The nonpartisan Congressional Budget Office (CBO) recently released a report presenting mixed reviews for President Obama’s key initiative of raising the minimum wage to $10.10 per hour. On the positive side, the report stated that 16,500,000 Americans would benefit from a $31 billion increase in earnings, including the 900,000 who will be lifted out of poverty. On the negative side, it also specified 500,000 jobs that would be eliminated due to increased labor costs. For example, it predicted that more employers would adopt technology to replace higher priced workers.
My experience as a technical recruiter leans toward market forces setting fair wages. There is always a cost involved when the government interferes with the free market. History shows that in almost every instance since 1938, when the U.S. government established a minimum wage, and the 30 times since then that the minimum wage has been raised, there has been a price to pay for American workers.
Unfortunately, almost 3,600,000 Americans are being paid $7.25 per hour (the current minimum wage) or less, according to the most recent figures by the Labor Department. This represents 4.7% of all hourly workers. Also, women are twice as likely to earn the minimum wage as men. Furthermore, the majority of minimum wage workers tend to be in jobs like food preparation and other service-related fields.
However, a lot of evidence, from both the CBO and other reputable sources, proves that increasing the minimum wage will significantly reduce entry-level opportunities restaurants and other service establishments can provide. For example, the most recent jobs report from the Bureau of Labor Statistics (BLS) shows that the category of Food Services and Drinking Establishments added 21,000 or 12% of the total 175,000 new jobs created last month. Furthermore, this sector has created an average of 27,000 new jobs per month for the last 12 months! Many of these jobs are at minimum wage. Therefore, it is highly likely that an increase in the minimum wage will reduce this darling sector of the BLS figures and further damage the chances of employees with limited skills or experience to enter the workforce.
In an ideal world no one should have to settle for minimum wage. For example, many of our executive recruitment clients crave highly skilled engineers, scientists, R&D, IT and technical professionals. Our phones at Strategic Search Corporation ring off the hook from their internal management recruiters begging us for such skilled talent that is in high demand, but short supply. Unfortunately, few of the workers at or near minimum wage possess these skills.
A better answer may be to provide more training and education to increase the overall talent of American workers. A good start is President Obama’s Digital Manufacturing initiative. However, as I wrote at http://www.recruitingblogs.com/profiles/blogs/digital-hubs-a-good-s... a lot more needs to be done. Our high school students are trailing the world in math and science, which are key preparatory subjects for R&D, engineering, scientific, IT and technical jobs. A better use of President Obama’s time and efforts may be focusing on improving our overall education. In turn our entire nation will benefit.
What are your thoughts?