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Fears of job losses from higher minimum wage overblown

12/31/2018

Fears of job losses from higher minimum wage overblown

One of the most common refrains that bubble up whenever there's discussion about a higher minimum wage is that such an increase will actually be a net negative for low-paid workers. The thinking, such as it is, goes that if restaurants have to pay higher wages, they will simply just lay workers off. However, there's plenty of evidence to suggest that this not only isn't the case, but that higher wages actually create more jobs in the long run.

The latest of these arguments comes in New York City, where the minimum wage will rise $2 at the start of 2019, to a new high of $15 per hour for employees with 11 or more employees, according to the New York Post. Business-side advocates say that when employers have to pay their workers more, they bear the additional cost only by raising prices or simply letting people go.

In the state as a whole, New York will raise wages to $11.10 per hour, though some regions will go above and beyond that level, the report said. Meanwhile, nearby New Jersey's wage only increases 25 cents per hour to $8.85, and Connecticut's doesn't change at all, holding steady at $10.10.

What's the reality?
While businesses express concern that they will have to give a larger piece of the pie to their workers, or simply lay them off, data from Seattle - where such increases have long since gone into effect - shows that their concerns are, at best, overblown, according to Barry Ritholtz, CIO of a wealth management fund, wrote in Bloomberg. Indeed, Seattle raised its minimum wage to $15 per hour a few years ago and, despite the concerns of restaurateurs and bar owners, have actually seen employment in the industry on the rise - sharply.

And while that comes at a time when the broader economy is doing better as well, experts are largely convinced that the hospitality industry has outperformed expectations, the report said.

"We can't emphasize enough just how wrong many of the initial analyses of the wage increase have been," Ritholtz wrote. "Cognitive dissonance is a powerful force. If your ideology includes the belief that all government attempts at raising living standards are doomed, then of course you are going to be against mandated minimum wages."

Why it's important
All these state- and city-level increases come at a time when the federal minimum hasn't risen in nearly nine and a half years, according to The Washington Post. The problem with that lack of increase is that, as time goes on, inflation devalues the minimum wage, meaning that the $7.25 per hour seen at the federal level today is really only worth $6.19 in July 2009 dollars. That's a decline in purchasing power for the nation's lowest-paid workers of nearly 15 percent in less than a decade.

When companies in a strong economy want to make sure they are able to both attract and retain talent on an ongoing basis, offering higher pay and better benefits is perhaps the best way to do so.

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