Sam’s Club closed the Los Colobos location in Carolina PR on 7-21-17. Plaza Escorial location in Carolina will remain open

There are consequences to raising taxes!  Higher taxes drive businesses and consumers away.  Higher taxes lead to less money in the pockets of consumers, less money for businesses to employ people, less money for businesses to expand.

http://caribbeanbusiness.com/carolina-sams-club-consolidation-impacts-250-employees

Carolina Sam’s Club consolidation impacts 250 employees

By on July 19, 2017

SAN JUAN – Amid the state of uncertainty caused by Puerto Rico’s economic crisis, membership warehouse chain Sam’s Club announced Wednesday it will consolidate its operations in Carolina. Its Los Colobos location in the municipality will be closed, leaving its 250 people employees jobless starting Friday.

Iván Báez, spokesman for Walmart and Sam’s Club in Puerto Rico, said in a WKAQ 580 radio interview that “the entire retail sector is undergoing a transformation” due to the island’s fiscal crisis. Báez said the store’s poor performance and hiked Carolina taxes were key reasons for the decision.

The chain will now consolidate its operations in that town at Sam’s Club in Escorial. Despite the closure, Báez assured that the Los Colobos employees may opt to work in one of the other 10 Sam’s Club stores on the island and may also request being interviewed to work at the company’s Walmart locations.

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Exodus From a Historic Puerto Rican Town, With No End in Sight

An abandoned furniture store in Lares, P.R. The town in the mountainous heart of the Caribbean island has lost more people to migration than any other municipality since 2010. Credit Erika P. Rodriguez for The New York Times

LARES, P.R. — This picturesque mountain town, renowned for its rich coffee, peculiar ice cream and a historic, if short-lived, rebellion, now has a far less welcome distinction.

On an island where about 400,000 people have moved away since the 2000 census, Lares lost the highest percentage of its residents — almost a quarter of its population since the census. The downtown plaza that marks the route that rebels took in 1868 to wrestle free from Spain’s colonial grasp is now surrounded by abandoned storefronts. Handwritten signs offering battered buildings for rent or sale have become the hallmark of a city struggling to keep pace with a continuing exodus.

Photo

Photographs of local beauty pageant contestants adorn the wall at the Municipal Legislature in Lares, P.R. Credit Erika P. Rodriguez for The New York Times

Even Heladeria Lares, the celebrated ice cream parlor where tourists and locals alike once lined up to savor frozen treats with eccentric flavors like rice and pigeon peas, garlic and codfish, has suffered a drop of 30 percent in business this year, as an increasing number of the town’s 26,000 residents face foreclosure on their homes, cannot find jobs and take off for the mainland United States.

“It’s nurses, teachers, doctors, firefighters. The dentist left,” said Elvin Cuevas, who manages the Lares Department Store, which offers furniture and jewelry, but does not sell much of either. “The two police officers who for years guarded that corner right there are in Texas. One day, they were gone.”

A quarter of Lares’s people are believed to have fled since the 2000 census. Credit Erika P. Rodriguez for The New York Times

Lares’s decline, following the long descent of its agricultural economy, could be a harbinger for Puerto Rico as it braces for the reverberations of its economic morass. A few thousand Puerto Rican teachers could be losing their jobs this fall when the government closes 167 schools, four of them in Lares. Pensioners are bracing for pay cuts, while the sales tax has risen to 11.5 percent. Businesses are struggling to keep their doors open.

Puerto Rico is in the midst of a financial collapse with no end in sight. The government is unable to pay $123 billion in debt and pension obligations and recently declared a form of bankruptcy. Island affairs that were being controlled by a fiscal board in New York are now in the hands of a bankruptcy judge there. The largest government default in United States history came after a decade-long economic downturn that left Lares with a 22.7 percent unemployment rate.

A vacant store for sale in Lares, P.R. Credit Erika P. Rodriguez for The New York Times

Puerto Rico was once the sixth-largest producer of coffee in the world; Lares’s beans were so special that they were directed to the Vatican. But a long period of economic decay shuttered farms, making Lares one of the island’s poorest municipalities. The government cut things like fertilizer subsidies; crop yields dropped, too.

There were fewer than 700 farms in Lares in 2012, down from 1,209 a decade earlier, Department of Agriculture figures show. The average wage in Lares is just $323 a week, according to the Bureau of Labor. A couple of years ago, Lares had one of the lowest median incomes on the island: $11,353.

Moráima Fuster serving ice cream at Heladeria Lares. Business is down 30 percent at the ice cream store, known for its more than 60 unusual flavors, including avocado and rice & beans. Credit Erika P. Rodriguez for The New York Times

“The people who leave come back and tell everyone how hard it is in Orlando, that you can’t survive there without three jobs,” Mr. Cuevas said. “The difference is that over there you find the three jobs. Here, you find zero job.”

In Lares, a central western town about an hour and a half from San Juan, the population declined 13.4 percent over the past six years, according to United States census figures. (In absolute numbers, Puerto Rico’s capital, San Juan, has lost the most people, nearly 50,000.)

Eliezer Roman cutting down weeds on a hillside of Hacienda Lealtad’s land in preparation for the next coffee crop in Lares, P.R. Credit Erika P. Rodriguez for The New York Times

People have always left Puerto Rico. Elite landowners left in the 1940s. Farm workers showed up in New York City in droves in the 1950s, and others took part in migrant worker programs in the ’70s. But back then, a steady flow of people moved in both directions. Since then, both manufacturing and agriculture have declined precipitously, decimating places like Lares.

“It’s ironic that Lares, the cradle of Puerto Rican independence, the symbol of national identity, is No. 1 in losing population,” said Jorge Duany, a professor who has studied Puerto Rican migration. “Who is staying behind? The youngest and the oldest.”

An abandoned gas station with a “For Sale” sign in Lares. Credit Erika P. Rodriguez for The New York Times

Mr. Duany left, too. While working as a professor at the University of Puerto Rico, he struggled to pay his bills, though his salary was much higher than that of most Puerto Ricans. He now works at Florida International University in Miami. “I frankly don’t know how people are surviving,” he said.

Alfredo González Ruiz, a retired history teacher in Lares, said statistics showed that 83,000 Puerto Ricans left the island last year — 1,000 of them from Lares.

Credit Erika P. Rodriguez for The New York Times

But even Mr. Pagán, a three-term mayor, lamented the drop in school enrollment and attendance at sporting events and church.

“A lot left,” he said. “Very few came back.”

As he went through the centuries of government policies, many directed in recent decades by Washington, that drove out Puerto Rico’s population, Mr. González ran into a cousin, Jan M. Ruiz Núñez, 19, who was off from school because of a two-month student strike at the public university.

“To be in Lares is to be in nothing,” the young man said. “If I find an opportunity, I’m going.”

A stream that passes through the property of Hacienda Lealtad. Mr. Soto’s family family is pouring millions into a mountainside resort in Lares. Credit Erika P. Rodriguez for The New York Times

The town’s mayor, Roberto Pagán Centeno, said he thought the dire figures of population loss were exaggerated. Census takers must have come counting during the times of the year when seasonal work is idle, and people temporarily leave to “try their luck” in Florida, he said. Unemployment rates are so high, he said, because a lot of people work off the books so they can cheat and qualify for welfare.

A bust of Ramón Emeterio Betances, the Puerto Rican nationalist and instigator of the Grito de Lares revolution, with the flag of Lares at the Plaza of the Revolution in the town center. Credit Erika P. Rodriguez for The New York Times

“Those are all the ways you can tell people are gone,” Mr. Pagán said. “Around 2008, 2009, you started to notice the difference.”

Nowhere is the drop more noticeable than in the town square. When banks and government services offices pulled out, nobody had reason to go there. Shops started to close one by one.

“We stay open in the afternoon to clean up and sell coffee, but we could just as well close at 1 p.m.,” said Edgar Martinez, who owns a cafeteria that faces the plaza near the mayor’s office. “After 1 p.m., we sell nothing here.”

Luz Pérez, 74, spent a recent afternoon working at her sister’s souvenir shop. Not a single customer came by. She reminisced about the childhood she spent in a town busy with commerce.

“Knock on any door in this neighborhood and ask how many people live there,” she said. “Then ask how many people used to live there.”

Edwin Soto, the head of the coffee growers’ association, said it had become increasingly difficult to hold on to employees. For one, most people do not wish to earn the $5.25 minimum wage offered in the fields.

“A lot of my employees have left,” Mr. Soto said, noting that even his major-domo, who earned $9 an hour with free housing, quit to try landscaping in Florida.

Still, he doesn’t feel all is lost.

Mr. Soto’s Cafe Lealtad is one of several chic coffee shops perched on mountaintops, where the owners envision streams of visitors eager to leave beachside tourist traps for a day of serenity. His family is pouring millions into a mountainside resort.

Another local businessman, José Rodríguez, is also betting on that future. He opened Heladeria El Grito, an ice-cream parlor right beside Heladeria Lares, the famous one that former President Bill Clinton once visited, and plans to rent eight beds on the floors above it on Airbnb.

“People say I’m crazy,” Mr. Rodríguez said. “If it doesn’t work out, I’ll just move into the house myself. You have to have hope.”

 

 

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Puerto Rico struggles to save historic buildings amid crisis

Another consequence of fiscal irresponsibility.

http://abcnews.go.com/International/wireStory/puerto-rico-struggles-save-historic-buildings-amid-crisis-48367251

Puerto Rico struggles to save historic buildings amid crisis

By danica coto, associated press

·SAN JUAN, Puerto Rico — Jun 30, 2017, 2:30 AM ET

In this June 22, 2017 photo, architect Andy Rivera looks up at an abandoned building in the historic part of Puerto Rico’s capital, in San Juan, Puerto Rico. The U.S. territory’s prized historic buildings are falling apart as a debt crisis and enduring economic recession have slashed public and private funding for maintenance, repairs and restoration.

Stained glass windows from the 16th century are broken. Porch railings from the 1700s are missing. Brick walls crumble inside the hall where Spain ceded Puerto Rico to the U.S.

Puerto Rico’s prized historic buildings are falling apart as a debt crisis and enduring economic recession have slashed public and private funding for maintenance, repairs and restoration. Tourists are increasingly banned from visiting once-popular sites now in dangerous disrepair.

Overall, nearly 40 key buildings in the metropolitan area are in danger of being lost, according to Andy Rivera, an architect who founded the Puerto Rico Historic Building Drawing Society.

“It’s a shame these things are deteriorating, and nobody is calling attention to it,” he said.

The majority of these buildings are in the historic part of Puerto Rico’s capital known as Old San Juan, founded in 1521 and governed by Spanish explorer Juan Ponce de Leon. It is a top tourist attraction with its blue cobblestone streets, colorful homes and expansive ocean views.

But dozens of historic buildings there are decaying. The exact number is unknown because the government hasn’t carried out structural evaluations of them in more than five years, said Carmen Marla Lopez, director of the historical heritage program at the Institute of Puerto Rican Culture.

“Given our fiscal situation, a lot of people and even the government itself do not have enough money to intervene in all the properties it would like to,” she said.

Many of the buildings are owned by the government of the U.S. territory, whose maintenance budgets have been cut along with most other spending at a moment when officials are trying to restructure a portion of its $73 billion public debt.

Private and other non-governmental maintenance budgets also have been squeezed by a severe, long-lasting recession that has been aggravated by government cutbacks in jobs, pensions and general spending.

As a result, authorities have closed several buildings and museums because they have decayed to the point where they pose a danger to the public, Rivera said.

Among them is the bell tower of the Cathedral of San Juan Bautista in Old San Juan. Worshippers and tourists can visit the rest of the 16th century church, best known for housing the remains of Ponce de Leon. Other attractions also have been damaged: Church officials were forced to remove several broken stained glass windows and a huge, antique organ because it was filled with termites. The church’s walls are crumbling in many places and mold is clearly visible.

A large sign at the cathedral’s entrance asks visitors to leave a donation to help finance the reconstruction project, although the extent of the damage and cost of the project is unclear. The Rev. Benjamin Perez, who helps oversee the project, did not return messages for comment.

Also shuttered for safety reasons are an apothecary museum in a building from the 1700s and a historic theater, the Home of the Two Forecourts, built in the mid-1700s.

“The balcony in the interior patio was going to collapse at any minute,” Lopez said.

Safety concerns led to closure of the hall where Spain signed a historic deal turning Puerto Rico over to the U.S. government in 1898 after the Spanish-American War.

One big concern is that the longer a building remains shuttered, the more it costs to restore, especially where a tropical climate speeds deterioration.

That is one of the reasons officials have struggled to reopen the National Gallery, a renowned seaside museum that housed the largest collection of Puerto Rican paintings from the 1700s onward, as well as antique furniture and military artifacts. It closed in November 2013 amid concerns over restoration permits, and projected costs keep rising as budgets keep shrinking.

“It’s going to take a lot of work to reopen because it’s been closed for several years,” Lopez said. “We’re evaluating its current condition.”

When the agency said it did not have $35,000 to renovate a historic fort on the nearby island of Vieques, the local community and sponsors helped raise the money needed. Lopez said she envisions similar arrangements in the future.

“We have to look for other ways given the economic crisis so we don’t lose these properties,” she said. “There are certainly serious concerns that these properties cannot be maintained.”

Puerto Rico’s government in some cases has opted to sell or lease historic buildings to individuals or nonprofit groups in hopes they can finance restoration. A private university is remodeling a building that was once an iconic movie theater in Old San Juan.

Rivera, the architect, said he understands the government cannot do it alone, but stressed there are other options.

“Lack of money is no excuse,” he said. “Conservation is important so that the children of your children know where they came from.”

———

Danica Coto on Twitter: http://www.twitter.com/danicacoto

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Minimum wage study shows it’s harmful, with real world evidence and results in Seattle WA

http://www.foxnews.com/politics/2017/06/29/seattle-commissions-new-minimum-wage-study-after-dismissing-first-results.html

Seattle commissions new minimum-wage study after dismissing first results

When a University of Washington study came out this week showing Seattle’s minimum wage has cost 5,000 jobs and is hurting low income workers, city leaders attacked the messenger –- a team of respected economists at Washington’s premiere public university.

The researchers, led by Jacob Vigdor, were hired by the city in 2014 to study the effects of Seattle’s $15 wage experiment. The contract called for five years of research. City officials stopped funding the UW team when they didn’t like the results.

“The moment we saw it was based on flawed methodology and was going to be unreliable, the Vigdor study no longer speaks for City Hall,” said Seattle City Councilwoman Kshama Sawant.

Sawant, a former economics professor at Seattle Central Community College who ran for office as a Socialist, accused the UW team of “ideologically editorializing.” She and Mayor Ed Murray then contacted Michael Reich, an economics professor at the University of California at Berkeley.

SEATTLE’S MINIMUM WAGE HIKE HURTING LOW-LEVEL WORKERS, STUDY SAYS

Reich is currently co-chair of the Institute for Research on Labor and Employment. Before earning his PhD in economics from Harvard, Reich was a founding member of the Union for Radical Political Economics (URPE), a group seeking a “human-centered radical alternative to capitalism,” according to its website.

Reich has authored several studies on the effects of raising the minimum wage. They all concluded that increasing the minimum wage only helps low-skilled workers.

As soon as Seattle politicians knew the University of Washington study found raising Seattle’s minimum wage from $11 to $13 an hour led to a 9-percent cut in hours worked and an average of $125 less earned each month, they commissioned Reich to do his own study and then criticized UW’s research.

According to emails obtained by Fox News, Reich was given a deadline by Murray. His work was to be completed just before the University of Washington team announced its results. Vigdor, the director of the study, shared with city council staffers the preliminary results of the research and provided a timeline for when it would be made public.

“We’re doing work that’s in the public’s interest,” Vigdor said, “and the value we place on being transparent with the city outweighs any reaction they might have.”

The stakes in this war of studies are high. A national campaign called “Fight for $15” aims to make Seattle’s law the federal minimum wage. So far, the campaign’s wins have come primarily in New York and California. Critics call what Seattle leaders did an egregious act of science shopping.

“They see the future of their ‘Fight for $15’ campaign grinding to a halt,” said Michael Saltsman, a Forbes Magazine contributor, “ so I think that’s why they’re working and using some of these unseemly tactics to try and discredit the economists who are doing their best to carefully study what’s happening.”

Many leading economists have reviewed the University of Washington study. Several have praised the work as credible.

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For Sale: Puerto Rico Territory seeks private companies to run ports, airports, ferries, and more; utilities could be next

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Puerto Rico does it better as their slogan claims?  What have they done better and better than whom?  Puerto Rico politicians again choosing short-term thinking over long-term thinking by selling off critical infrastructure.   Then again, a private-public partnership is likely to run whatever service they take over better than what the Puerto Rican government does.

https://www.wsj.com/articles/for-sale-puerto-rico-1498474800

For Sale: Puerto Rico
Territory seeks private companies to run ports, airports, ferries, and more; utilities could be next
By Heather Gillers
June 26, 2017 7:00 a.m. ET

Puerto Rico has no cash and can’t borrow money anymore. So it is looking to sell itself off in parts.

The troubled U.S. territory is preparing to seek bids in coming months from private companies willing to operate or improve seaports, regional airports, water meters, student housing, traffic-fine collections, parking spaces and a passenger ferry, according to a government presentation reviewed by The Wall Street Journal.

The goal is to attract more than $500 million in investment starting this summer, according to a spokesman for the Puerto Rico Public-Private Partnerships Authority. Future possibilities include the island’s power utility, water and sewer system and waste management, according to presentations made in April to private investors.

Puerto Rico officials haven’t disclosed exactly how they plan to use any proceeds. The government currently needs cash to pay down debt, run operations and for other purposes.

Potential deals are a cornerstone of a new plan to revitalize the territory, which in May was placed under court protection, the largest-ever U.S. municipal bankruptcy. Gov. Ricardo Rosselló predicts public-private partnerships launched over the next three years will bring $5 billion in new investment and 100,000 jobs to Puerto Rico. Economic projections in the commonwealth’s revitalization plan are based in part on the completion of public-private partnership deals.

It’s an ambitious goal. U.S. public-private transportation projects—the most common type of partnerships—have attracted about $30 billion in total private and public investment since 1993, according to Public Works Financing newsletter’s P3 Projects Database.

“I hope it happens but I recognize it’s aggressive,” former Puerto Rico Gov. Luis Fortuño, who created the Public-Private Partnerships Authority, said of the $5 billion target.

In public-private partnerships, the government allows private firms to lease and operate public infrastructure for decades in exchange for upfront cash or a promise of long-term improvements. Some arrangements also involve building new infrastructure. Unlike municipal bonds, public-private partnerships insulate investors from the government’s financial distress: The money typically flows straight to the private operator without ever passing through government officials’ hands.

Proponents say privately run projects are typically more efficient and well-run than public projects, creating savings that lower the overall cost.

Critics of the partnerships say governments are pledging away revenues they need to fund core services in exchange for infrastructure improvements that could cost less if publicly financed. In one example, after Chicago leased its parking meters to a private firm in 2008, the city’s inspector general found the firm’s $1.157 billion upfront payment was $974 million less than what the city would have gotten from operating the meters itself.

“Just as it is imprudent to sell your house to make a monthly credit card payment, valuable governmental assets shouldn’t be viewed as a one-shot budget solution,” said Chris Hamel, head of municipal finance at RBC Capital Markets, speaking generally about public-private partnerships.

Puerto Rico has had issues in the past with private partners.

Former Gov. Alejandro García Padilla tried to find partners for a passenger ferry from the mainland to the islands of Culebra and Vieques. But the government couldn’t afford to put down collateral to guarantee to a private operator that it would make payments to supplement ferry fares, and prospective partners lost interest.

Rick Newman, a developer and owner-operator of hotels in Puerto Rico who runs a private ferry service, opted against bidding to operate the Culebra and Vieques ferry under Mr. García Padilla’s plan. He said the proposed partnership carried too much risk. He said he would consider a new partnership, but not if the private partner is expected to rely solely on passengers for revenue.

“If the request for proposals comes out and says you have to live off of the fare box, the government may not find a private operator,” Mr. Newman said.

Other public-private partnerships in Puerto Rico have done better.

In 2009, then-Gov. Fortuño pushed through legislation creating an authority that could move forward with public-private deals without legislative approval. Puerto Rico’s largest airport is run by a public-private partnership.

The authority’s first major deal was a decision to lease the island’s busiest road, the José de Diego Highway, and a shorter nearby road. Puerto Rico got $1.08 billion in upfront cash—almost all of it went to pay off debt—and a promise from the private firm, Autopistas Metropolitanas de Puerto Rico LLC, to invest about $350 million in the roads, according to the Federal Highway Administration.

The private firm made a range of improvements, paving and widening the expressway and enhancing toll-collection efforts. It also raised prices for drivers by 20% since 2011; driving from end to end now costs $4.45.

Mr. Fortuño said without private investment, he wouldn’t have had the upfront capital to make needed safety improvements. “I didn’t have a choice,” he said.

The private operator’s owners, Goldman Sachs Infrastructure Partners and the Spanish infrastructure firm Abertis , each received about $40 million in earnings before interest, tax, depreciation and amortization from the road last year, according to people familiar with the matter.

Prices on the toll road’s bonds have risen by about eight cents on the dollar since October and now are trading at par value. Puerto Rico highway bonds, in contrast, are trading at close to 50 cents on the dollar after the island’s highway authority entered a court-supervised bankruptcy process last month.

“This is the solution that Puerto Rico has to move forward,” said Wilson Ortiz-Vega, advisory leader with the insurance brokerage Aon , which worked on a previous public-private partnership with Puerto Rico.“They don’t have access to capital markets at a reasonable rate, and they don’t have the resources.”

Even so, Carlos A. Colón De Armas, a professor of finance at the University of Puerto Rico Graduate School of Business, said the commonwealth would have been better off continuing to operate the José de Diego Highway. His 2011 study found the present value of the revenue the government would have collected over 40 years was $2.1 billion.

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What is Minimum Wage: Its History and Effects on the Economy

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http://www.heritage.org/testimony/what-minimum-wage-its-history-and-effects-the-economy

What is Minimum Wage: Its History and Effects on the Economy

June 26, 2013 31 min read
James Sherk
James Sherk
Research Fellow, Labor Economics
As research fellow in labor economics at The Heritage Foundation, James Sherk researches ways to promote competition and mobility.

Testimony before the Health, Education, Labor, and Pensions Committee, United States Senate on June 25, 2013

Chairman Harkin, Ranking Member Alexander, and Members of the HELP Committee, thank you for inviting me to testify this afternoon. My name is James Sherk. I am a Senior Policy Analyst in Labor Economics at The Heritage Foundation. The views I express in this testimony are my own, and should not be construed as representing any official position of The Heritage Foundation.

Supporters of the minimum wage intend it to lift low-income families out of poverty. Unfortunately, despite these good intentions, the minimum wage has proved ineffective at doing so. Indeed, it often holds back many of the workers its proponents want to help. Higher minimum wages both reduce overall employment and encourage relatively affluent workers to enter the labor force. Minimum wage increases often lead to employers replacing disadvantaged adults who need a job with suburban teenagers who do not.

This can have long-term consequences. Minimum wage positions are typically learning wage positions—they enable workers to gain the skills necessary to become more productive on the job. As workers become more productive they command higher pay and move up their career ladder. Two-thirds of minimum wage workers earn a raise within a year. Raising the minimum wage makes such entry-level positions less available, in effect sawing off the bottom rung of many workers’ career ladders. This hurts these workers’ career prospects.

Even if minimum wage workers do not lose their job, the overlapping and uncoordinated design of U.S. welfare programs prevents those in need from benefitting from higher wages. As their income rises they lose federal tax credits and assistance. These benefit losses offset most of the wage increase. A single mother with one child faces an effective marginal tax rate of 91 percent when her pay rises from $7.25 to $10.10 an hour. Studies also find higher minimum wages do not reduce poverty rates. Despite the best of intentions, the minimum wage has proved an ineffective—and often counterproductive—policy in the war on poverty.

Congress could do more to help low-income families by restructuring and coordinating welfare programs and their associated phase-out rates. No one in American—and especially not low-income workers—should face tax rates in excess of 50 percent.

History of the Minimum Wage

Congress instituted the minimum wage in 1938 as part of the Fair Labor Standards Act (FLSA). The first minimum wage stood at 25 cents an hour. The last minimum wage increase occurred in 2007, when Congress raised the rate in steps from $5.15 an hour that year to $7.25 an hour in July 2009. The District of Columbia and 19 states have also established local minimum wages higher than the federal rate. The highest state minimum wage in the country occurs in Washington State at $9.19 an hour. The average minimum wage in the U.S.—including higher state rates—currently stands at $7.57 an hour.[1]

Over the past 65 years the minimum wage has varied considerably in inflation-adjusted buying power. It has averaged $6.60 an hour in purchasing power in 2013 dollars. But it has ranged from a low of $3.09 an hour in late 1948 to a high of $8.67 an hour in 1968.[2] Today’s minimum wage buys somewhat more than the minimum wage has historically, although it remains over a dollar an hour below its historical high.[3]

Current Federal Minimum Wage Above Historical Average

Congress typically raises the minimum wage only during times of healthy economic growth and low unemployment. In 1990, Congress enacted a minimum wage hike that took effect on April 1 of that year, when unemployment stood at 5.4 percent. Congress voted to raise the minimum wage again in August 1996—when unemployment stood at 5.1 percent. The next vote to raise the minimum wage occurred in May 2007, when unemployment stood at 4.4 percent.[4] Congress has not voted to raise the minimum wage when unemployment stood above 7.5 percent since the Great Depression ended.[5]

Who Earns the Minimum Wage?

Stereotypes of minimum wage earners range from teenagers holding summer jobs to single mothers struggling to support their family. Bureau of Labor Statistics (BLS) data sheds light on who actually makes the minimum wage.

Relatively few Americans do so. In 2011 and 2012, 3.7 million Americans reported earning $7.25 or less per hour—just 2.9 percent of all workers in the United States.[6][7][8] Those who do work in minimum-wage jobs fall into two distinct categories: young workers, usually in school, and older workers who have left school. Most minimum-wage earners fall into the first category; just over half are between the ages of 16 and 24.[9] The rest are 25 or older. Table 1 shows the characteristics of minimum wage workers overall, and broken down by age groups.

Demographic Characteristics of Minimum-Wage Workers

Minimum-wage workers under 25 are typically not their family’s sole breadwinners. Rather, they tend to live in middle-class households that do not rely on their earnings—their average family income exceeds $65,000 a year. Generally, they have not finished their schooling and are working part-time jobs. Over three-fifths of them (62 percent) are currently enrolled in school.[10] Only 22 percent live at or below the poverty line, while two-thirds live in families with incomes exceeding 150 percent of the poverty line. These workers represent the largest group that would benefit directly from a higher minimum wage, provided they kept or could find a job.

Adults who earn the minimum wage are less likely to live in middle- and upper-income families. Nonetheless, three-fourths of older workers earning the minimum wage live above the poverty line. They have an average family income of $42,500 a year, well above the poverty line of $23,050 per year for a family of four. Most (54 percent) of them choose to work part time, and two-fifths are married.

Many advocates of raising the minimum wage argue it will help low-income single parents surviving on it as their only source of income. Minimum-wage workers, however, do not fit this stereotype. Just 4 percent of minimum-wage workers are single parents working full time, compared to 5.6 percent of all U.S. workers.[11] Minimum-wage earners are actually less likely to be single parents working full time than the average American worker.

Though some minimum-wage workers do struggle with poverty, they are not representative of the typical worker in minimum-wage jobs. The data simply does not support the stereotype of minimum-wage workers living on the edge of destitution.

Learning Wage Positions

Most minimum wage jobs are entry-level positions filled by workers with limited education and experience. As Table 1 shows, almost three-fifths of minimum wage workers have no more than a high school education. They work for the minimum wage because they currently lack the productivity to command higher pay.

Minimum-wage jobs give these workers experience and teach them essential job skills. Sometimes these skills are unique to an individual job, such as how to operate a particular piece of equipment. More often they pertain to general employability: the discipline of waking up early to go to work each day, learning how to interact with customers and coworkers, how to accept direction from a boss. These skills are essential to getting ahead in the workplace, but difficult to learn without actual on-the-job experience.

Once workers gain these skills they become more productive, and most quickly earn raises. Over two-thirds of workers starting out at the minimum wage earn more than that a year later.[12] Minimum-wage jobs are learning wage jobs—they teach inexperienced employees skills that make them more productive. They are the first step on many workers’ career ladders.

While very few Americans currently work for the minimum wage, a substantial number once did so. Over half of American started their careers making within one dollar of the minimum wage.[13] Most quickly get promoted as their productivity increases.

Workers have a say in how quickly they get promoted. Most minimum-wage earners work part time, and many are students and young adults who desire this flexibility. But minimum-wage workers who choose to work longer hours gain more skills and experience than those who work part time and, as expected, earn larger raises. A typical minimum-wage employee who works 35 hours or more a week is 13 percentage points more likely to be promoted within a year than is a minimum-wage worker putting in fewer than 10 hours per week.[14]

The notion that workers are trapped earning $7.25 an hour for much of their working lives is mistaken and ignores the primary value of minimum-wage jobs. Their importance lies not so much in the low wages they pay in the present, but in making workers more productive so they can command higher pay in the future.

Labor Demand Falls as Prices Increase

One of the central premises of economics is that “demand curves slope downwards”—when prices rise people buy less of a good or service. When gasoline becomes more expensive Americans drive less, and when it becomes less costly Americans drive more. The same applies to business owners. When the price of goods or services they use in production rises, they buy less of them. This includes labor costs—when wages rise employers hire fewer workers. Economists estimate the long-run elasticity of labor demand in the U.S. economy at around –0.3.[15] In other words, a ten percent increase in labor costs causes employers to cut their workforce by three percent. Higher compensation costs without corresponding increases in productivity cause employers to hire fewer workers.

This finding applies to employers of both highly skilled and unskilled workers.[16] Employers will not pay a worker more than their productive value to a firm. Businesses that do so quickly go out of businesses.

American Samoa

The recent experience of American Samoa dramatically illustrates how wage increases reduce employment. The tiny Pacific island chain has been an American territory for over a century. However, American Samoans have a largely separate economy and considerably lower incomes than residents of the continental United States: the average Samoan worker made $12,000 in 2009.[17] The tuna canning industry makes up a significant portion of their private sector.

Until recently American Samoa had a different minimum wage schedule than the continental United States. A committee within the Department of Labor set Samoan wage minimums according to local economic conditions. In January 2007 the minimum wage in the canning industry stood at $3.26 an hour. Unfortunately for American Samoa, Congress applied the 2007 federal minimum wage increase to the territory. The legislation aligned the Samoan minimum wage with the U.S. rate of $7.25 an hour in 50 cent annual increments.[18]

Almost every hourly worker in the tuna canning industry makes less than $7.25 an hour.[19] At that level the minimum wage would cover 80 percent of the islands’ hourly workers.[20] This would be the economic equivalent of raising the minimum wage to $20.00 an hour in the continental U.S.[21]

By May 2009 the third scheduled minimum wage increase in Samoa took effect, rising to $4.76 an hour and covering 69 percent of canning workers. This did not increase purchasing power, stimulate demand, and raise living standards, as many minimum wage proponents theorize. Instead StarKist—one of the two canneries then located in Samoa—laid off workers, cut hours and benefits, and froze hiring.[22] The other cannery—Chicken of the Sea—shut down entirely in September 2009.[23]

The Government Accountability Office reports that between 2006 and 2009 overall employment in American Samoa fell 14 percent and inflation-adjusted wages fell 11 percent. Employment in the tuna canning industry fell 55 percent.[24] The GAO attributed much of these economic losses to the minimum wage hike.

The Democratic Governor of American Samoa, Togiola Tulafona, harshly criticized this GAO report for understating the damage done by the minimum wage hike. Testifying before Congress Gov. Tulafona objected that “this GAO report does not adequately, succinctly or clearly convey the magnitude of the worsening economic disaster in American Samoa that has resulted primarily from the imposition of the 2007 US minimum wage mandate.”[25] Gov. Tulafona pointed out that American Samoa’s unemployment rate jumped from 5 percent before the last minimum wage hike to over 35 percent in 2009.[26] He begged Congress to stop increasing the islands’ minimum wage:

“We are watching our economy burn down. We know what to do to stop it. We need to bring the aggressive wage costs decreed by the Federal Government under control. But we are ordered not to interfere …Our job market is being torched. Our businesses are being depressed. Our hope for growth has been driven away…Our question is this: How much does our government expect us to suffer, until we have to stand up for our survival?”[27]

Samoan employers responded to higher labor costs the way economic theory predicts: by hiring fewer workers. Congress hurt the very workers it intended to help. Fortunately, Congress heeded the Governor’s plea and suspended the future scheduled minimum wage increases.

Minimum Wage Employment Effects

Virtually no economist doubts that raising the minimum wage to $20.00 an hour in the mainland U.S. would have similar consequences. Economists only debate the consequences of small minimum wage increases.

In part this is because, at current rates, the minimum wage affects very few workers, so it has relatively small effects on the overall economy. Even groups considered highly affected by the minimum wage have few minimum-wage workers overall. Just one-fifth of teenagers and restaurant employees work for the federal minimum wage.[28] Raising the minimum wage by $1.00 an hour – as many states have done – has little effect on most workers, even most teenagers. Consequently, a moderate increase in the minimum wage will have only small effects on the U.S. economy. It affects too few workers to have a larger impact. A law eliminating a tenth of minimum-wage jobs would raise overall unemployment by less than 0.3 percentage point.[29] Congress should not conflate small effects with no effect. The minimum wage does hurt the prospects of the relatively small number of workers it covers.

Until the mid-1990s, labor economists had a consensus that a 10 percent increase in the minimum wage reduced employment of impacted groups (like teenagers) by about 2 percent.[30] Research by David Card of the University of California-Berkeley challenged this conclusion.[31] His research, focusing on case studies of states that raised the minimum wage and states that did not, concluded the minimum wage had no adverse effect on employment. This spurred an explosion of research on the topic. This research coincided with a significant number of states raising their minimum wages above the federal level in the 1990s and 2000s. These state increases created far more case studies for economists to analyze and permitted panel studies utilizing variation in minimum wage rates across all U.S. states.

Two-thirds of the studies in this “new minimum wage research” utilizing state variation in minimum wages came to the same conclusion that previous economists had: higher minimum wages reduce the employment of less-skilled workers.[32] Among the most methodologically rigorous studies, 85 percent came to this conclusion.

A recent line of papers by Michael Reich, Arindrajit Dube, and Sylvia Allegretto contest these findings.[33] They argue that states that raised their minimum wage above the federal level (typically in the Northeast and West Coast) have slower underlying employment growth than states that did not raise their minimum wage (typically in the South and Mountain West). They contend that studies finding negative employment effects conflate these pre-existing trends with the effects of higher minimum wages. They find that once researchers control for state or regional trends the negative relationship goes away. They then compared counties that border each other across a state line and concluded higher minimum wages have negligible employment effects on teenagers and restaurant employees.

David Neumark of the University of California–Irvine and William Wascher of the Federal Reserve Board strongly dispute this critique.[34] They show that the evidence for pre-existing trends biasing previous studies is weak. They demonstrate that it takes very specific controls to make the relationship between the minimum wage and job losses disappear. Using more general specifications favored by economists produces the standard conclusion that minimum wage increases cost jobs.

Neumark and Wascher also argue that the many counties compared across state borders have very different economic climates. For example, Dube et al. compare urban Leon County in Florida (the home county of Tallahassee) with its population of 275,000 to rural Grady County, Georgia – population 25,000. Neumark and Wascher used statistical tests to analyze how closely the labor markets of these cross-border counties resemble each other. They find that among reasonable candidates for comparison, the cross-border counties “appear no better than a random draw.”[35]

They conclude that economists should look at data from all states, not just cross-border comparisons, and use standard specifications to control for pre-existing trends. Doing so produces the usual finding that minimum wage increases cost jobs. Raising the price of unskilled labor causes employers to hire fewer unskilled workers.

Crowding Out Disadvantaged Workers

The minimum wage especially hurts disadvantaged workers’ job prospects. Higher minimum wages encourage employers to replace less-skilled workers with more productive employees. Given the choice between hiring an unskilled worker for $10.10 an hour and a worker with more experience for the same rate, companies will always choose the more experienced and productive employee.

Higher minimum wages also make working in such jobs more attractive, drawing greater numbers of workers with outside sources of income into the labor market. Many suburban teenagers and college students enter the labor market when the minimum wage rises. As they apply for job openings they crowd out urban teenagers and disadvantaged adults who would have sought the jobs at the previous wages. Overall, the minimum wage reduces disadvantaged workers’ employment much more than it reduces overall employment. It causes the very workers minimum wage advocates most want to help to have the greatest difficulty finding jobs.

Empirical research consistently bears this out. One recent study examined administrative data from a large retail chain.[36] When the minimum wage rose, the chain slightly reduced overall employment. Surprisingly, however, teenage employment rose in several stores. These teen employment gains came at the expense of larger job losses among adults. The composition of teenage employment also changed, with more teens coming from wealthier neighborhoods and fewer from low-income neighborhoods. The higher wages prompted many suburban teenagers to apply for work. They crowded many low-income adults and youth out of jobs.

Another study examined how teenage employment and school enrollment changed after states raised their minimum wage.[37] It found that when states raised their minimum wage, younger teens and those who had dropped out of school were more likely to become unemployed. At the same time, higher-skill teenagers were more likely get jobs. When they have to pay higher wages, businesses hire higher-skill workers, freezing the least productive workers out of the job market.

Even studies that find the minimum wage has negligible overall employment effects find it decreases the employment of disadvantaged workers. Kevin Lang and Shulamit Kahn of Boston University examined how restaurant employment changed after minimum wage hikes in the late 1980s and early 1990s.[38] They found no evidence that the minimum wage reduced total restaurant employment, but they did find that it dramatically changed the mix of workers that restaurants hired. Teenage and student employment rose, while adult employment dropped.

A higher minimum wage is great news for a high school student working part time to buy an iPhone. It hurts lower-skill adult workers who need work to support themselves and perhaps their families. Making entry-level jobs less available makes it harder for them to gain the skills and experience necessary to advance to better paying jobs. The minimum wage effectively saws off the first rung on their career ladder.

Little Benefit to Families in Poverty

The minimum wage raises the pay of many workers at the cost of some jobs. A lot of advocates for minimum wage increases consider this a good trade-off. They argue that the gains for the workers who benefit far outweigh the costs to those who lose out. For example, raising the minimum wage by 40 percent – from $7.25 an hour to $10.10 an hour – would cost roughly 8 percent of heavily affected worker groups their jobs (although losses would be larger among the most disadvantaged workers).[39] At first glance this may seem like a good deal.

However, this analysis ignores the way American tax and welfare programs claw back wage gains made by low-income workers. Congress has created many overlapping means-tested benefit programs: the supplemental nutrition assistance program (SNAP, formerly called food stamps), temporary assistance for needy families (TANF), the Earned Income Tax Credit (EITC), child-care subsidies, housing vouchers, and Women, Infants, and Children (WIC) benefits. The government also provides extensive in-kind health care benefits: Medicaid, SCHIP, and the soon to be operating health care exchange subsidies.

These benefits phase out at different rates as income rises. Earning an additional dollar of income reduces SNAP benefits by 24 cents. Workers in the EITC phase-out range lose 21 cents for each additional dollar they earn. Housing vouchers phase out at a 30 percent rate. Low-income workers must also pay payroll (15 percent) and income taxes (10-15 percent) on each additional dollar of income. Medicaid operates with a cliff: when workers’ incomes exceed a certain threshold, they lose all benefits.

Congress did not coordinate these benefit phase-outs across programs. Consequently low-income workers can face very high effective tax rates as they lose benefits from multiple programs. Consider workers both losing SNAP benefits and landing in the EITC phase out range. For each additional dollar they earn they pay 15 cents in additional payroll taxes, 15 cents in income taxes, an average of 5 cents in state income taxes, as well as losing 21 cents of their EITC benefit and forgoing 24 cents of SNAP benefits – an effective marginal tax rate of 80 percent. Each extra dollar earned increases their net income by only 20 cents. Not even millionaires pay such high tax rates.

The Congressional Budget Office studied this issue in a report released last year.[40] It found that a single parent with one child earning between $15,000 to $25,000 experiences almost no financial benefit from working additional hours or getting a raise.[41] What they gain in market income they lose in reduced benefits, leaving them no better off.

The academic literature concludes that low-income families financially benefit when the head of the household enters the labor force and takes a job that pays near the poverty level. However, additional hours of work – or higher wages – beyond that generally produce little additional net benefit until earnings exceed 150 to 200 percent of the poverty level.[42]

Unfortunately, minimum-wage workers with incomes below the poverty level fall into this earnings dead zone. A childless adult working full time for the minimum wage earns $15,080 a year, above the poverty level for one person ($11,490). That adult (or a teenager) qualifies for relatively few federal benefits. But a single parent working the same job would fall below the poverty level for either one ($15,510) or two ($19,530) children. That single parent qualifies for many means-tested federal benefits. If the federal minimum wage rose to $10.10 an hour ($21,008 a year for a full-time job) benefit reductions would claw back the majority of his or her raise.

Table 2 shows the effective marginal tax rates facing full-time workers in various family situations whose incomes rise from $7.25 an hour to $10.10 an hour. The figures come from the Urban Institute’s Net Income Change Calculator. Some columns show the effective tax rates when workers participate in all programs for which they are eligible. Others show the tax rate when workers only participate in food stamps and pay their taxes. Note that these figures understate the effective marginal tax rates because they exclude the loss of health care benefits like Medicaid and SCHIP. Even without including health benefits, workers lose at least 50 percent of their benefits and in some cases much more.

Effective Marginal Tax Rates Facing Workers Moving from $7.25 Per Hour to $10.10 Per Hour (1 of 2)

Effective Marginal Tax Rates Facing Workers Moving from $7.25 Per Hour to $10.10 Per Hour (2 of 2)

Nationwide, the average single parent with one child who participates in all programs for which they are eligible faces an effective marginal tax rate of 91 percent. The same parent with two children faces an effective tax rate of 79 percent. In some states the raise would actually financially hurt families.

Consider a Patty Jones, a hypothetical single mother in Des Moines, Iowa, who gets an offer for a job at minimum wage.[43] If she goes from not working to working full time, her monthly income rises from $1,146 to $1,838. However, if she gets a raise to $10.10 an hour, her monthly income falls to $1,574. She loses over $260.While her market income rises by $494, she loses $71 in EITC refunds, pays $37 more in payroll taxes and $45 more in state income taxes. She also loses $88 in food stamp benefits and $528 in child-care subsidies. Patty would be better off without the raise.

This system makes it very difficult to lift families out of poverty by raising the minimum wage. Higher minimum wages make it more difficult for disadvantaged adults to find jobs. This hurts their finances. However, for those living below the poverty line who keep their job, the raise provides little net benefit. Much or all of what they gain in higher pay gets clawed back as reduced benefits.

College students and teenagers with jobs do benefit from a higher minimum wage; they have few government benefits to lose. But Congress does not raise the minimum wage to help teenagers buy jeans or iPhones. It does so to help families struggling below the poverty line. Current law makes it almost impossible to achieve that goal.

No Effect on Poverty

Economic research further shows that raising the minimum wage does not reduce poverty.[44] Economists have studied changes in aggregate state poverty rates when states raise their minimum wage. They have also examined micro-data on individual families’ finances when the minimum wage changes. A study finds minimum wages reduce poverty.[45] One other study finds the opposite result.[46] But the overwhelming balance of recent research finds no effect of the minimum wage on poverty.[47] Even David Card, a researcher celebrated by minimum wage advocates, comes to this conclusion.[48]

This should come as little surprise. Besides reducing job opportunities and the perverse structure of the welfare state, very few poor families have any minimum wage workers. Only 11 percent of the workers who would gain from raising the minimum wage to $9.50 an hour live at or below the poverty line.[49]

In fact, very few poor families have any full-time workers at all. Only 9 percent of adults living below the poverty line work full time year round. One quarter work part time. Two-thirds of adults living below the poverty line do not work at all.[50] Raising the minimum wage hurts their job prospects but does nothing to increase their earnings – they have none.

If Congress wants to reduce poverty it should focus on restructuring the welfare state to remove the current disincentives to work. For too many low-income families additional work does not pay. Few Americans at any income level would work longer hours when faced with a tax rate exceeding 50 percent.


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Endnotes

[1] Heritage Foundation calculations using data on state minimum wage rates from the Department of Labor, Wage and Hour Division. The figure is a weighted average, where the weights are each state’s respective share of hourly employees in the U.S.

[2] Source: Heritage Foundation calculations using data from the Department of Labor, Wage and Hour Division. Inflation adjusted using the Personal Consumption Expenditures (PCE) price index.

[3] Analysis inflation adjusting historical minimum wage rates with the Consumer Price Index (CPI) will report higher real rates. The CPI estimates higher inflation than the PCE index and other chained measures of inflation do. This results in a larger upwards to historical rates to account for inflation.  Using the CPI the minimum wage stood at $10.60 an hour in 1968. However, economists widely agree that the Laspreyes fixed-basket methodology the CPI utilizes produces less accurate estimates than a chained-index methodology. Consequently this paper uses the PCE index to adjust for past inflation. See for example Clinton McCully, Brian Moyer, and Kenneth Stewart, “A Reconciliation between the Consumer Price Index and the Personal Consumption Expenditures Price Index,” Bureau of Economic Analysis Papers, September 2007.

[4] Department of Labor, Bureau of Labor Statistics, “The Employment Situation,” April 1990, August 1996, May 2007.

[5] Although the economy has slipped into recessions after minimum wage increases (such as in 2007), these contractions were not expected when Congress voted.

[6] Heritage Foundation analysis of data from the Current Population Survey (CPS). The Census Bureau and Bureau of Labor Statistics jointly conduct the CPS. All numbers, except average family income and poverty status, come from analysis of the 2011 and 2012 Merged Outgoing Rotation Group (MORG) file of the CPS. Minimum-wage earners were defined as hourly employees paid $7.25 an hour or less. Poverty and family income statistics come from the March supplement to the 2011 and 2012 CPS data. Data available for download at http://thedataweb.rm.census.gov/ftp/cps_ftp.html and https://cps.ipums.org/cps/

[7] The 2.9 percent figure includes both salaried and hourly employees. Approximately 5 percent of hourly employees get paid the federal minimum wage.

[8] These numbers include workers who also earn tip income. Many of those earning less than the minimum wage work in restaurants and make more than the minimum wage after taking tips into account.

[9] 50.5 percent of minimum wage earners are between the ages of 16 and 24.

[10] Heritage Foundation calculations using the 2011 and 2012 Current Population Survey. The months of June, July, and August were excluded to avoid conflating summer breaks with non-enrollment.

[11] Heritage Foundation analysis of data from the Current Population Survey (CPS). A single parent is defined as someone who reports that he or she has one or more of his or her own children present in the household and who is widowed, divorced, separated, or never married. Full-time employees are classified as those working 35 or more hours a week.

[12] David Macpherson and William Even, “Wage Growth Among Minimum Wage Workers,” Employment Policies Institute, June 2004, p. 3-5, at www.epionline.org/studies/macpherson_06-2004.pdf.

[13] William Carrington and Bruce Fallick, “Do Some Workers Have Minimum Wage Careers,” Monthly Labor Review, May 2001, pp. 17-27, Table 2

[14] Macpherson and Even, “Wage Growth Among Minimum Wage Workers,” pp. 8-11.

[15] Daniel S. Hamermesh, Labor Demand (Princeton, N.J.: Princeton University Press, 1993).

[16] Although studies typically find workers with greater skills have a smaller elasticity of demand.

[17] Government Accountability Office, American Samoa and the Commonwealth of the Northern Mariana Islands: Employment, Earnings, and Status of Key Industries Since Minimum Wage Increases Began, Report No. GAO-11-427, June 2011, Figure 11.

[18] Ibid., Table 4.

[19] Government Accountability Office, American Samoa and the Commonwealth of the Northern Mariana Islands, p. 63.

[20] U.S. Department of Labor, Impact of Increased Minimum Wages on the Economies of American Samoa and the Commonwealth of the Northern Mariana Islands, January 2008.

[21] Heritage Foundation calculations using data from the Outgoing Rotation Groups of the 2012 monthly current population survey. $20.00 an hour is the 80th percentile for workers paid hourly wages.

[22] Government Accountability Office, American Samoa and the Commonwealth of the Northern Mariana Islands p. 63.

[23] Ibid., p. 40.

[24] Ibid., Table 2.

[25] Testimony of American Samoa Governor Togiola Tulafona before the Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs of the Committee on Natural Resources, U.S. House of Representatives, September 23, 2011. Opening statement available online at http://americansamoa.gov/index.php/news-bottom/30-gov-togiola-tells-u-s-congress-minimum-wage-increase-will-destroy-as-economy

[26] Ibid., Written Testimony, Table 3.

[27] Ibid., opening statement.

[28] Department of Labor, Bureau of Labor Statistics, “Characteristics of Minimum Wage Workers – 2012,” Tables 1 and 4, athttp://www.bls.gov/cps/minwage2012tbls.htm.

[29] The increase in unemployed would probably be less – many of these workers, especially teenagers and college students, would probably drop out of the labor market altogether and no longer count as unemployed.

[30] Charles Brown, Curtis Gilroy, and Andrew Kohen, “The Effect of the Minimum Wage on Employment and Unemployment,” Journal of EconomicLiterature Vol. 20, No. 2 (June 1982), pp. 487–528.

[31] David Card and Alan Krueger. “Minimum Wages and Employment: A Case Study of Fast-Food Industry in New Jersey and Pennsylvania,” American Economic Review, Vol. 48, No. 4 (1994), pp. 772-793.

[32] David Neumark and William Wascher, Minimum Wages (Cambridge, MA: The MIT Press, 2008).

[33] See for example Sylvia Allegretto, Arindrajit Dube, and Michael Reich, “Spatial Heterogeneity and Minimum Wages: Employment Estimates for Teens Using Cross-State Commuting Zones,” Berkeley, CA: Institute for Research on Labor and Employment, 2009; Sylvia Allegretto, Arindrajit Dube, and Michael Reich, “Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data,” Industrial Relations, Vol. 50, No. 2, pp. 205-240; Arindrajit Dube, T. William Lester, and Michael Reich, “Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties,” Review of Economics and Statistics, Vol. 92, No. 4 (2010), pp. 945-964.

[34] David Neumark,  Ian Salas, and William Wascher, “Revisiting the Minimum Wage- Employment Debate: Throwing Out the Baby with the Bathwater?” National Bureau of Economic Research Working Paper No. 18681 (2013), http://www.nber.org/papers/w18681.

[35] Ibid., pp. 27-28.

[36] Laura Giuliano, “Minimum Wage Effects on Employment, Substitution, and the Teenage Labor Supply: Evidence from Personnel Data,” The Journal of Labor Economics, Vol. 31, No. 1 (January 2013), pp. 155-194.

[37] David Neumark and William Wascher. “The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys,” in Solomon Polchek, ed. Research in Labor Economics, Vol. 15 (Greenwich, Conn.: JAI Press, 1996).

[38] Kevin Lang and Shulamit Kahn, “The Effect of Minimum-Wage Laws on the Distribution of Employment: Theory and Evidence,”Journal of Public Economics, Vol. 69, No. 1 (July 1998), pp. 67-82.

[39] This assumes an employment elasticity of –0.2.

[40] Congressional Budget Office, “Effective Marginal Tax Rates for Low – and Moderate- Income Workers,” November 2012,http://www.cbo.gov/sites/default/files/cbofiles/attachments/11-15-2012-MarginalTaxRates.pdf.

[41] Ibid., Summary Figure 1.

[42] Elaine Maag, C. Eugene Steuerle, Ritadhi Chakravarti, and Caleb Quakenbush, “How Marginal Tax Rates Affect Families at Various Levels of Poverty,” National Tax Journal, Vol. 65, No. 4 (December 2012), pp 759-782.

[43] All assumptions are the same as for a single parent with one child as explained in the footnotes of Table 2.

[44] Note that this does not follow directly from the preceding section. Poverty calculations exclude non-cash benefits like Medicaid, SNAP, and housing vouchers.

[45] John Addison and McKinley L. Blackburn, “Minimum Wages and Poverty, Industrial and Labor Relations Review Vol. 52, No. 3 (1999), pp. 393–409.

[46] David Neumark, Mark Schweitzer, and William Wascher, “The Effects of Minimum Wages on the Distribution of Family Incomes: A Non-Parametric Analysis,” Journal of Human Resources Vol. 40, No. 4 (2005), pp.867–94.

[47] Richard V. Burkhauser and Joseph J. Sabia, “Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?” Southern Economic Journal, Vol. 77, No. 3 (January 2010); Richard Vedder and Lowell Gallaway, “Does the Minimum Wage Reduce Poverty?” Employment Policies Institute, June 2001; Jill Jenkins, “Minimum Wages: The Poor Are Not Winners,” Employment Policy Foundation, January 12, 2000; Ronald B. Mincy, “Raising the Minimum Wage: Effects on Family Poverty,” Monthly Labor Review Vol. 113, No. 7 (July 1990); Richard Burkhauser, and Joseph J. Sabia, 2007. “The Effectiveness of Minimum Wage Increases in Reducing Poverty: Past, Present, and Future,” Contemporary Economic Policy Vol. 25, No. 2 (2007), pp. 262–281; Craig Gundersen, and James Patrick Ziliak, 2004. “Poverty and Macroeconomic Performance Across Space, Race, and Family Structure,”Demography Vol. 41, No. 1 (2004), pp. 61–86; David Neumark, and William Wascher. 2002. “Do Minimum Wages Fight Poverty?”Economic Inquiry Vol. 40, No. 3(2002) pp. 315–333.

[48] David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage (Princeton, N.J.: Princeton University Press, 1995).

[49] Burkhauser and Sabia, “Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?”

[50] U.S. Census Bureau, Historical Poverty Tables, Table 25, “Work Experience and Poverty Status for People 16 years Old and Over: 1987-2011,” http://www.census.gov/hhes/www/poverty/data/historical/hstpov25.xls

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More real world evidence that minimum wages harm people – Seattle WA

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Those who think higher minimum wages solve problems are mistaken, as it’s contrary to a common sense economic principle.  The higher the price of a good or service, the less affordable it becomes, and thus, the less of it is purchased, whether it be labor or a cup of coffee.  Should the government require all cups of coffee, whether they are now $1 coffee at McDonalds or $5 coffee at Starbucks, to suddenly be priced at a minimum of $15 per cup, obviously far fewer cups of coffee will be sold at $15.  As a result, more people would do without coffee, or make their own at home.  With less coffee being ordered, there would be less need for employees at coffee shops, and the workers’ hours would be reduced as well as many being fired.   If you only have $5 in your pocket, you could previously buy 1 Starbucks coffee at $5, or 5 McDonald’s coffees at $1 each.  Once the price is $15 for a cup of coffee, even though you want coffee, you can no longer afford it.

http://freebeacon.com/issues/report-15-minimum-wage-in-seattle-killed-jobs

Report: $15 Minimum Wage in Seattle Killed Jobs

Democrats adopted $15/hr minimum wage in 2016 national platform

BY: Bill McMorris Follow @FBillMcMorris
June 26, 2017 12:40 pm

Seattle’s groundbreaking minimum wage hike hurt the low-income people that it was meant to help, according to a report prepared for the city council.

Seattle became one of the largest cities to embrace the $15 minimum wage—double the federal minimum of $7.25—in 2014, adopting an ordinance that would achieve the hike by 2017 for major employers and 2019 for small businesses. The new base rate pleased labor activists and the politically powerful Service Employees International Union, but it has dealt a blow to the take-home pay of workers even before the hike has been completed.

Researchers from the University of Washington found that low-income workers saw their pay fall drastically when the city moved to the $13 mark in 2015. Companies reduced the number of hours that employees worked to cope with the increased labor costs.

“The lost income associated with the hours reductions exceeds the gain [in hourly rates],” the report says. “The average low-wage employee was paid $1,897 per month. The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6%), which is sizable for a low-wage worker.”

The study also found that the baseline wage did not help as many low-wage workers as bill supporters expected it to because “most affected low-wage workers were already earning more than the statutory minimum at baseline.”

The minimum wage hike has been the centerpiece of the Democratic Party’s economic agenda over the last several years.  Democrats put the $15 minimum wage on its 2016 party platform, despite the fact that nominee Hillary Clinton had misgivings about the drastic hike’s effect on hiring; she initially backed a $12 rate during the primary.

“Democrats believe that the current minimum wage is a starvation wage and must be increased to a living wage. No one who works full time should have to raise a family in poverty.  We believe that Americans should earn at least $15 an hour and have the right to form or join a union,” the platform said.

Labor watchdogs said that the study should serve as a “wake-up” call to those who have led the campaign to drastically overhaul the minimum wage.

“This important study ought to be a big wake-up call that the ‘Fight for $15′ minimum wage effort is actually hurting those they say they want to help—reducing incomes and eliminating economic opportunities for low-income Americans who need them most,” America Rising Squared spokesman Jeremy Adler said in a statement.

Michael Saltsman, research director for the pro-free-market Employment Policies Institute, said that the results of the study were not surprising and fell in line with previous research that has linked drastic minimum wage hikes to jobs and earnings losses. He said that the report shows that the push for the wage hike is “colliding with economic reality” and that policymakers should approach future bills with caution.

“Similar to members of the flat earth society, some true believers in the labor movement may be unmoved by this body of evidence, but sensible policymakers on the left and the right should feel very comfortable opposing $15 knowing that it hurts employees rather than helps them,” Saltsman said.

The $15 hourly range has spread from Seattle to other major metropolitan areas. New York and California, as well has numerous deep blue cities, including Washington, D.C., and Boston, have passed legislation to eventually raise wages to $15 an hour. Not all of those laws are guaranteed to take effect; the California law allows lawmakers to opt out of future hikes if they are found to hinder job creation or hurt the economy.

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https://townhall.com/tipsheet/guybenson/2017/06/26/settled-science-on-minimum-wage-obamacare-and-singlepayer-basic-economics-keeps-foiling-liberal-dreams-n2346831

Settled Science: On Minimum Wage, Basic Economics Again Rudely Intrudes on Liberal Dreams

Guy Benson

Posted: Jun 26, 2017 2:25 PM

Whenever the Left pushes for sharp increases in the minimum wage (which has intrinsic populist appeal and tends to poll well), conservatives argue that such plans would kill jobs, stifle entry-level opportunities, and end up hurting many of the very people it was ostensibly meant to help. Liberals’ rhetoric about the minimum wage does not align with the data, critics contend, citing evidence about the types of workers who actually seek and fill those positions.  Many supporters respond, in turn, with slogans and smears: It’s time to “give America a raise,” to end “starvation wages” and promote “fairness,” they claim, attacking “mean-spirited” and “greedy” opponents for protecting “the rich” at the expense of the poor.  Which brings us to Seattle’s hard-left city counsel — home to such lovely characters as this woman — deciding in 2014 to ignore pleas from the business community and hike the minimum wage within their jurisdiction to $15 per hour.  The Left celebrated, the Right braced for impact.  The new law took effect two years ago, and basic economics has now rendered a verdict:

Seattle’s $15-an-hour minimum wage law has cost the city jobs, according to a study released Monday that contradicted another new study published last week. A University of Washington team studying the law’s effects found that the law has boosted pay in low-wage jobs since it took effect in 2015, but that it also caused a 9 percent reduction in hours worked, The Seattle Times reported. For an average low-wage Seattle worker, that’s a loss of about $125 per month, the study said. “If you’re a low-skilled worker with one of those jobs, $125 a month is a sizable amount of money,” said Mark Long, one of the authors. “It can be the difference between being able to pay your rent and not being able to pay your rent.” There would be about 5,000 more low-wage jobs in the city without the law, the study estimated…in the years covered by the study, 2015 and 2016, the minimum wage was at most $13, depending on business size, worker benefits and tips.

In other words, even before the full $15-per-hour mandate was phased in, thousands of jobs were killed, and  low-wage workers’ hours were significantly reduced — taking money out of their pockets.  Behold, the (ahem) wages of “fairness.”  A rival study conducted by a progressive, pro-union organization was commissioned by the Seattle Mayor’s office (after preliminary data from UW’s respected, nonpartisan team of economists appeared politically unhelpful to the city’s policy), predictably declaring the move a big success.  Unsurprisingly, it is being criticized as bought-and-paid-for propaganda.  Its liberal authors are counter-attacking by alleging that the more credible study by mainstream economists is methodologically flawed, drawing this strong rebuke: “When we perform the exact same analysis as the Berkeley team, we match their results, which is inconsistent with the notion that our methods create bias,” one UW professor noted.  It turns out that when you raise the cost of creating new jobs and sustaining existing ones, fewer jobs are created, and employers find ways to stay in business.  Hardest hit are low-skilled, would-be workers looking to get a foot in the door — as well as low-income workers whose hours were slashed after the government artificially mandated a spike in their hourly pay.  Based on the data, the harm outweighed the benefits:

NBER: $13 minimum wage in Seattle LOWERED average low-wage employee pay 6.6 percent. https://t.co/LLv9xmQuM2 pic.twitter.com/uMOtnF9ui4

— Phil Kerpen (@kerpen) June 26, 2017

Seattle’s minimum-wage hike seems to have reduced low-wage workers’ earnings by $1500 a year: https://t.co/zB3elfXWdJ

— Annie Lowrey (@AnnieLowrey) June 26, 2017
But hey, at least a bunch of liberal politicians were able to congratulate themselves on being “compassionate.” National Review’s Charles Cooke joked that the study’s conclusions simply indicate that the minimum wage must be goosed even higher:

Better make it $20. https://t.co/Gaon8cnTFi

— Charles C. W. Cooke (@charlescwcooke) June 26, 2017
Even though he obviously meant this in jest, there are undoubtedly left-wing activists re-writing their talking points demanding precisely this “solution” at this very moment.  Hell, why not make it $150 per hour?  By the way, the Democratic Party enshrined a national $15 minimum wage in its 2016 platform.  To borrow the Left’s lazy, bullying preferred framing on so many policy debates, why do Democrats hate poor people?  Especially those who actually work for their party?  Parting thought: Between California’s dashed single-payer fantasy and Obamacare’s continued implosion, it’s been a rough stretch for liberal policy schemes.  Not that it will deter the true believers for one nanosecond.  Onward, for “fairness!”

 

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