Economists wrangle over $10.10 minimum wage, CFOs say increase will slow hiring

Among the challenges faced by policymakers (and that includes voters) trying to determine the effects of raising the minimum wage is sorting through the flood of conflicting information. Much of the conflict comes because people who are supposedly talking about the same thing are not, really, talking about the same thing. There’s a difference between $7.25 (the current federal minimum), $9.32 (the Washington state minimum), $10.10 (the proposed federal minimum wage), $10.74 (the San Francisco treat), $12 (the short-lived statewide minimum proposed here by House Democrats), and $15 (the reality for a small number of workers and SeaTac and the proposal under discussion in Seattle).

Yet every time you read about the effects of minimum wage increases the issue assumes a binary form – up or down. There’s general agreement that small increases have small, if any, negative effects on employment. But even those in the camp that would raise the federal wage to $10.10 demur at predicting the effects of an increase to $15.

Some 500 economists, including three Nobel Prize winners have signed a letter saying that increasing the federal minimum would have damaging employment and economic effects. Countering an earlier letter from economists supporting the increase. Economist Mark Perry includes a nice graphic illustration of the problem.minimum wage graph

Confirming the negative employment effect is a survey of Chief Financial Officers.

Nearly 57 percent of retailers would reduce hiring if the federal minimum wage were increased to $10.10 an hour, according to a new survey of chief financial officers of U.S. companies.

More than 44 percent of service firms said they would reduce hiring if the minimum wage were raised by that amount, according to the Duke University/CFO Magazine Global Business Outlook Survey.

The tradeoff – better pay for some, no pay for others – seems off when jobs and unemployment continue to top Americans’ ranking of the nation’s biggest problems.

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