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Minimum Wage Hike Passed by House Democrats Would Put Millions Out of Work

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House Democrats today passed a federal minimum wage hike, $7.25 to $15 per hour, though with slim expected chance of gaining Senate passage. Politics aside, CEI labor policy experts warn the consequences of imposing that substantial burden on employers would be dire for millions of workers.

Statement by Trey Kovacs, CEI labor policy analyst

“It is disappointing the House of Representatives passed the Raise the Wage Act. The minimum wage is a poor anti-poverty tool, no matter how well-intentioned. As the recent CBO report shows, the consequences of a $15 minimum wage would be millions of workers losing their job and families taking home less income. Policymakers must recognize there are trade-offs to raising the minimum wage. Some individuals may see wage gains, but others will be forced further into poverty thanks to government wage mandates.

“Rather than help unskilled and inexperienced workers, a $15 minimum wage will cut off the first rung of the career ladder for many. By raising the minimum wage, businesses will choose to hire more productive employees. This leaves less productive workers—the target of minimum wage policies—out of a job and deprived of the opportunity to gain the skills necessary to get higher paid employment.”

Statement by Ryan Young, CEI senior fellow

“Today’s House vote on the Raise the Wage Act puts feeling good over doing good. There are some winners in a minimum wage hike but many more losers. The Senate should put a stop to this ill-considered effort that will make too many workers worse off.

“Instead of getting higher total pay under the Raise the Wage Act, higher wages will be offset by cuts to non-wage pay, as well as cuts to hours worked. Employee discounts, complimentary meals or parking, flexible hours and leave policies, insurance, and tuition assistance would dwindle as employers scramble to reduce expenses and cover the higher wage costs. The Raise the Wage Act would take away many of these flexible pay options that workers enjoy.

“Tipped workers would see their tip income decline or go away entirely, which proved highly unpopular when Washington, D.C. temporarily eliminated its tip credit in 2018. Moreover, a majority of minimum wage earners are already in households well above the poverty line. As anti-poverty measures go, minimum wages are poorly targeted.

“Meanwhile, large companies such as Wal-Mart, Amazon, and McDonald’s, which already have starting wages well above the minimum, would gain an unfair advantage over smaller competitors who cannot automate jobs or absorb costs as easily. This would be more severe in areas where lower costs of living make increases and tradeoffs steeper.”

Yesterday, CEI spearheaded a coalition letter to Congress opposing this legislation. The letter was signed by over three dozen national and state public policy organizations.