February 4, 2014

A Higher Minimum Wage Harms the Economy

Keith Hall

Former Senior Research Fellow
Summary

As expected, President Obama used part of his State of the Union speech to advocate for a higher federal minimum wage. There is a strong argument that the costs of this policy proposal outweigh the benefits. And that argument is stronger when you take a closer look at the numbers to see who could be directly affected by a higher minimum wage, because it might not be who you think.

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As expected, President Obama used part of his State of the Union speech to advocate for a higher federal minimum wage. There is a strong argument that the costs of this policy proposal outweigh the benefits. And that argument is stronger when you take a closer look at the numbers to see who could be directly affected by a higher minimum wage, because it might not be who you think.

Certainly the impact of the recession on the labor market has forced some higher skilled workers into lower paying jobs. However, at this point most of the 8.8 million people making at or near the minimum wage (between $7.25 and $8.25 an hour) are still under the age of 25 and have a high school degree or less. The biggest economic problem for this group is employment of any type. Less than half of this group is even in the labor force and for those that are the unemployment rate is 21.7 percent – well over three times the national average.

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