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"Financial Impacts and Policy Considerations of a Minimum Wage Increase"


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"Financial Impacts and Policy Considerations of a Minimum Wage Increase"
Presented by: Scott Manley, Vice President of Government Affairs, Wisconsin Manufacturers and Commerce (WMC)

Published in: News & Politics
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"Financial Impacts and Policy Considerations of a Minimum Wage Increase"

  1. 1. The Chamber – Manitowoc County Business Connects With Government November 3, 2014
  2. 2. Who Earns the Minimum Wage? Minimum Wage Increase: • Employer Impacts • Employee Impacts Policy Considerations: • The Poverty Argument • The Economic Stimulus Argument • The “Trapped Wages” Argument • The Single Mom Argument • The Economic Equality Argument Public Opinion Wisconsin’s Chamber
  3. 3. Wisconsin’s Chamber
  4. 4.  Founded in 1911, WMC is the State Chamber of Commerce and Manufacturers Association  More than 3,700 members statewide, or about ¼ of Wisconsin’s private sector workforce  Represent all sectors of economy, and businesses of all size  Mission: To make Wisconsin the most competitive state in the nation to do business Wisconsin’s Chamber
  5. 5. Wisconsin’s Chamber
  6. 6.  In 2012, the U.S. Department of Labor (DOL) reported 3.6 million minimum wage workers.  Civilian labor force in 2012 averaged 154.9 million workers.  Minimum wage workers comprised 2.3% of the labor force. Wisconsin’s Chamber
  7. 7. Looking at workers aged 25 and older, only 1.1% are minimum wage earners. According to Pew Research, 64% of minimum wage workers are only working part-time, which typically does not indicate someone working a career. Wisconsin’s Chamber
  8. 8. Wisconsin’s Chamber
  9. 9. U.S. Census Bureau: only 16.5 percent of minimum wage recipients are raising a family. The remaining 83.5 percent are teenagers living with working parents, adults living alone, or dual-earner married couples. Percentage of total workforce raising a family on minimum wage is 0.45%. Wisconsin’s Chamber
  10. 10. Raising the minimum wage will increase the cost of labor for employers, including: • Higher costs paid for wages • Higher Social Security taxes • Higher Medicare taxes • Higher unemployment taxes Wisconsin’s Chamber
  11. 11. Higher labor costs from government-mandated wage hikes do not result in additional efficiency, output or productivity. Higher costs without a corresponding economic gain make it extremely difficult to grow the business, and is not sustainable in the long term. Wisconsin’s Chamber
  12. 12. How do employers cope with higher labor costs? They typically respond by: • Reducing hours available for work • Reducing employee benefits • Cutting existing employees • Stop hiring new/additional employees • Raising prices for goods & services None of these options are good outcomes for employees. Wisconsin’s Chamber
  13. 13. Because minimum wage workers tend to be young, unskilled, entry level workers, the loss of minimum wage jobs is especially harmful to this category of employees. The loss of entry level jobs where workers can learn “soft skills” and begin to climb the economic ladder will have negative ripple effects on our economy and employers’ ability to hire in the future. Wisconsin’s Chamber
  14. 14. How many jobs would be lost by raising the minimum wage from $7.25 to $10.10 per hour? U.S. CBO: estimated about 500,000 lost jobs nationwide, but noted possibility of up to 1 million Employment Policy Institute: 27,659 lost jobs in Wisconsin Wisconsin’s Chamber
  15. 15. How many jobs would be lost by raising the minimum wage from $7.25 to $15.00 per hour? National estimates have been difficult to find, but wage and payroll tax impacts would amount to $17,500 cost increase per employee. (Forbes) MacIver Institute: 91,000 lost jobs in Wisconsin Wisconsin’s Chamber
  16. 16. The study focused on raising the minimum wage to $15 per hour in the fast food sector. Average fast food restaurant’s wages/payroll account for 26% of sales. Profit margin is typically around 3% of sales. $15 per hour minimum wage would result in: • 36% fewer hours worked • 38% higher prices • 36% less sales • 77% drop in profits Wisconsin’s Chamber
  17. 17. Wisconsin’s Chamber
  18. 18. Talking Point: Minimum wage workers are living in poverty, and need higher wages to sustain themselves. Fact: In Wisconsin, 70% of minimum wage workers live with a parent/relative, or are in a dual earner household. (Census Bureau) Fact: The average family income in Wisconsin with a minimum wage earner is $ 63,293. (Census Bureau) Wisconsin’s Chamber
  19. 19. Fact: Nationally, in 94 percent of families with an adult who works a job that pays the minimum, the spouse works as well. Fact: In 80% of minimum wage families with a children present, the minimum wage accounts for less than 20 percent of the household’s total income. Wisconsin’s Chamber
  20. 20. Talking Point: Raising the minimum wage will inject between $15 billion to $30 billion of new spending power into the economy, stimulating job creation. Fact: This argument fails to account for the lost wages from terminated workers, who now have zero buying power. Wisconsin’s Chamber
  21. 21. Fact: We have a $15 trillion economy - $30 billion is immaterial to the macroeconomic picture, and would not be impactful. Fact: In 2009, an $800 billion federal stimulus did not result in significant or long-term job creation, nor did it reduce unemployment or improve the economy. In fact, unemployment continued to remain higher than it was prior to the stimulus Wisconsin’s Chamber
  22. 22. Talking Point: Workers are being “trapped” at the minimum wage by employers who refuse to increase wages unless the legislature forces them to pay more. Fact: Two-thirds of minimum wage workers receive a raise in less than a year, with a median raise of 24%. (Meer & West, National Bureau of Economic Research) Wisconsin’s Chamber
  23. 23. Talking Point: Most minimum wage workers are single moms struggling to provide for their kids. There are few jobs more difficult than being a single mom, and they are deservedly a very sympathetic demographic. That said… Fact: In Wisconsin, only 9% of minimum wage workers (0.29% of all workers) are single earners with kids, and numerous public assistance programs supplement that income. Wisconsin’s Chamber
  24. 24. Talking Point: Increasing the minimum will promote economic equality by lifting people out of poverty. Fact: Between 2003 and 2007, a total of 2 states raised their minimum wage above the federal minimum. A 2010 study by Sabia and Burkhauser found no evidence that poverty was reduced in any of those states. Fact: US Census bureau reports that 59.7% of working-age people in poverty do not work, and are therefore not impacted by a minimum wage hike. Wisconsin’s Chamber
  25. 25. Polls often show strong public support for increasing the minimum wage, largely because people don’t understand the issue and economic implications. WMC commissioned a statewide survey in February, and found 53% support raising the minimum wage to $10.10 per hour, with 40% opposed. When told that raising the wage could result in 27,000 lost jobs, support dropped to 39%, with 51% opposing the idea. Messaging really matters! Wisconsin’s Chamber
  26. 26. The politicians, labor unions and liberal advocacy groups supporting the national effort to increase the minimum wage to $15 per hour are selling it with an income equality message. Yet the exact opposite would happen in practice. The massive lost jobs and economic dislocation resulting from a $15 per hour minimum wage would hit low-wage, entry level workers the hardest – and would only widen the gap between the richest and poorest workers in this country. Wisconsin’s Chamber
  27. 27. Scott Manley Vice President of Government Relations Wisconsin Manufacturers & Commerce (608) 258-3400 Follow me on twitter: @ManleyWMC Wisconsin’s Chamber