Debunking A Mythbuster [ARCHIVE]

in economics •  8 years ago 

1.  

Myth: Raising the minimum wage will only benefit teens. 
Not true: The typical minimum wage worker is not a high school  student earning weekend pocket money. In fact, 89 percent of those who  would benefit from a federal minimum wage increase to $12 per hour are  age 20 or older, and 56 percent are women. 

They’re both wrong. Yes, there are mostly adults working for minimum wage, but that does not increase the value of the job that they are working. In fact, teens aren’t getting jobs because their elder counterparts are replacing them. The last thing a teen with no experience needs is an adult who is comfortable in making minimum wage taking his place in the workforce and relinquishing his shot at gaining experience at an early age.


2. 

Myth: Increasing the minimum wage will cause people to lose their jobs. 
Not true: In a letter to President Obama and congressional leaders urging a  minimum wage  increase, more than 600 economists, including 7 Nobel Prize  winners  wrote, "In recent years there have been  important developments in the  academic literature on the effect of increases in  the minimum wage on  employment, with the weight of evidence now showing that increases  in  the minimum wage have had little or no negative effect on the employment  of  minimum-wage workers, even during times of weakness in the labor  market.  Research suggests that a minimum-wage increase could have a  small stimulative  effect on the economy as low-wage workers spend their  additional earnings,  raising demand and job growth, and providing some  help on the jobs front." 

Correction: Of the 600 economists who signed the letter, only 5 were Nobel Laureates. 

This response is an Argumentum ad populum, and it’s quite underwhelming to see a government site commit this fallacy, but I don't trust government anyway. 600 economists account for this letter. That’s nice, dear, but that’s <3% of economists working in the U.S. and I think it’s safe to assume most of those listed are left-leaning, so it should come at no surprise to anyone that the economists listed would support such a decision by trouncing any argument against the minimum wage. 

On the other hand, according to a source from 2007 in 2007, 73% of labor economists of the American Economic Association have concluded that the minimum wage hike would effectively hurt the less-skilled and inexperienced, which would deny them the chance of gaining experience in the workforce. 


3. 

Myth: Small business owners can't afford to pay their workers more, and therefore don't support an increase in the minimum wage. 
Not true: A July 2015 survey  found that 3 out of 5 small business owners with employees support a  gradual  increase in the minimum wage to $12. The survey reports that  small  business owners say an increase "would immediately put more money  in the pocket  of low-wage workers who will then spend the money on  things like housing, food,  and gas. This boost in demand for goods and  services will help stimulate the  economy and help create  opportunities." 

Most small businesses don’t have to entry level workers on their payroll. All this survey proves is that said small businesses want 3 out of 5 small businesses think they will be able to compete better if larger businesses were forced to pay their employees more. 


4. 

Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would hurt restaurants. 
Not true: In California, employers are required to pay  servers the  full minimum wage of $9 per hour — before tips. Even with a 2014   increase in the minimum wage, the National Restaurant Association projects California restaurant sales will outpace  all but only a handful of states in 2015. 

The cost of living is high in California and thus, the minimum wage has been adjusted for inflation. Funnily enough, despite it outpacing of sales a large amount of states in the NRA report, it would not outpace Texas (4.8%), North Dakota (4.8%), or Utah (3.9%), which have wages starting at $7.25. Whereas, many of the states that will see the lowest sales growth (i.e., Vermont, Massachusetts, Rhode Island, Connecticut [If you like top 10 lists, you'll be happy to know that 2 of them appear in this one.]) and the District of Columbia, are among the highest in both current minimum wage and projected wage growth, and consequently, the highest costs of living. The recurring them is more or less population and business proliferation, but the outcome of these findings is gratifyingly counterintuitive to their narrative.


5. 

Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would lead to restaurant job losses.
Not true: As of May 2015, employers in San Francisco must  pay tipped  workers the full minimum wage of $12.25 per hour — before tips. Yet,   the San Francisco leisure and hospitality industry, which includes  full-service  restaurants, has experienced positive job growth this year, including following the most recent minimum wage  increase.  

D.o.L....Meet the c.o.l. Once more, we see them using California as an example, much less, a city in California which couldn’t serve as a legitimate microcosm for business growth in the United States. The unemployment rate, according to the chart, may be at 4.2% (as of my writing of this article), but the unemployment for California as a whole, is 5.4% (as of my writing of this article), ranking it #34 in the nation, and as for the United States, as a whole, it averages out to 4.9%. In fact, many cities in California are cited to have the highest unemployment rates of the top 500 metropolitan U.S. cities, with El Centro, CA topping the list at 23.7%. 


6. 

Myth: Raising the federal minimum wage won't benefit workers in  states where the hourly minimum rate is already higher than the federal  minimum. 
Not true: While 29 states and the District of Columbia  currently  have a minimum wage higher than the federal minimum, increasing the  federal minimum wage will boost the earnings for nearly 38 million  low-wage workers nationwide. That includes workers in those states  already earning above  the current federal minimum. Raising the federal  minimum wage is an important  part of strengthening the economy. A raise  for minimum wage earners will put  more money in more families'  pockets, which will be spent on goods and  services, stimulating  economic growth locally and nationally. 

Technically, both parties are correct. The Department of Labor spokesperson is correct in stating that a federal minimum wage hike will increase earnings for those who can stay on the job. However, the scarecrow they built seems to have gotten its wish from the Wizard. If a federal minimum rate increases, inflation will also increase. This is why states with higher minimum wages have higher living costs. 


7. 

Myth: Younger workers don't have to be paid the minimum wage. 
Not true: While there are some exceptions, employers are generally  required to pay  at least the federal minimum wage. Exceptions allowed  include a minimum wage of  $4.25 per hour for young workers under the  age of 20, but only during their first  90 consecutive calendar days of  employment with an employer, and as long as  their work does not  displace other workers. After 90 consecutive days of  employment or the  employee reaches 20 years of age, whichever comes first, the  employee  must receive the current federal minimum wage or the state minimum   wage, whichever is higher. There are programs requiring federal  certification  that allow for payment of less than the full federal  minimum wage, but those  programs are not limited to the employment of  young workers. 

Two things to note here:

“...as long as their work does not displace other workers.”

How would less experienced, younger workers displace their older and more experienced counterparts? Of course, provided their coworkers are just poor workers who could be so easily replaced, their displacement would be of no loss to the employer. (Before any inconsistency is claimed on my part, this would be disastrous for the displaced worker. A 2003 study shows that job loss results in a shortfall in annual earnings.)

Secondly, the response provided states a pay rate lower than the federal minimum wage. Given that throughout this repudiation, the hypothetical bearer of each “myth” has been refuted on the basis of federal minimum wage and not state minimum wage, we can safely assume that the myth was not disproven. 


8. 

Myth: Restaurant servers don't need to be paid the minimum wage since they receive tips. 
Not true: An employer can pay a tipped employee as little as $2.13  per hour in  direct wages, but only if that amount plus tips equal at  least the federal  minimum wage and the worker retains all tips and  customarily and regularly  receives more than $30 a month in tips.  Often, an employee's tips combined with  the employer's direct wages of  at least $2.13 an hour do not equal the federal  minimum hourly wage.  When that occurs, the employer must make up the  difference. Some states  have minimum wage laws specific to tipped employees.  When an employee  is subject to both the federal and state wage laws, he or she  is  entitled to the provisions of each law which provides the greater  benefits. 

Usually, when a waiter/waitress is paid $2.13/hr, before tips, it is due to the job being one for experience and the employees overall disposability and the work or it being a side job. If the employee is paid at this rate for long enough, they’d be able to resign and use their experience to find a new job, so it’d stand to reason that the employer wouldn’t make said rate of pay a long-term thing. 


9. 

Myth: Increasing the minimum wage is bad for businesses.  
Not true: Academic research has shown that higher wages  sharply  reduce employee turnover which can reduce employment and training   costs. 

Training costs would dissipate because more skilled workers would be hired; inexperienced workers would be not be considered. This is axiomatic to the problem with the unemployment rate. It does not take into account those with no work experience and it accounts for those who once had higher-paying jobs who are now working for a lower income due to their displacement. 


10. 

Myth: Increasing the minimum wage is bad for the economy. 
Not true: Since 1938, the federal minimum wage has been  increased 22  times. For more than 75 years, real GDP per capita has steadily   increased, even when the minimum wage has been raised. 

Monetarily, this is false

Upon looking into this, one cannot help but notice a correlation between the minimum wage enacted by the respective president and the average inflation rate.   

In summary:

Franklin D. Roosevelt (Oct. 1938 - Oct. 1939): -2.1%

Franklin D. Roosevelt (Oct. 1939 - Oct. 1945): 0.65%

Harry S. Truman (Oct. 1945 - Jan. 1950): 0.66%

Harry S. Truman (Jan. 1950 - Mar. 1956): 0.21%

Dwight D. Eisenhower (Mar. 1956 - Sept. 1961): 0.32%

John F. Kennedy (Sept. 1961 - Sept. 1963): 0.68%

John F. Kennedy (Sept. 1963 - Feb. 1967): 0.27%

Lyndon B. Johnson (Feb. 1967 - Feb. 1968): 2.78%

Lyndon B. Johnson (Feb. 1968 - May 1974): 1.62%

Richard Nixon (May 1974 - Jan. 1975): 


11. 

Myth: The federal minimum wage goes up automatically as prices increase. 
Not true: While some states have enacted rules in recent  years  triggering automatic increases in their minimum wages to help them keep   up with inflation, the federal minimum wage does not operate in the  same  manner. An increase in the federal minimum wage requires approval  by Congress  and the president. However, in his call to gradually  increase the current  federal minimum, President Obama has also called  for it to adjust automatically  with inflation. Eliminating the  requirement of formal congressional action  would likely reduce the  amount of time between increases, and better help  low-income families  keep up with rising prices. 

This is why the federal income stays the same in certain states. Inflation is not the same in every state and the unemployment rate is seen by congress as stable, so from where they're sitting, not everyone has a hard time adjusting to inflation.


12. 

Myth: The federal minimum wage is higher today than it was when President Reagan took office. 
Not true: While the federal minimum wage was only $3.35  per hour in  1981 and is currently $7.25 per hour in real dollars, when adjusted  for  inflation, the current federal minimum wage would need to be more than  $8  per hour to equal its buying power of the early 1980s and more  nearly $11 per  hour to equal its buying power of the late 1960s. That's  why President Obama is  urging Congress to increase the federal minimum  wage and give low-wage workers  a much-needed boost. 

It would’ve helped for there to be a record of the demographic trend of support for minimum wage increase. It also begs the question of why the support for minimum wage is increasing despite you praising states where the min. wage has increased gradually and what is the extent of which you think it should increase? 


13. 

Myth: Increasing the minimum wage lacks public support.
Not true: Raising the federal minimum wage is an issue  with broad  popular support. Polls conducted since February 2013 when President   Obama first called on Congress to increase the minimum wage have  consistently  shown that an overwhelming majority of Americans support  an increase. 

I want recorded audio of someone actually saying this. 


14. 

Myth: Increasing the minimum wage will result in job losses for newly  hired and unskilled workers in what some call a  “last-one-hired-equals-first-one-fired” scenario.  
Not true: Minimum wage increases have little to no  negative effect  on employment as shown in independent studies from economists  across  the country. Academic research also has shown that higher wages sharply   reduce employee turnover which can reduce employment and training  costs. 

For one thing, the cost of living is not always rising. There is no trend to it. 


15.

Myth: The minimum wage stays the same if Congress doesn't change it.  
Not true: Congress sets the minimum wage, but it doesn't  keep pace  with inflation. Because the cost of living is always rising, the  value  of a new minimum wage begins to fall from the moment it is set. 

Your heard it here first, folks. The Dept. of Labor basically just nullified every point they'd made by saying that raising it is pointless. Raising it automatically, will mean raising the cost of living automatically and at what rate will we stop before we realize that we've mandated that companies are paying their employees too much?   

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!