Economy

The 3 Biggest Myths About Raising the Minimum Wage

On Thursday, Senate Democrats plan on introducing the Raise the Wage Act. If passed, the bill would raise wages to $12 an hour by 2020, index the minimum wage to the median wage after 2021, and lift the minimum wage for tipped workers. The act is unlikely to pass the Republican-controlled Congress. It is likely, however, to help galvanize support for the raised wage -- and voter support for politicians who support a raised wage.

There are several key myths surrounding this once-uncontroversial policy. ATTN: took a moment to look into them:

Myth #1: Minimum wage jobs are primarily for teenagers or part-time workers who are just trying to score some extra cash.

This myth is one that has been parroted by politicians -- including a 2016 presidential candidate. In terms of the age of minimum wage workers, 88 percent are age 20 or older. On top of that, nearly 250,000 hold college degrees, and more than 50 percent work full-time. According to a 2014 Pew Research Center report -- minimum wage workers are also 77 percent white and nearly 50 percent of them are white women.

Myth #2: Raising the minimum wage will raise prices. (After all, businesses will pass along the cost of more expensive labor to consumers by raising the prices of their products.)

It is possible that a higher wage will create some price increases, but it's likely you wouldn't notice.

"Even if Wal-Mart were to pass 100 percent of a wage increase to 10 dollars on to consumers, the average impact on a Wal-Mart shopper would be quite small: about $0.36 per shopping trip, or $9.70 per year, for the average consumer who spends approximately $1,088 per year at Wal-Mart," a study from University of California, Berkeley found.

Another study from the Economic Policy Institute found that "Wal-Mart could have raised the wages and benefits of each of its non-supervisory employees in 2005 by more than $2,000 without raising prices a penny."

Many worry that small businesses, who don't have high profits like Wal-Mart will be hurt. But many small businesses support raising the minimum wage, the U.S. Department of Labor found:

"A June 2014 survey found that more than three out of five small business owners support increasing the minimum wage to $10.10. Small business owners believe that a higher minimum wage would benefit business in important ways: 58% say raising the minimum wage would increase consumer purchasing power. 56% say raising the minimum wage would help the economy. In addition, 53% agree that with a higher minimum wage, businesses would benefit from lower employee turnover, increased productivity and customer satisfaction."

Myth #3: Raising the wage kills jobs.

Opponents of the minimum wage also argue that by creating a minimum wage -- or a price floor for labor -- you'll kill all jobs that require labor that's worth less than the minimum wage. If someone is willing to work for a few bucks an hour, the argument follows, isn't it better for them to have that job rather than have the government eliminate it?

Many studies have looked into whether a higher minimum wage kills jobs, and most have found that they do not or, if they do, the job loss is small. Some studies -- including ones from the Economic Policy Institute (EPI) and the Los Angeles Economic Roundtable -- even found that raising the minimum wage spurs moderate job growth due to increased consumer spending because low income workers spend most of their pay raises, putting that money right back into the economy.

More on the new, proposed minimum wage law.

The Raise the Wage Act, put forth by Sen. Patty Murray (D-Wash.) and Congressman Robert C. Scott (D-Va.), would raise the wage to $12 per hour by 2020. This would return the minimum wage's value to its 1968 peak, when purchasing power for those who were earning the minimum wage was at its highest. This increased minimum wage would raise the wages of nearly 38 million workers in the United States.

"In 2014, the minimum wage was equal to only 37.1 percent of the hourly median wage of full-time, full-year workers," the EPI reported. "Using a conservative projection of wage growth, a $12.00 minimum wage would equal 54.1 percent of the projected national median wage, returning it to its 1968 level (52.1 percent)."

A report from the EPI is also making the case that the gradual shift to a $12 minimum wage over the next five years is also economically feasible and has the added benefit of increasing worker productivity and education. 

“Today’s more productive and better educated workforce means that raising the minimum wage to a level comparable to its 1968 value should be an easier lift for the economy now than it was then,” said Dave Cooper, one of the economic analysts from the report, in a statement. “Additionally, wages in Southern states were much lower than the rest of the country in 1968. They’ve since caught up, meaning that if low-wage state economies could handle the federal minimum wage in 1968, they shouldn’t have any trouble going to similar levels today. This is a goal well within our historical experience.”

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