, it can only be expected that employers will be responsible for coming up with these funds, meaning people are going to lose their jobs.

    A report by the Congressional Budget Office estimates that there will be 500,000 people who have lost their jobs by 2016. The report said that the eliminated jobs will increase the earnings of low-wage workers by a total of $31 billion, but only 19 percent would go to low-income families. In fact, the study said that families making three times the poverty threshold, those that don’t necessarily need the money, will benefit most.

    “The increased earnings for some workers would be accompanied by reductions in real (inflation-adjusted) income for the people who became jobless because of the minimum wage increase, for business owners, and for consumers facing higher prices,” the report said.

    Here’s a hypothetical situation. You’re the shop owner in a poor area of Tucson. You sell shoes to a target demographic that only makes an average of $7.25 an hour, so you adjust your prices to meet the consumers needs.

    Now let’s say everyone in your demographic was suddenly making over $10 an hour. Would you increase your prices?

    You’d be a fool not to. Your clients can pay more — you should be charging more.

    How are daycare centers, apartments complexes, healthcare providers, service workers or any other type of profitable businesses any different? The proposed federal minimum wage increase would give these businesses the opportunity to increase their prices, especially since firing 500,000 people means no more paying income tax on those workers.

    The federal minimum wage, hasn’t increased in five years. Mark Stegeman, associate professor of economics at the UA, proposed that the minimum wage could increase, but it should be set to index with inflation.

    “It seems a bit low,” Stegeman said, “It could probably go up … but 40 percent in three years seems excessive.”

    That extra $3 an hour is not worth the cost of 500,000 jobs. In fact, if the federal government is going to be recklessly excessive with its proposals, it shouldn’t be involved. It is the states, with separate economies, costs of living and inflation rates that should and can best determine whether or not to increase the state minimum wages.

    Making laws to ensure that states such as New York and California, where cost of living is drastically above average, don’t abuse minimum wage laws is much more practical. Set the minimum wage at the cost of living per state and let it adjust with inflation. Doing that would mean no one will have to worry about the federal minimum wage again and 500,000 people can keep their jobs.

    Plus, the minimum wage will still go up. You can still feel like you’re making it rain, which we all know is the best part.

    — Kasey Shores is a journalism sophomore. Follow her @kaseyshores.

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