No need to fear proposed minimum-wage increase
By Paul T. Manion
It is strange that it seems so difficult to find meaningful information on the actual economic effect of the proposal to raise the minimum wage to $10 per hour.
Certainly, it has been persuasively asserted that it is virtually impossible for an adult to live with any degree of comfort at the present minimum wage of $7.25 per hour (i.e. $270 per week after FICA tax is paid).
On the other hand, many have strenuously argued that raising the minimum wage is a very bad idea because it will cause widespread layoffs of many low-income workers as well as causing significant increases in prices. Some have even said such a raise will result in many businesses dosing due to the increased costs.
The precise issue was the subject of an extensive study done at the University of California published in 2011 entitled "Living Wage Policies and Big Box Retail." The study determined that raising the wages of all Wal-Mart employees to a minimum of $12 per hour would cost Wal-Mart a total of $3.21 billion. Though seemingly a large amount of money, it is actually less than 1 percent of Wal-Mart's annual sales (See Yahoo Finance). Hence, such an increase in the minimum wage could be entirely offset by a minuscule price increase of less than 1 percent.
Further significant evidence on this subject is found in the state of Washington, where the minimum wage was, in fact, raised to $9.32 per hour, effective Jan. 1 of this year.
According to the May 7, 2014, issue of Bloomberg Magazine, job growth there has continued to exceed the national average since the increase.
It is also noteworthy that Washington state now has an unemployment rate of 6.3 percent, below the national average, despite the fact that its largest private manufacturer, Boeing, has laid off thousands. Surprisingly, there has been an increase in employment in restaurants and bars.
Bloomberg concluded that there was no evidence that the increase in the minimum wage had harmed Washington's economy in any way.
The many parties who argue against the minimum wage seem to support their position with nothing more than conjecture or hypothetical anecdotal opinions. These same arguments have been advanced against every proposal to increase the minimum wage each time it has been increased for the past 60 years. Nonetheless, all such increases were followed by a stronger economy.
The studies of the result of such increases by the University of California and the experience in the state of Washington surely give a reasonable assurance that the proposed increase of the minimum wage to $10 per hour likewise will not harm the economy now.
In the meantime, none of us should forget how utterly impossible it must be to try to exist on wages of $270 per week.
Paul T. Manion had been the senior partner of a Vermilion County law firm for 40 years prior to his retirement in 2006. He had served for many years as a member of the Board of Governors of the Illinois Trial Lawyers Association. He is the former chairman of the Vermilion County Democratic Party. He resides in rural Hoopeston with his wife, Bonnie.