Federal Minimum Wage Increase could have serious negative economic impact, according to Algra of USA Labor Law Posters

PR Newswire

SANTA BARBARA, Calif., March 18, 2014 /PRNewswire/ -- In the Congressional Budget Office (CBO) new report released February 18, 2014,  "The Effects of a Minimum-Wage Increase on Employment and Family Income", the nonpartisan CBO presented a detailed analysis of the potential effects of the increase of the federal minimum wage. How might the increase affect incomes, employment, and the federal budget?

By raising the federal minimum wage to $10.10 per hour there could be both positive and negative effects on the American workforce. According to the CBO it is predicted that by 2016 total employment will decrease by half a million workers as a result of the increase. This would mean fewer jobs at the minimum wage level available and job loss as a whole based on the employers' ability to afford the increase and various other factors. On the other hand, Americans on the receiving end of the hourly pay increase that are in the lower income bracket may benefit from an increased likelihood of getting out of poverty level in the long run and increase in their standard of living. For those two possibilities alone some supporters of the increase applaud the current administration. But what is the potential downside of the increase that makes some Americans apprehensive?

Referring to data set forth in the report a comparison is made between the increase to $9.00 or $10.10 from the current $7.25 the adoption of the $10.10 minimum wage would have a greater effect on families. Part of this is because the wage increase will be adjusted to reflect inflation. What is notable is that a change in the number of Americans employed at the $10.10 level could result in an actual decrease of 1.0 million employees in the workforce. But an adoption of a slightly lower wage of $9.00 minimum wage would increase total employment a gain of 200,000 employees. What this tells us is that choosing the slightly lower wage of the two could actually increase employment whereas the higher wage could have a detrimental effect.

We can't get ahead of ourselves just yet. The result of the increase is indeed speculative. Just like any area that is subject to heated political debate Democrats and Republicans have commented on the validity of the statistics in the report. Some under the current administration have stated that it is a possibility that no jobs at all will be affected by the change. This is unlikely a reasonable estimate because it is bound to cause some change especially because of the reality that some employers may not be able to afford to pay their employees more.  But will it in turn negatively or positively affect Americans? Probably too early to tell. See the report to read the various factors considered for this analysis, but it goes to show that the higher minimum wage affects more Americans so it will cause a ripple effect in the pool of employment for better or for worse.  Visit www.cbo.gov for more information and to read the report.

Stay current with employment law notices with the Algra Corporation's USA Labor Law Posters website and with the automatic labor law poster insurance plan to be sent an updated poster in the event that an important legal update occurs such as the increase of the federal minimum wage.

Commentary by Ashlyn Algra
March 2, 2014

Ashlyn C. Algra, third year law student, graduate from University of California, Santa Barbara in Global Studies (2010), has experience in analyzing and writing economic reports and legislative proposals with an emphasis on employment and immigration. She has worked as an intern for the U.S. State Department Bureau of European and Eurasian Affairs Economic Section (2009), U.S. State Department –U.S. Embassy to Italy Bureau of Consular Affairs as the primary candidate (2011) and for the U.S. House of Representatives Majority Whip Congressman Kevin McCarthy (2013). She will sit for the California Bar exam in 2015. She and her father, illustrator Bruce Algra developed the USA labor law poster series. Combining her multifaceted background of foreign affairs, politics, and law studies, Ashlyn maintains a close watch on current events in employment law. 

Contact: Max Tracy, 1-949-378-7753, Max@noospheric.com

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