Would a $15/hr minimum wage result in fewer benefits?
If employers have to spend more on hourly compensation, they'll have to make cuts somewhere else, argues the Competitive Enterprise Institute.
Tradeoffs resulting from an increase in the minimum wage, argues a new paper from the Competitive Enterprise Institute, result in negative economic effects for people with low incomes that offset the benefit of any raises.
“A few workers benefit a lot, and a lot of workers are hurt a little,” writes author Ryan Young. “It is an ethical judgment whether that is a good thing or not, but the risks of increased rent-seeking and reduced workplace flexibility tip the scales against an increase.”
Related: Amazon’s minimum wage hike comes with tradeoffs
Potential negative impacts of an increased minimum wage include, according to Young:
- Less vacation and personal time, as a higher minimum wage would make such benefits more expensive.
- Reduced or eliminated perks such as meals, snacks or parking.
- Reduction in flex scheduling.
- Higher insurance copays or reduced coverage as employers look to offset costs of paying workers more.
These are just a few points in a veritable laundry list of what Young says are the negative effects of an increase in wages. He also notes the potential for layoffs, tax increases, fewer jobs, cut hours, more automation, increased youth unemployment, more abusive behavior by bosses and higher crime rates.
Young cites economists Armen Alchain and William Allen, who argue: “The unintended consequence is that to get or retain jobs at the higher imposed wage rates, job applicants will tolerate less pleasant and stricter working conditions, less vacation, less insurance, less employer-supplied work clothing and tools, shorter coffee breaks, more intense labor, less job security, and more occasions of temporary layoffs when demand is transiently low.”
The Economic Policy Institute disagrees with the theme of CEI’s paper, having stated in testimony in February before the House of Representatives Committee on Education and Labor that an increase in the minimum wage to $15 would be “good for workers, good for businesses and good for the economy.” It cited recent economic research indicating that “both the average study as well as the best research show that there has been little downside to raising minimum wages,” reducing poverty, improving the living conditions of women, children and people of color and even allowing people to save for emergencies and eventual retirement.
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