The Congressional Budget Office has just released a report saying that while raising the minimum wage will lift more people out of poverty, it’ll also lead to 1 million less jobs in the country.
The United States federal minimum wage is currently set at $7.25 an hour, with some states paying more than that. For states that don’t have a minimum wage, it falls to the federal default. Lately, though, there has been a lot of talk as to whether or not the federal minimum wage should be raised to $10.10 an hour, a motion that is supported by President Obama. Research conducted by Quinnipiac University this past January has shown that most Americans support raising the minimum wage, with 71% saying it’s a good idea and 52% of Republicans agreeing.
Potential Job Losses?
The report has been most notably opposed by (Republican) House Speaker John Boehner, with one of his spokesmen saying, “While helping some, mandating higher wages has real costs, including fewer people working. With unemployment Americans’ top concern, our focus should be creating—not destroying—jobs for those who need them most.”
However, House Minority Leader Nancy Pelosi disagrees with this statement, as she’s gone on record to say, “No matter how the critics spin this report, the CBO made it absolutely clear: raising the minimum wage would lift almost 1 million Americans out of poverty.”
This anti-confluence of opinions makes it hard to understand which side is arguing most correctly, but looking at other similar countries can identify if higher minimum wages cause job losses or not. For example, the Ontario minimum wage is set at $10.25 an hour and due to rise to $11 in June, with their dollar closely matching ours. It has steadily increased every few years, with the minimum wage in 2001 being only $6.40 and hundreds of thousands of Canadians not suddenly out of work (note: the federal minimum wage is set provincially, with Alberta the lowest at $9.95). And in Australia, where both the dollar again is relatively comparable and they’ve escaped the recession, the minimum wage rests at a comfortable $16.37 an hour. Interestingly, Australia sets its minimum wage based on age, with 19-year-olds earning $13.51, 17-year-olds earning $9.46, and 15-year-olds earning $6.03.
The United States tends to let individuals and states handle their own affairs, so one possible solution is for employers to just pay their employees more, regardless of what the minimum wage laws say. The law says that there only has to be a floor, not a ceiling, and so employers like Gap Inc., which employs the Canadian-born Glenn Murphy as its chief executive, is raising its minimum wage to $9 this year and $10 the next. Because Gap, Inc. owns several chains of stores, about 65,000 employees will be seeing a pay hike.
Obama supported the move, saying, “I applaud Gap Inc. for announcing that they intend to raise wages for their employees beginning this year. But only action from Congress can make a difference nationwide…It’s time to pass that bill and give Americans a raise.”
So for now, Americans wait and see what will happen.