In President Obama’s 2013 State of the Union address, he called to increase the minimum wage. In response to this, Senator Tom Harkin and Representative George Miller have introduced the Fair Minimum Wage Act of 2013. This act would raise the federal minimum wage from the current $7.25 to $10.10 over the course of the next two and a half years. This would be done in three separate increases of $.95. From this point, the act would adjust the minimum wage annually, in order to keep up with the rising cost of living, and to account for inflation. The minimum wage for tipped workers would also be raised, putting it at 70% of the standard minimum wage.
Republicans are quite adamantly against this increase, to the point that they House unanimously voted down the proposed increase. While economists generally disagree on the impact of minimum wage increases, these disagreements revolve around small minimum wage increases. Economists across the board generally agree that a large minimum wage increase will damage the economy. Republican views on minimum wage revolve around this idea – they believe that raising the minimum wage that much that rapidly can only cause problems. For the most part, Republicans believe that wages should be based on skill, education, and the law of supply and demand. Workers should make what these three factors combine to allow both the employee and the employer to benefit from the arrangement.
- Impact on Businesses
- Impact on Employment
- Who Are We Really Helping?
- Mitt Romney on the Minimum Wage
- Paul Ryan on the Minimum Wage
- Marco Rubio on the Minimum Wage
A minimum wage increase will increase the operating cost that businesses face. There is no question about that. Republicans believe that this will force businesses to increase product prices, in order to account for this increased operating cost. Therefore, competition will be decreased, as businesses do not have as much freedom to set their own prices in order to compete with those around them. Some economists believe that this will lead to reduced market shares, and will even bankrupt some businesses, in cases where consumers do not buy as much product due to the price increases.
Republicans believe that the loss of capital that the increase would cause will actually increase unemployment, which is the opposite of what the Obama administration is arguing. Businesses that are losing money may need to compensate for it by cutting hours, or even laying off workers. Even businesses that do not get rid of the employees they already have will probably be less likely to hire new people.
One of the biggest arguments that the Democratic Party is making for the minimum wage increase is that it will create jobs. They have estimated that raising the federal minimum wage to $10.10 would create $22 billion in new economic activity, translating to 85,000 new full-time jobs. They argue that these jobs are created when minimum wage workers have more money to spend on goods. This causes consumer demand to increase, and employers therefore need more employees to keep up with this higher demand.
However, a study published in the Review of Economics and Statistics in November of 2010 found “no detectable employment losses from the kind of minimum wage increases we have seen in the United States.” Another published in 2011 “found no impact on hours worked or employment levels.”
Again, all of these studies are done based on small increases of the minimum wage. They show that small minimum wage increases did not decrease unemployment. Therefore, we have no proof that a larger one will. We have no proof that an increase of this magnitude won’t harm the economy, or increase unemployment, either. Due to the country’s economically volatile state, Republican views on minimum wage are that this is a risk that America should not be willing to take at this time.
What many people who are not business owners fail to realize is that businesses are paying far more than an extra $2.85/hour if this raise goes through. They pay more in payroll taxes, more in social security, more in unemployment. The cost is high, and not all businesses are equipped to handle it, whether they support it or not.
The minimum wage increase will only help 1% of Americans, as only 1% of Americans make minimum wage. Furthermore, the majority of minimum wage earners receive raises within 6 months or less of employment.
Of the people who are making minimum wage, and would therefore benefit from the raise, very few are actually using that money to cover their living expenses. Not that many Americans hold minimum wage jobs that rely on them for their livelihood. Households with workers who make minimum wage average $50,000/year in income. This is because those who make minimum wage are mostly spouses who are supplementing their household income in order to have some extra savings, or students who are living at home and rely on their parents for most of their living expenses.
The majority of households that are living in poverty are in this state due to unemployment, not to being underpaid. These families need jobs, not wage increases. Whether or not the minimum wage will create or take away jobs is more of a factor here than the actual amount the wage is increased by.
Romney’s beliefs on the minimum wage actually go largely against those of the rest of his party. “I…part company with many of the conservatives in my party on the issue of the minimum wage. I think we ought to raise it,” Romney has said. “Because frankly, our party is all about more jobs and better pay.” While he does not believe in a large increase such as the one being proposed at this time, he believes in raising the minimum wage to account for inflation on a regular basis. When asked about the issue during the 2012 primaries, Romney stated, “well, actually, when I was governor the legislature passed a law raising the minimum wage. I vetoed it… And I said, `Look, the way to deal with the minimum wage is this. On a regular basis,’ I said in the proposal I made, `every two years we should look at the minimum wage, we should look at what’s happened to inflation. We should also look at the jobs level throughout the country, unemployment rate, competitive rates in other states or, in this case, other nations.’ So, certainly, the level of inflation is something you should look at and you should identify what’s the right way to keep America competitive… Yeah, so that would tell you that right now there’s probably not a need to raise the minimum wage. What I can tell you is had one indexed the minimum wage back to, let’s say, 1990, the minimum wage would be lower now than it actually is. Democrats make big hay of this every few years, `Oh, we’re going to raise the minimum wage’, and get a lot of hoopla for it. Frankly, the right way to process it is to look at the minimum wage, look at how unemployment rates are, make adjustments as time goes on based upon our need to compete, the need of the job market, and, of course, what’s happened to inflation.”
When asked his opinion on the minimum wage increase, House Budget Committee Chairman Paul Ryan spoke out against it. He stated, I think it’s inflationary. I think it actually is counterproductive in many ways. You end up costing job from people who are the bottom rung of the economic ladder. Look, I wish we could just pass a law saying everybody should make more money without any adverse consequences. The problem is you’re costing jobs from those who are just trying to get entry level jobs. The goal ought to be is to get people out of entry level jobs into better jobs, better paying jobs. That’s better education and a growing economy… I don’t think raising minimum wage — and history is very clear about this — doesn’t actually accomplish those goals.”
Senator Marco Rubio also spoke out against the minimum wage increased. When asked his opinion on it, he commented, “I want to see people making a lot more than $9 an hour in the United States. And the way you do that is through rapid economic growth where people are being paid a lot more than that. $9 is not enough. I think we all would want that. The question is is a minimum wage the best way to do it? And history has said the answer is absolutely not. In fact, the impact of minimum wage usually is that businesses hire less people. That’s the impact of it. They’ll just hire less people to do the same amount of work…We have a lot of history to prove that the minimum wage, raising the minimum wage does not grow the middle class.”
- Top Republicans Oppose Obama’s Call To Raise The Minimum Wage – Think Progress
- House Republicans Unanimously Vote Down Minimum Wage Increase – The Huffington Post
- The GOP and the minimum wage – Slate
- Minimum Wage Increases: Good For Employees, But Detrimental To Employers
- Fix the Economy: A Cause Republicans Can Stand Together On
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- Republican Views on the Economy