ObamaPresident Obama has hit the campaign trail again to push policy reform that will raise minimum wage to $9 per hour. The White House asserts that increasing minimum wage elevates the economic status for the working-poor, particularly single parents and women, who account for 60 percent of hourly employees. Raising the wage helps parents avoid debt and support their families.

However, this initiative does not account for the potential detriment that raising minimum wage can have on businesses and unemployment. Though seminal research has found that minimum wage increases benefit workers and the costs often fall on consumers, it also has a negative impact on low-skill workers. The American Enterprise Institute, a Republican-leaning think tank, found that a 10 percent increase in minimum wage decreases low-skill employment by a minor percentage. Since low-skill workers will have to be employed at a higher rate, employers cut hours and some lose their jobs.

Despite their findings, most evidence supports President Obama’s position.

Alan Krueger, who is now Chairman of the White House Council of Economic Advisers, and his colleague David Card produced research in the 1990s that focused on the results of New Jersey’s decision to raise minimum wage. Their findings included:

  • No evidence that the rise in New Jersey’s minimum wage reduced employment at fast-food restaurants.
  • Prices of fast-food meals increased in New Jersey, so the burden of cost was passed on to consumers.

Even the consumer costs are minimal. “The Effect of Minimum Wage on Prices,” a 2004 collection of previously published research found that a 10 percent increase in minimum wage increases food prices by less than 5 percent. So though Republicans and Democrats have opposing viewpoints on President Obama’s proposal, the real impact of minimum wage is pulling the poor out of poverty by helping 15 million workers and paying a little more for a blouse or cheeseburger.

  • Ask_ME

    Wal-Mart already pays above minimum wage. Some locations pay $10.00 an hour.

    Companies like McDonalds, Burger King, Taco Bell, service occupations etc. will be effected by raising the minimum wage.

    They can easily get around this by 1). Giving employees LESS hours (many of these folks are already part-time) and 2). Closing down some locations while hiring less employees. Full-time people would likely be expected to do more with the loss of part-time people.

    Rather than pay a janitor $9.00 an hour companies will likely require employees to help keep the facility clean.

    There are ways to get around minimum wage.

  • Fantastico

    Yes, child care must be treated as a public good. Then integrated into the Public school system through extended school hours and universal pre-k.

  • beth anderson

    WalMart starts at minimum wage. Then you can get raises once a year , UP to .40 an hour. And thats if you have been a good worker. And when minimum wage goes up, they do not adjust your pay accordingly. So its like you dont make much more than minimum wage , even after you have been there for 5 years. I know this because my nephew works there.