Is a Higher Minimum Wage Really a Raise?

March 5, 2014

A great deal of national and state attention is being directed at minimum wages hikes. Political operatives call it a wedge issue. The President and the Governor recently joined forces to promote and market the highest in the nation minimum wage increases in Connecticut. The timing of this issue appears to be politically motivated and a diversion from the serious problems plaguing our state. Embracing a higher minimum wage may be a not so subtle way to deflect public attention away from failing economic policies that have stymied job growth and produced high taxes and business costs.

Those policies have led to an unemployment rate of almost 11%, when Connecticut’s shrinking labor force is taken into account. Data from moving companies shows that in 2013 more people moved out of Connecticut than moved in. In fact, the disparity between the number of outbound residents of and the number of inbound residents was the fifth highest in the nation. Connecticut also has the dubious distinction of being the only state where its economy is shrinking and its recovery is barely noticeable.

The oft repeated argument that opponents of a high minimum wage have no compassion for low income workers is entirely false. It also overlooks the reality that the wages of Connecticut’s low income workers are far from their only lifeline.

The state of Connecticut pays 100% of the insurance premiums of low income citizens; it provides food, rental and heating assistance. Low income residents are eligible for the state Earned Income Tax Credit, which they receive in addition to the federal EITC. The EITC is a check distributed each year from taxpayers to residents who work but do not pay income taxes. Collectively, these benefits amount to more than a minimum wage, but what Connecticut workers want most is a job and educational opportunities that allow them to advance to a higher salary.

Is a Higher Minimum Wage Really a Raise? Not When You Are Paying More at the Cash Register.

Raising the minimum wage will make it more difficult for businesses to hire new workers. By adding to the cost of labor a business must increase the cost of their goods or lay off workers. Low income earners need to purchase those goods and services like everyone else, and the extra money that they earn from a higher minimum wage will be offset by the price increases that follow, harming the very people they mean to help. Young and inexperienced workers, who already experience a high rate of unemployment, stand to lose the most from a higher minimum wage.

The answer to higher income inequality lies not in raising the minimum wage, but in closing the education gap. It is a widely reported and a proven fact that closing the income gap is directly related to higher levels of training and education. Too many good jobs go unfilled in Connecticut and the United States as a whole because we do not have the technically trained labor that exists elsewhere.

Connecticut is one of the nation’s most unfriendly states for business. Yearly proposals to increase the minimum wage coupled with many unfriendly job bill proposals and unemployment regulations, adds to Connecticut’s anti-business reputation. So when the governor declares that our state is open for business, the statement is not credible.

The power should reside in the marketplace and not the state house when it comes to wages and labor costs. We need to focus on the real economic multiplier, closing the education gap so that our fellow citizens have the best possible opportunity to succeed.