By: Isabelle Foley
Sentry Staff Reporter
In this year’s State of the Union address, President Barack Obama voiced his support for the raising of the minimum wage. Today, minimum wage in the United States is $7.25 an hour. In his speech, President Obama announced an increase of $2.85 ($10.10/hour) for federal contract workers. Vowing to enact change with or without the support of Congress, the president claimed that “average wages have barely budged” and that “upward mobility has stalled.” While the president’s intentions to help the working class are well-meaning, the paradoxical consequences of raising the minimum wage will in fact hinder job creation and eliminate upward economic mobility.
Since 1970, the minimum wage has been raised five times by Congress. Four out of five of these wage increases have resulted in a dramatic rise in unemployment, according to the Bureau of Labor Statistics. In 1974, 1978, 1990 and 2007, an increase in the minimum wage led to a peak unemployment rate that was almost double the unemployment rate when the bill was passed. As many of our AP Psychology students know, correlation does not always mean causation. However, such a strong relationship between wage increases and unemployment cannot be ignored. While it cannot be scientifically proved that the two are causally linked, what is made abundantly clear by the statistics is that job creation is stagnating.
While President Obama’s raising of the minimum raise may directly benefit federal workers who already have jobs, what is being done to help Americans who are still unemployed? The more immediate issue that should be addressed by the Obama Administration is unemployment, not wages. Legislation that stimulates job creation, rather than the inhibition of job creation, should be the real focus of the president’s initiative. Although President Obama claims to be helping unskilled workers, they will be the group that suffers most from an increase in the minimum wage.
Rather than relying on statistics to show how unskilled workers will be harmed, one can turn to economic fact. Businesses, especially small business, cannot afford to pay more for unskilled or low-skilled labor. “Unskilled” labor refers to entry-level jobs that require little to no training. The whole point of entry-level employment is to gain experience that allows one to climb the economic ladder. Padding the wages for these jobs is a misplaced effort, because these workers should be focused on achieving higher positions. Raising wages for unskilled labor is like spending a lot of money (money the government does not have) on a house you do not want to live in for the rest of your life. Furthermore, it will force these businesses to lay off workers, eliminating opportunity and contributing to the president’s observation that “upward mobility has stalled.” Therefore, the very people whom the legislation aims to help will end up losing the most.
As we have seen in the past with legislation such as Obamacare, President Obama has not been able to compromise with the Republicans in the House of Representatives. Without the support of Congress, the president can only enact wage increases for federal contract workers. Generous estimates predict that this will affect, at most, several hundred thousand jobs. In comparison, legislation enacted by Congress would have the ability to increase wages for 17 million workers. Bypassing congressional legislation will not only benefit dramatically less workers, but it would be the second time the president has enacted major spending without the support of half of the country. The first time being the passage of Obamacare, President Obama signed into law the biggest spending bill in U.S. history without a single vote of support from Republicans in the House. This lack of compromise holds fault on both sides, but that does not mean it should be ignored.
