Economists Tell Lawmakers That Minimum Wage Hike Would Do More Harm Than Good

Demonstrators fighting for a $15-per-hour minimum wage march through downtown during rush hour on May 23, 2017 in Chicago
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• February 13, 2019 4:55 am


Speaking before a group of Pennsylvania lawmakers, Duquesne University economics professor Antony Davies allowed that hiking the minimum wage in the state will have economic benefits for some workers.

"That argument is true, halfway," Davies told a meeting of the House Labor & Industry Committee. "Raising minimum wage does put more money in workers’ pockets who keep their jobs. It takes money out of the workers’ pockets who lose their jobs."

Davies and fellow economics professor Matthew Rousu of Susquehanna University were invited to testify in the wake of Gov. Tom Wolf’s proposal to raise the state’s minimum wage this summer from the federal level of $7.25 per hour to $12 per hour. The governor’s plan would subsequently add 50 cents per hour each year until it hits $15 per hour, and after that the minimum wage would increase perpetually along with the rate of inflation.

According to Davies, what happens when the minimum wage is increased is that the money to pay for it comes from one of three sources – either consumers pay more, employers make do with lower profits, or a percentage of workers lose their jobs to fund the raises for those who remain.

"People claim that the minimum wage protects workers from employers who would pay them as little as possible," he said. "That's a fascinating argument to me. Because if it were true, then every employer would pay exactly the minimum wage, because there's no law requiring them to pay more. In fact, in Pennsylvania, 99 percent of employees earn more than the minimum wage."

Rousu presented numbers showing that if consumers are forced to pay more for products and services because of a minimum wage hike, the resulting increase in the cost of living will have a negative impact on the buying power of families across the state.

"A family who's earning approximately the median income of Pennsylvania, $55,000 a year … would lose $1,300 dollars," Rousu said. "So the price increase would essentially serve as a tax of $1,300 to these families, which is a pretty enormous loss."

Rep. Fred Keller, R-Mifflinburg, suggested that if Rousu’s argument is correct, it could be devastating to Pennsylvania’s senior population living on fixed incomes, a point to which Rousu agreed, and Rep. Cris Dush, R-Brookville, noted that Pennsylvania has the nation’s second largest population living on fixed incomes.

Rousu stirred some discomfort among Democratic members of the committee by arguing that historically, minimum wage levels were instituted as a means of pricing minority workers out of the job market.

"You mentioned in 1925 in British Columbia, the catalyst for raising the minimum wage there was due to racism," asked Rep. Morgan Cephas, D-Philadelphia. "Are there any current studies, probably within the last decade or two, that would point to racism as a catalyst?"

The professor allowed that the racist underpinnings he was describing were historical in nature, conceding that backers of a minimum wage hike today are not trying to hurt minorities. But he insisted that good intentions or not, an increase would hurt minority populations.

"There's a disparate impact in the impact on the minimum wage," he said. "The individuals who did have racist intentions, I mean, I hate to say they won, because that sounds wrong, but it seems like they had intentions to cause harm to minority groups, and through their actions, they indeed did cause harm."

Rep. Dan Miller, D-Mt. Lebanon, was concerned that the committee was hearing from two economists opposed to minimum wage hikes and wasn’t having an opportunity to hear from the other side of the argument.

"We've heard today from two people who, respectfully, they believe that the minimum wage should be gone, in one way or the other," he said. "Fair enough. … We're not hearing from an economist who would perhaps consider the other side."

Published under: Minimum Wage