Raising the minimum wage helps, doesn't hurt

Raising the minimum wage helps, doesn't hurt

By Dr. Boyce Watkins
9:00 AM on 07/24/2009

I am a curious professor, a compassionate capitalist and the owner of a small business. All of these hats create a complex perspective on whether or not it is a good idea to increase the minimum wage. After all, we are in a recession, and one might be tempted to argue that any sort of pay increase would slow down our nation's economic recovery, eliminate jobs, and significantly reduce corporate profitability.

Sorry to burst those bubbles, but the data don't validate most of the above concerns.

First of all, the minimum wage was introduced during the Great Depression, the mother of all economic downturns. The Fair Labor Standards Act of 1938 was designed to ensure that the most vulnerable Americans were no longer going to be exploited by the power of big business. The Great Depression came to an end shortly thereafter, and there is no evidence that it slowed down the economic recovery in any significant way.

Secondly, the budgetary implications of minimum wage increases are not very large. According to the Bureau of Labor Statistics, only 2 percent of all men and 3.6 percent of all women currently earn the minimum wage. But while the impact on our national budget is small, the gains for those affected are tremendous: there are nearly 5 million children in families who earn the minimum wage, and nearly all of these children are going to have better lives in the advent of an increase.

Third, the impact of a minimum wage increase is further minimized by the fact that 18 states and the District of Columbia have already implemented a minimum wage that matches the $7.25 per hour being offered in the current federal adjustment. Additionally, another 9 states had a minimum wage that exceeded the previous rate of $6.55 an hour. So, the truth is that the minimum wage is simply not worth fighting over from a political standpoint, since most states realized that the federal minimum wage was already too low.

Finally, the massive job losses some expect due to a minimum wage increase are simply non-existent. Even in the restaurant industry, which employs a disproportionate number of minimum wage earners, 76% of all restaurants did not cut jobs as a result of the last increase. The 2008 Survey of the National Restaurant Association also revealed that 74% of all restaurants did not put off hiring new workers. So, in spite of the fact that a few jobs might be lost, there appears to be a net wealth benefit for low wage earners.

The bottom line is that the minimum wage is more of an issue of advocacy. If you advocate for women, children, minorities and the poor, you are going to support most minimum wage increases. When it comes to the least privileged members of our society, trickle-down economics simply does not work.