NFIB: Raising minimum wage could cost jobs, hurt economy

Juanita Duggan
Juanita Duggan

Raising the federal minimum wage to $12 an hour could reduce private sector employment by 1.8 million over 10 years and cut economic output by $2 trillion, according to a new report from the National Federation of Independent Business.

“Both candidates for president have expressed support for raising the minimum wage, and it’s important for voters to understand the consequences,” said Juanita Duggan, president and chief executive officer of the NFIB, a small business advocacy group. “Raising the minimum wage to $12 without any connection to the economy or business conditions has the potential to devastate small businesses and wipe out nearly two million jobs.”

In Colorado, a proposed amendment to the state constitution on the November ballot would raise the state minimum wage to $9.30 an hour in 2017 and then 90 cents an hour each year until it reaches $12 an hour in 2020.

The NFIB report assumes an increase in the federal minimum wage to $12 per hour phased in by 2019 and then increased every year thereafter based on inflation.  Hillary Clinton, the Democratic candidate for president, already has called for a $12 minimum wage. Donald Trump, the Republican candidate, has publicly said he would support a federal increase, although he hasn’t been specific on how high the rate should be raised.

According to the Bureau of Labor Statistics, 3.3 percent of hourly workers earn the federal minimum wage of $7.25.  Raising the wage to $12 would increase the cost of labor by those workers 65 percent.

According to the NFIB, 57 percent of the jobs that would disappear would come from small businesses. “Small businesses rely heavily on entry level, hourly employees. They will bear the brunt of the cost, and their employees will pay the price in the form of fewer jobs and fewer job opportunities,” Duggan said.

Raising the minimum wage to $12 per hour also would limit economic output, according to the NFIB. Fewer jobs mean fewer workers producing goods and services. Economic output would be lower by trillions of dollars as a result of a $12 minimum wage, the study predicted.

“Economic growth has been dismally low for years,” Duggan said. “A 65 percent increase in labor costs for small employers could push the economy over the edge.  This is a very big issue, and it deserves a much brighter spotlight before voters go to the polls next month.”