"Financial Impacts and Policy Considerations of a Minimum Wage Increase"
The Chamber – Manitowoc County Business Connects
November 3, 2014
Who Earns the Minimum Wage?
Minimum Wage Increase:
• Employer Impacts
• Employee Impacts
• The Poverty Argument
• The Economic Stimulus Argument
• The “Trapped Wages” Argument
• The Single Mom Argument
• The Economic Equality Argument
Founded in 1911, WMC is the State Chamber of Commerce and
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
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.
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.
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%.
Raising the minimum wage will increase the cost of labor for
• Higher costs paid for wages
• Higher Social Security taxes
• Higher Medicare taxes
• Higher unemployment taxes
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.
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.
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.
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
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
MacIver Institute: 91,000 lost jobs in Wisconsin
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
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)
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.
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.
Fact: We have a $15 trillion economy - $30 billion is
immaterial to the macroeconomic picture, and would not be
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
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)
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.
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
Polls often show strong public support for increasing the minimum wage,
largely because people don’t understand the issue and economic
WMC commissioned a statewide survey in February, and found 53%
support raising the minimum wage to $10.10 per hour, with 40%
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!
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.
Vice President of Government Relations
Wisconsin Manufacturers & Commerce
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