Instead of a wage increase

February 23, 2014 

Our president issued an executive order raising the minimum wage for the employees of government contractors to $10.10. The current rate is $7.25.

The nonpartisan Congressional Budget Office predicts raising the minimum wage would lift 900,000 workers out of poverty but the study reports that an estimated 500,000 jobs would be eliminated as a result.

An estimated 2 million people work on government contracts but only a small fraction work for minimum wage. About 75 percent earn less than $10 per hour.

So 1.4 million people earning $7.25 per hour minimum wage earn a collective weekly total of $406 million. If 900,000 workers collectively earn $363.6 million per week after the wage increase but 500,000 get laid off, resulting in a loss of $145 million per week, collectively the group went down in total income.

Not all the workers are working for minimum wage, so in reality the group will be about the same before as after, but 500,000 are now unemployed. If the workers had been averaging $9 per hour and got a raise to $10.10 per hour, the collective group wages still drop from $504 million to $363.6 million after the layoffs.

Is that really an improvement?

Wouldn't it be better to entice the private sector to create new jobs that all pay better than $10 per hour, let the presently employed move into those jobs and let the presently unemployed have those old jobs?

Brad Sewell


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