Delay the minimum wage increase?


With the economy in shambles, the timing for an increase in the federal minimum wage could not be more awkward.

The two sectors most likely to be effected by the increase -- retailers and restaurants -- have been hurt badly by souring consumer confidence and yet their costs are about to skyrocket: The minimum wage is expected to rise from $6.55 per hour to $7.25 in July, an increase of more than 10%.

In an op-ed piece in the Wall Street Journal, David Neumark writes that "Based on 20 years of research, I doubt there is ever a good time to raise the minimum wage. However, with the aggregate unemployment rate at 9.4%, the teen unemployment rate exceeding 22%, and the unemployment rate for black teens nearing 40%, next month's increase seems like the worst timing possible. . . The best estimates from studies since the early 1990s suggest that the 11% minimum wage increase scheduled for this summer will lead to the loss of an additional 300,000 jobs among teens and young adults. This is on top of the continuing job losses the recession is likely to throw our way."

Neumark argues -- with compelling evidence -- that few people from low-income families actually earn the minimum wage. Rather, minimum wage workers are more likely to be high school and college students from families earning at least three times the federal poverty level.

With college costs rising and the dangers of student loan debt becoming more apparent, it's clear that raising the minimum wage will result in job losses that make it harder for young people to save and pay for college.

It would be much better to see a de facto federal minimum wage established through tax credits for people who work low wage jobs. But any policy that results in job losses at a time when the unemployment rate is near 10% is probably one that should rethought.