12 February 2014, 12:56

US raising minimum wage may increase unemployment rate - report

A new study argues that raising the federal minimum wage rate would do little to actually help the poor. The Employment Policies Institute, a widely known economic research center, has repeatedly warned that increasing the minimum wage could be, in fact, harmful.

The question is whether increasing the minimum wage by nearly 40 percent to $10.10 an hour by next year would reduce poverty or further it.

"The vast majority of economic research shows there are serious consequences," Michael Saltsman, the institute's research director, said in an interview.

Even if the legislation never passes millions of dollars will be spent this year on lobbying the firms, non-profit research organizations and advertising campaigns, as industry groups like the National Restaurant Association and the National Retail Federation try to bury it. Liberal groups, in turn, will be spending lots of money to turn the debate into a political issue before the midterm elections.

The left has its own prominent groups, like the Center for American Progress and the Economic Policy Institute, whose donors include nearly 20 labor unions, and whose reports, with their own aura of objectivity, consistently conclude that raising the minimum wage makes good economic sense. But none has played such a prominent and multifaceted role in recent months as the conservative Employment Policies Institute.

A new study found that just 1.6 percent of American workers meet the minimum federal wage and argues raising the rate would do little to help the working poor.

President Barack Obama is pushing for an increase in the federal minimum wage to $10.10 an hour. However, analysts insist that the Earned Income Tax Credit (EITC) does far more to alleviate poverty.

Raising the minimum wage would fail to directly assist over 98 percent of all Americans in poverty, according to an analysis released Wednesday.

The EITC, which provides income subsidies through the tax code for low-income working families, is “much more effective at assisting the working poor than the minimum wage,” the report says.

Overall, only 1.6 percent of American workers earn the federal minimum wage of $7.25 per hour.

“Even among those who work and are in poverty, the minimum wage stacks up poorly against the EITC,” the report said. “In 2012, 24.4 percent of the working poor earned $9 per hour or less, 31.7 percent earned $10.10 per hour or less, and 43.5 percent earned $15 per hour or less.”

What is more, the report contends that the minimum wage was never meant to address income inequality. When the Fair Labor Standards Act introduced the minimum wage in 1938, it was only available to manufacturing workers and was designed to restrain child labor.

Voice of Russia, CNBC, epionline.org

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