Alexander: Making Hiring More Expensive “Hurts The People We Want To Help”

Thursday, March 14, 2013

At a hearing Thursday of the Senate Health, Education, Labor and Pensions Committee on legislation to raise the minimum wage by more than 39 percent and mandate automatic increases every year by the rate of inflation, Ranking Member U.S. Senator Lamar Alexander (R-Tn.) said the proposal, “while well intentioned, hurts employees and hurts the people best positioned to help employees—their employers.”

Senator Alexander said: “We won’t help the 12 million Americans who can’t find jobs by loading up employers with costs that make it more expensive to hire employees. These proposals will hurt the very people that we want to help.”

At the hearing, Senator Alexander cited the example of a teenager looking for a first job—representing the 16-24 year-olds making up half of all minimum wage workers—and asked: “Will raising the minimum wage help this young man find a job, or will it eliminate the job he wants to help earn extra money? Will it saw off the first rung of the ladder of economic success, which will help him climb up that ladder and help him earn something more like a maximum wage, instead of a minimum wage?”

The unemployment rate for teenagers today is more than 25 percent. For African-American teens, it is even higher, at more than 43 percent. Senator Alexander cited a study by economists at the University of California-Irvine and the Federal Reserve who surveyed more than 100 major academic studies on the impact of minimum wage and determined that 85 percent found a negative employment effect on low-skilled workers.

Hearing witnesses included two restaurant owners who testified that an increase in the minimum wage 39 percent from $7.25 to $10.10 and mandating automatic increases every year, as proposed by committee Chairman Senator Tom Harkin (D-Ia.), would force them to cut jobs to stay in business. One testified that it would increase his labor costs by 22 percent.

Senator Alexander detailed the situation of a franchise group of nearly 20 fast food restaurants who said that the growing cost of federal and states mandates would exceed their entire budgeted net profit for the year 2013. The mandates include Social Security and Medicare taxes, paid sick leave mandates imposed by the state, a federal menu-labeling mandate, and now the cost of the health care law, if they opt to pay the per-employee penalty rather than meet the federal mandates for health care coverage.

At the hearing Senator Alexander said, “I’m intrigued here, listening to a very fine, professional academic study that includes the restaurant business and thinking that maybe everybody who studies [the restaurant business] ought to have to run one…They’re telling [restaurant owners] that increasing labor costs is good for business.”

The last time Congress increased the minimum wage, in 2007, the national unemployment rate stood at 4.4 percent and had averaged under 5 percent for the preceding three years. 

Today the unemployment rate stands at 7.7 percent and has averaged 8.8 percent over the last three years. 

Most economists believe that a more accurate measure of the nation’s unemployment also includes discouraged workers who have given up hope of finding a job and those who have taken part-time work but want full-time—and that today stands at 14.4 percent, or more than 22 million people.  

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