Study: $15 Minimum Wage Would Cost 7 Million Jobs

Alissa Lopez | July 28, 2016
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The Heritage Foundation published a study on Tuesday by James Sherk, a Research Fellow at the organization's Institute for Economic Freedom and Opportunity, that listed and explained the various negative outcomes of raising the minimum wage to $15/hour.

Sherk argued that the jobs that would be directly affected by this adjustment “would [be] a somewhat smaller proportion (28.2 percent) of total hours worked in the economy," but added that amount “still represents 37.5 million FTE jobs.”

Of those 37.5 million full-time minimum wage paying jobs, Sherk estimated that 7 million would be eliminated.

Ultimately, he points out, people are fighting for a policy that will potentially cost them their jobs.

Sherk specified that if the minimum wage is increased, it would more accurately go up to $18.61 due to unemployment insurance taxes, payroll taxes and Obamacare penalties. Employers would never receive that $3.61 in their paychecks, but businesses would have  to pay out an additional 11.36 cents per employee.

And we all know money doesn’t grow on trees, nor can it appear in a puff of smoke. As the cost of workers go up, prices of products will need to go up as well in order for businesses to make enough money. Simple economics show when prices of certain products go up, less people purchase them. Hence, revenue will decrease.

Sherk indicates companies would have to make some decisions: shut down, fire people, cut hours, implement “labor-saving technology” or leave America. And out of all of that, which ones are the easiest to do? Cut hours and fire people.

In addition to that the study stated:  

The Affordable Care Act (Obamacare) requires most employers with 50 or more employees to offer full-time workers qualifying health coverage. Failing that, they must pay a per employee penalty (after the first 30 workers) out of after-tax dollars. The penalty currently stands at $2,160 per employee and is projected to rise to $2,886 by 2021. This equates to a $4,731 increase in pre-tax payroll costs —$2.27 per hour for a full-time worker.”

Once again, which one do you think is easier to achieve?

Sherk also declared that “companies hire workers when the additional earnings their labor creates exceed the cost of employing them.”

“Starting wages of $15.00 per hour mean full-time employees must create at least $38,700 a year in value for their employers. Such a high hurdle would make it much harder for less experienced and less skilled workers to find full-time jobs. Many of these workers are not yet productive enough to create that much value for their employers, and businesses will not hire them at a loss.”

Legislation proposed by Bernie Sanders in Congress, the Pay Workers a Living Wage Act, would officially raise the minimum wage to $15 over the next four years. Not only is the bill controversial and disapproved of on both sides of the political spectrum, which is mentioned in Sherk’s research, but it would negatively impact workers and businesses alike.

New York City and California have both implemented this $15 increase, Sherk points out. But some California businesses, specifically American Apparel, have since suffered immense losses. 

Serhk states in the document
Shortly after Los Angeles raised its minimum wage to $15 per hour, American Apparel eliminated 500 clothing manufacturing jobs in the city. The Los Angeles Times reports the company planned to relocate those jobs within California. After California raised minimum starting wages statewide, however, American Apparel began examining options to move production outside California.

If liberals truly want to help everyone, the minimum wage hike that would cost millions of jobs is very evidently not the way to go about it. They would be economically helping some and leaving others in the dust, unemployed and no where to turn to but the welfare offices.

Which is exactly where liberals want them.