Furchtgott-Roth: Raising Minimum Wage Is a Dead End

Monday, 23 Dec 2013 07:03 AM

By John Morgan

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Raising the federal minimum wage as President Obama has suggested would not be a real boost to the economy, and would definitely raise the unemployment rate among low-skilled people and teenagers, according to Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor.

In a column for MarketWatch, Furchtgott-Roth said that hiking the minimum as proposed from its current level of $7.25 to $10.10 per hour — a 39 percent hike — might be viewed in Washington as less onerous than some other forms of wealth redistribution.

The problem is, it would not have the desired impact, she explained.

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When minimum wages are raised, "employers hire higher-skilled people, or switch to different forms of technology, such as placing orders through touchscreens," she said.

"Finding the effects of raising the minimum wage is challenging, because 97 percent of American workers now make above the minimum wage — not because it is the law, but because employers have to pay higher compensation packages to retain workers."

Furchtgott-Roth, who held the Labor Department post under President George W. Bush and is now a senior fellow at the Hudson Institute, said a forthcoming New York Times piece that is favorable to raising the minimum wage relies on faulty academic research.

Approximately 1.8 million Americans aged 16 to 24 worked in minimum-wage jobs in 2012, and many more would have if more such jobs were available, she said.

Furchgott-Roth noted the teen unemployment rate is 21 percent and unemployment rate for black teens is 36 percent.

Her prediction if the minimum wage is hiked by lawmakers in Washington?

"More low-skill Americans would be out of work. People would buy less of the higher-priced services. Supersizing a wage is not as simple as supersizing a hamburger."

According to a report from the Economic Policy Institute (EPI), raising the federal minimum wage to $10.10 could increase the pay of 27.8 million Americans.

"There's increasing buzz that [$10.10] might not be adequate," Rep. Keith Ellison, D-Minn., told MSNBC. "When you think about it, we have not been keeping pace with inflation. We're supportive of it, but we need to go beyond the least we can do."

The EPI analysis showed those 27.8 million workers "would take home about $35 billion in additional wages and they would probably spend it, as low-income people living with little financial cushion tend to do," The Huffington Post reported.

The EPI study concluded if the minimum wage had grown at the same rate as productivity since 1968, it would be $18.30 today.

Editor’s Note: Add Up to $152,046 to Your Social Security Benefits Using Weird Trick

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