Myth
Most minimum wage earners work for large national corporations who can afford to pay their workers more.
The PA Chamber is a leading voice against government mandated minimum wage increases. Nonpartisan studies have shown and businesses have reported that these “feel good” policies often lead to reduced employee hours, job loss and a higher cost for goods and services. Our organization supports more targeted approaches to helping low wage earners’ upward mobility in the workforce, such as implementing a state Earned Income Tax Credit and strengthening workforce development programs.
Despite insight from experts and myths we’ve debunked over time that show the negative impact of mandated wage hikes on employers, consumers and even the low-wage workers that proponents claim to support, some elected officials and the Wolf administration continue to ignore these facts even though the legislation does nothing to address the income and skills gaps that are causing real problems for the Commonwealth.
Supporters of mandated wage hikes don’t take into account that other states don’t have our tax climate – with a 9.99 percent Corporate Net Income Tax rate – among other uncompetitive taxes. They’re also not thinking of our history and what happened the last time the minimum wage was raised in Pennsylvania, when employers (especially small businesses) showed reductions in hiring, less investment and even job cuts.
The PA Chamber believes that a better alternative to helping low-wage workers is a focus on career oriented job training, where educational institutions and employers work together to prepare students and workers for rewarding jobs. There’s also the option of a Earned Income Tax Credit to spread the costs of financial aid for those in poverty over the entire taxable population, without demanding that employers exclusively shoulder the burden. The PA Chamber will continue to promote these options while standing firm against an unwarranted minimum wage increase.
Gov. Tom Wolf and several lawmakers recently unveiled a proposal calling for one of the most extreme minimum wage increases in the country. Their latest plan would hike PA’s minimum wage to $12 an hour in July - a 65 percent increase - and incrementally increase the minimum wage until it reaches $15. They also call for eliminating the tipped wage, which means Pennsylvania’s restaurants have just a few months to figure out how they will increase entry level wages by over 235 percent by July and by over 500 percent in just a few years.
We want to hear from you. Tell us - could YOUR business survive a mandatory 500 percent increase in labor costs?
In the past, many employers have shared their real-world perspective on how mandatory wage increases would negatively impact their business and employees, which has helped us make the case to lawmakers why they should pursue alternative solutions to help low-income Pennsylvanians without risking job loss and other negative impacts.
Feedback can remain anonymous if you prefer. Thank you in advance for your valued insight!
Organized labor and other left-leaning organizations are once again pushing for mandatory wage increases and, as usual, the success of their campaign will depend on policymakers, the media and general public believing several well-trodden myths:
Most minimum wage earners work for large national corporations who can afford to pay their workers more.
The vast majority of minimum wage earners do not work for large corporations. In fact, according to data from the U.S. Census Bureau, the majority of the minimum wage workforce is employed by small businesses. And according to the U.S. Department of Treasury, most small businesses owners' annual income is less than $50,000 per year.
Employers exaggerate when they say mandatory wage increases will harm business and employment prospects.
Minimum wage advocates shrug off concerns raised by the business community but the impacts of mandatory government-imposed wage increases are real. According to a Feb. 2014 report from the nonpartisan Congressional Budget Office, raising the minimum wage to the oft-cited level of $10.10 would result in approximately 500,000 lost jobs and possibly up to a million. A Pennsylvania specific study by the state’s Independent Fiscal Office, found that an increase to $10.10 could lead to the loss of more than 30,000 jobs throughout the Commonwealth. Other states that have mandated increases have seen a negative impact on employment. A recent study from the University of Washington found that Seattle’s $13 an hour minimum wage rate – which went into effect in 2016 – has led to employee hours dropping by 9 percent and has actually lowered the average monthly income for low wage workers by $125. Here in Pennsylvania, many employers reported adverse impacts in the months following the minimum wage increase in 2006, such as Kennywood Park outside Pittsburgh, which had to lay off 70 employees; or a chain of fitness stores in the Lehigh Valley, which had to lay off 100 workers. Ignoring concerns raised by employers who will face increased labor costs of anywhere from 40 to 107 percent (as various proposals aim to do) is shortsighted and unfair to the employers and employees who will be impacted.
Increasing the minimum wage is the best way to fight poverty.
This common rationale for mandating wage increases is a myth for multiple reasons. The majority of those living at or below the poverty line cannot benefit from a mandatory wage increase because, according to the U.S. Census Bureau, they don't have a job in the first place. A University of California at Irvine economist concluded that 85 percent of major academic studies on the minimum wage found a negative employment effect on low-skilled workers. Moreover, most minimum wage earners do not fit the demographic description that supporters use in their narrative. For example, according to the 2018 Pennsylvania Department of Labor and Industry’s Minimum Wage Advisory Board report: most are under 25; nearly a third live in homes in which annual income is over $75,000; and over 90 percent have no children. The best way for government to truly help low-wage workers is to strengthen workforce development programs to provide necessary skills-training for in demand jobs in the Commonwealth. Additionally, more targeted approaches – such as a state Earned Income Tax Credit – will better help low-wage earners as they move upward through the workforce.
The legislature should at least raise the minimum wage to $10 because that's around what it would be if it had been increased based on the rate of inflation since 1968.
Advocates of a higher minimum wage consistently use 1968 as a historical reference point because that is the year in which the minimum wage hit its inflation-adjusted high point. Anyone can pick an arbitrary year: had minimum wage tracked inflation from, say, 1948, today it would be a little over $3; or from 1988, it would be $6.50. The federal government first set a minimum wage in 1938 at 25 cents, which means that, based on the logic employed by advocates, the minimum wage should be about $4.07 today.
Minimum wage will help the economy because people will have more money to spend.
Government-mandated raises will indeed put more money in some people's pockets; but that money comes from someone else's pocket, most likely a small business owner. Therefore, while some people will benefit, others will lose their job or employers will not be able to expand, add new positions or hire back workers who had been laid off. Even more likely is that workers will see hours reduced, considering around three quarters of minimum wage earners work hourly part-time jobs. Advocates who claim artificially raising wages would significantly boost the economy seem to forget that the federal minimum wage was increased in 2007, 2008 and 2009 – years in which the country suffered through a debilitating recession and historically sluggish recovery.
Workers deserve a raise which is why we have to increase the minimum wage.
Standard rhetoric from minimum wage advocates implies that, unless the government takes action, those earning the minimum wage will never experience a wage increase. In reality, minimum wage is typically a starting or training wage for employees entering the workforce who usually earn commensurate wage increases as they gain experience and skills. Overall, the number of minimum wage earners has generally declined as the size of the workforce has increased and the age of minimum wage earners is getting younger. These facts indicate that people usually do not get "stuck" at minimum wage.
Pennsylvania Chamber of Business and Industry President and CEO Gene Barr issued the following statement in response to a press conference by Gov. Tom Wolf calling for a government mandated minimum wage increase to $12 an hour in July with incremental increases to $15 and elimination of the tipped wage:
Last week, a new study was released that once again proves just how harmful a $15 minimum wage can be. The study, conducted by the economic consulting group PFM, found that raising the minimum wage to $15 an hour in Montgomery County, Maryland, would cost the county 47,000 jobs over the next five years. That job loss is equivalent to $396.5 million of income.
At the PA Chamber Educational Foundation's Third Economic Forecast Summit in February, Dr. Martin Regalia—a respected economist with the U.S. Chamber of Commerce— spoke off-the-cuff about the minimum wage during a question and answer segment of the program. Calling efforts to raise the minimum wage "bad public policy," Dr. Regalia went on to explain that while minimum wage hikes are beneficial to a small number of individuals, they actually have a negative impact on the majority of affected employers and potentially millions of individuals nationwide. The PA Chamber has long advocated against government-mandated wage increases, including legislation this session for which Governor Tom Wolf has voiced support and would raise the current $7.25 minimum wage rate to $10.10 an hour. We spoke with Dr. Regalia following the summit to gain further insight on his remarks and glean his perspectives on the impact of a minimum wage hike on the overall economy.