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A Heritage Foundation study examined what would happen to the workforce if Hillary Clinton and her progressive friends were able to enact the nation-wide  $15.00 minimum wage idea she stole from Bernie Sanders. And it ain’t pretty.

Heritage’s approach was different rather than look at it on a national basis, they examined what would change on a state by state basis. When the the state results are aggregated we learn that the progressive’s $15.00 minimum would put between 7 and 9,000,000 Americans out of work.

Mandatory $15-per-hour starting wages was once a fringe idea. Politicians of every ideological stripe agreed that it would eliminate too many job opportunities. Nonetheless, recent, union-backed campaigns have pushed the idea into the mainstream. The California and New York legislatures recently passed bills raising minimum starting wages in their states to this level. Several cities, including Washington, DC, have also passed $15-per-hour minimum wages.

In Congress, Senator Bernie Sanders (I–VT) has introduced the Pay Workers a Living Wage Act, which would raise the federal minimum wage from $7.25 per hour to $15.00 per hour over four years. Prominent Senators, including Assistant Minority Leader Dick Durbin (D–IL), have co-sponsored this bill. The Democratic Party has formally included a $15-per-hour minimum starting wage in its 2016 campaign platform. If the policy became law in 2017, the federal minimum wage would rise to $15 by 2021.

Companies hire workers when the additional earnings their labor creates exceeds the cost of employing them. Starting wages of $15.00 per hour mean full-time employees must create at least $38,700 a year in value for their employers (including wages, employer payroll taxes, and Obamacare-mandate penalties).Such a high hurdle would make it much harder for less-experienced and less-skilled workers to find full-time jobs. Many of these workers are not yet productive enough to create that much value for their employers and businesses will not hire them at a loss.

Consequently, many businesses might respond to a $15 mandate by eliminating positions, cutting hours, and looking for new ways to implement labor-saving technology. Some companies might have to face shutting down or leaving America entirely to cope with the additional expenses.

About a third of American wage and salary workers would be the minimum wage jump. Therefore, existing studies can’t be used to estimate the changes because there has never been an increase affecting that many workers

However, economists have extensively studied how businesses respond to higher wages overall, not just minimum-wage increases. On average these studies find a 10 percent increase in labor costs causes firms to reduce employment of less-skilled workers by 6.8 percent in the long run. This is not a precise estimate—some studies find greater job losses, others find lower. This figure does indicate, however, the approximate magnitude of job losses that occur when labor costs rise.

The Heritage Foundation took two different approaches:

  • Table 1: The table shows “the total proportion of employees directly affected by minimum starting wages of $15 per hour in 2021 in each state It also shows the total number of full-time-equivalent (FTE) jobs such a mandate would cost each state, relative to the employment that would have occurred if each state left its minimum wage at 2015 levels”. Overall this version will cost about 9 Million jobs. Interesting is the fact that “States with lower living costs would experience relatively greater job losses. For example, New Jersey and Georgia have similar total employment. However, Georgia would lose almost twice as many jobs to a $15 mandate (329,000) as New Jersey (170,000). This happens because a $15 mandate affects substantially more employees in Georgia (39.5 percent) than in New Jersey (26.1 percent).”

With this version if you live in New York and either the state or the federal government legislates a $15/hr. minimum wage it will kill about 400,000 FTE jobs. In Illinois it would eliminate over 300,000 jobs. Arizona and Indiana each lose about 200,000 jobs.

IB-15-hour-by-state-table-1-600

 

  • Table 2s estimates are smaller than in Table 1 for two reasons. “Table 2 shows the effect of a $15 federal minimum wage above and beyond currently legislated state minimum-wage increase. For example, it accounts for the fact that California will have a $14-per-hour minimum wage in 2021 and New York State will have a statewide $15-per-hour rate and thus be unaffected by a federal mandate. The federal minimum wage exempts many workers in the agricultural sector; state laws generally do not.” This version will put “only” 7 million Americans out of work.

This version would hurt Texans the most, about 900,000 FTE jobs, Florida would lose about 600,000 FTE job and North Carolina, Ohio, and Pennsylvania would each lose about 300,000 FTE jobs.

IB-15-hour-by-state-table-2-600Here’s the bottom line, according to the Department of Labor report on Aug 5th, approximately 7.8 million Americans are unemployed (not including the people who have given up looking). At the very least the $15.00 minimum wage would almost double that number to 14.8 million.

As usual the progressives have come up with a solution that will hurt the economy rather than help it.

 

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