Don't rush to raise minimum wage

So the debate that comes around every few years has come around again — the question of whether to raise the national minimum wage.

In a sluggish economy with a continuing high unemployment rate of 6.7 percent and the highest number of people no longer seeking work in more than 30 years, it’s obvious that folks are hurting out there. And sure, giving the working poor a raise seems like a good thing to do.

The Congressional Budget Office recently estimated that raising the current minimum wage from $7.25 to $10.10 by 2016 would give about 25 million workers raises and it would lift about 900,000 people above the poverty line.

Not only that, but the fact that the country has long had a minimum wage signals that there is widespread acceptance of it. The question is how much of an increase can be justified without causing too much harm?

And the type of harm is obvious: Increasing the cost of jobs will lead to fewer jobs.

By the CBO’s estimate, the proposed minimum wage increase would reduce the number of available jobs by about 500,000, with the caveat that this estimate comes with a lot of uncertainty. A betting person might be inclined to believe that half a million is a minimum of the actual job loss, given that it’s difficult to calculate how many new jobs might have been created without a minimum wage increase.

This is very similar to the difficulty in predicting how many jobs might have been created if the federal Affordable Care Act didn’t have a disincentive for employers to have 50 or more employees. Who knows how many jobs might be created beyond 50 if that disincentive didn’t exist?

While wage increase advocates like to refer to big companies like Walmart or McDonald’s as employers that can absorb higher labor costs, there are thousands of small businesses that may not be so capable.

A person who owns a landscaping business, for instance, might be able to hire two workers without the minimum wage increase. Their additional productivity, in turn, might generate additional revenue to hire another worker, and so on and so on. And along the way, the growing, more experienced and more productive roster of workers may get pay raises well above the minimum wage.

That is what economic growth looks like. If economic growth in the form of job creation and increased opportunities for the working poor is a high priority, as it should be, then government actions like an excessive minimum wage increase are counterproductive to that goal, particularly if they are piled on one after another.

Editorials represent the majority opinion of the Daily Inter Lake’s editorial board.