Debunking a Mythbuster [Archive, July 2016]


Myth: Raising the minimum wage will only benefit teens. 

Not true: The typical minimum wage worker is not a high school student earning weekend pocket money. In fact, 89 percent of those who  would benefit from a federal minimum wage increase to $12 per hour are age 20 or older, and 56 percent are women. 

They’re both wrong. Yes, there are mostly adults working for minimum wage, but that does not increase the value of the job that they are working. In fact, teens aren’t getting jobs because their elder counterparts are replacing them. The last thing a teen with no experience needs is an adult who is comfortable in making minimum wage taking his place in the workforce and relinquishing his shot at gaining experience at an early age.


Myth: Increasing the minimum wage will cause people to lose their jobs. 

Not true: In a letter to President Obama and congressional leaders urging a minimum wage increase, more than 600 economists, including 7 Nobel Prize winners wrote, “In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on  employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front.” 

Correction: Of the 600 economists who signed the letter, only 5 were Nobel Laureates.

This response is an Argumentum ad populum, and it’s quite disappointing to see a government site commit this fallacy, but I don’t trust government anyway. 600 economists account for this letter. That’s nice, dear, but that’s less than 3% of economists working in the U.S. and I think it’s safe to assume most of those listed are left-leaning, so it should come at no surprise to anyone that the economists listed would support such a decision by trouncing any argument against the minimum wage. On the other hand, according to a source from 2007 in 2007, 73% of labor economists of the American Economic Association have concluded that the minimum wage hike would effectively hurt the less-skilled and inexperienced, which would deny them the chance of gaining experience in the workforce.


Myth: Small business owners can’t afford to pay their workers more, and therefore don’t support an increase in the minimum wage. 

Not true: A July 2015 survey found that 3 out of 5 small business owners with employees support a gradual increase in the minimum wage to $12. The survey reports that small business owners say an increase “would immediately put more money in the pocket of low-wage workers who will then spend the money on things like housing, food, and gas. This boost in demand for goods and services will help stimulate the economy and help create opportunities.” 

Most small businesses don’t have to entry level workers on their payroll. All this survey proves is that 3 out of 5 small businesses think they will be able to compete better if  larger businesses were forced to pay their employees more.


Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would hurt restaurants. 

Not true: In California, employers are required to pay servers the full minimum wage of $9 per hour —before tips. Even with a 2014 increase in the minimum wage, the National Restaurant Association projects California restaurant sales will outpace all but only a handful of states in 2015. 

The cost of living is high in California and thus, the minimum wage has been adjusted for inflation. Funnily enough, despite it outpacing a large amount of states in the NRA report, it would not outpace Texas (4.8%), North Dakota (4.8%), or Utah (3.9%), which have wages starting at $7.25. Whereas, many of the states that will see the lowest sales growth (i.e., Vermont, Massachusetts, Rhode Island, Connecticut [If you like  top 10 lists, you’ll be happy to know that 2 of them appear in this one.]) and the District of Columbia, are among the highest in both current minimum wage and projected wage growth, and consequently, the highest costs of living. The recurring them is more or less population and business proliferation, but the outcome of these findings is gratifyingly counterintuitive to their narrative.


Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would lead to restaurant job losses.

Not true: As of May 2015, employers in San Francisco must pay tipped workers the full minimum wage of $12.25 per hour —before tips. Yet, the San Francisco leisure and hospitality industry, which includes full-service restaurants, has experienced positive job growth this year, including following the most recent minimum wage increase.  

D.o.L….Meet the c.o.l. Once more, we see them using California as  an example, much less, a city in California which couldn’t serve as a legitimate microcosm for business growth in the United States. The unemployment rate, according to the chart, may be at 4.2% (as of my writing of this article), but the unemployment for California as a whole,  is 5.4% (as of my writing of this article), ranking it #34 in the  nation, and as for the United States, as a whole, it averages out to 4.9%. In fact, many cities in California are cited to have the highest unemployment rates of the top 500 metropolitan U.S. cities, with El Centro, CA topping the list at 23.7%.


Myth: Raising the federal minimum wage won’t benefit workers in states where the hourly minimum rate is already higher than the federal minimum. 

Not true: While 29 states and the District of Columbia currently have a minimum wage higher than the federal minimum, increasing the federal minimum wage will boost the earnings for nearly 38 million low-wage workers nationwide. That includes workers in those states already earning above the current federal minimum. Raising the federal minimum wage is an important part of strengthening the economy. A raise for minimum wage earners will put more money in more families’ pockets, which will be spent on goods and services, stimulating economic growth locally and nationally. 

Technically, both parties are correct. The Department of Labor spokesperson is correct in stating that a federal minimum wage hike will increase earnings for those who can stay on the job. However, the scarecrow they built seems to have gotten its wish from the Wizard. If a federal minimum rate increases, inflation will also increase. This is why states with higher minimum wages have higher living costs.


Myth: Younger workers don’t have to be paid the minimum wage. 

Not true: While there are some exceptions, employers are generally required to pay at least the federal minimum wage. Exceptions allowed include a minimum wage of  $4.25 per hour for young workers under the age of 20, but only during their first 90 consecutive calendar days of employment with an employer, and as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive the current federal minimum wage or the state minimum  wage, whichever is higher. There are programs requiring federal certification that allow for payment of less than the full federal minimum wage, but those programs are not limited to the employment of young workers. 

Two things to note here: “…as long as their work does not displace other workers.” How would less experienced, younger workers displace their older and more experienced counterparts? Of course, provided their coworkers are just poor workers who could be so easily replaced, their displacement would be of no loss to the employer. (Before any inconsistency is claimed on my part, this would be disastrous for the displaced worker. A 2003 study shows that job loss results in a shortfall in annual earnings.) Secondly, the response provided states a pay rate lower than the federal minimum wage. Given that throughout this repudiation, the hypothetical bearer of each “myth” has been refuted on the basis of  federal minimum wage and not state minimum wage, we can safely assume that the myth was not disproven.


Myth: Restaurant servers don’t need to be paid the minimum wage since they receive tips. 

Not true: An employer can pay a tipped employee as little as $2.13 per hour in direct wages, but only if that amount plus tips equal at least the federal minimum wage and the worker retains all tips and customarily and regularly receives more than $30 a month in tips. Often, an employee’s tips combined with the employer’s direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage. When that occurs, the employer must make up the  difference. Some states have minimum wage laws specific to tipped employees. When an employee is subject to both the federal and state wage laws, he or she is entitled to the provisions of each law which provides the greater benefits. 

Usually, when a waiter/waitress is paid $2.13/hr, before tips, it is due to the job being one for experience and the employees overall disposability and the work or it being a side job. If the employee is paid at this rate for long enough, they’d be able to resign and use their experience to find a new job, so it’d stand to reason that the employer wouldn’t make said rate of pay a long-term thing.


Myth: Increasing the minimum wage is bad for businesses.  

Not true: Academic research has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs. 

Training costs would dissipate because more skilled workers would be hired; inexperienced workers would be not be considered. This is axiomatic to the problem with the unemployment rate. It does not take into account those with no work experience and it accounts for those who  once had higher-paying jobs who are now working for a lower income due to their displacement.


Myth: Increasing the minimum wage is bad for the economy. 

Not true: Since 1938, the federal minimum wage has been increased 22 times. For more than 75 years, real GDP per capita has steadily increased, even when the minimum wage has been raised. 

Monetarily, this is false. Upon looking into this, one cannot help but notice a correlation between the minimum wage enacted by the respective president and the average inflation rate.

In summary:

Franklin D. Roosevelt (Oct. 1938 – Oct. 1939): -2.1%

Franklin D. Roosevelt (Oct. 1939 – Oct. 1945): 0.65%

Harry S. Truman (Oct. 1945 – Jan. 1950): 0.66%

Harry S. Truman (Jan. 1950 – Mar. 1956): 0.21%

Dwight D. Eisenhower (Mar. 1956 – Sept. 1961): 0.32%

John F. Kennedy (Sept. 1961 – Sept. 1963): 0.68%

John F. Kennedy (Sept. 1963 – Feb. 1967): 0.27%

Lyndon B. Johnson (Feb. 1967 – Feb. 1968): 2.78%

Lyndon B. Johnson (Feb. 1968 – May 1974): 1.62%

Richard Nixon (May 1974 – Jan. 1975):  11.56%

Gerald Ford (Jan. 1975 – Jan. 1976): 9.1%

Gerald Ford (Jan. 1976 – Jan. 1978): 6.6%

Jimmy Carter (Jan. 1978 – Jan. 1979): 7.6%

Jimmy Carter (Jan. 1979 – Jan. 1980): 11.3%

Jimmy Carter (Jan. 1980 – Jan. 1981): 13.5%

Jimmy Carter (Jan. 1981 – Apr. 1990): 4.9%

George H. W. Bush (Apr. 1990 – Apr. 1991): 5.4%

George H. W. Bush (Apr. 1991 – Oct. 1996): 6.5%

Bill Clinton (Oct. 1996 – Sept. 1997): 2.7%

Bill Clinton (Sept. 1997 – July 2007): 2.6%

George W. Bush (July 2007 – July 2008): 3.7%

George W. Bush (July 2008 – July 2009): 1.4%

Barack Obama (July 2009 – [July 2016]): 2.2%


Take what you will from these findings. I see a gap that lasted almost almost a decade long during the Reagan years and a decline in inflation to follow it.


Myth: The federal minimum wage goes up automatically as prices increase. 

Not true: While some states have enacted rules in recent years triggering automatic increases in their minimum wages to help them keep up with inflation, the federal minimum wage does not operate in the same manner. An increase in the federal minimum wage requires approval by Congress and the president. However, in his call to gradually increase the current federal minimum, President Obama has also called for it to adjust automatically with inflation. Eliminating the requirement of formal congressional action would likely reduce the amount of time between increases, and better help low-income families keep up with rising prices. 

This is why the federal income stays the same in certain states. Inflation is not the same in every state and the unemployment rate is seen by congress as stable, so from where they’re sitting, not everyone has a hard time adjusting to inflation.


Myth: The federal minimum wage is higher today than it was when President Reagan took office. 

Not true: While the federal minimum wage was only $3.35 per hour in 1981 and is currently $7.25 per hour in real dollars, when adjusted for inflation, the current federal minimum wage would need to be more than $8 per hour to equal its buying power of the early 1980s and more nearly $11 per hour to equal its buying power of the late 1960s. That’s why President Obama is urging Congress to increase the federal minimum wage and give low-wage workers a much-needed boost. 

I highly doubt anyone has even said this, but I’ll humor this assertion. The purchasing power may have been higher during the Reagan years than it is today, but a lot of it owes to his administration leaving the minimum wage as it was, as mentioned earlier. In fact, now that the 1960’s have been mentioned, the shift from the specie in circulation in the 1960’s to fiat money also had a huge impact on the consumer-price index of the time. This recovery from said shift took nearly a decade and a steadily increasing minimum wage only contributed to the rise in inflation, so it was best if it was left alone.


Myth: Increasing the minimum wage lacks public support.

Not true: Raising the federal minimum wage is an issue with broad popular support. Polls conducted since February 2013 when President Obama first called on Congress to increase the minimum wage have consistently shown that an overwhelming majority of Americans support an increase. 

I want recorded audio of someone actually saying this.


Myth: Increasing the minimum wage will result in job losses for newly  hired and unskilled workers in what some call a last-one-hired-equals-first-one-fired” scenario.

Not true: Minimum wage increases have little to no negative effect on employment as shown in independent studies from economists across the country. Academic research also has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs. 

The employee turnover is reduced because of the lack of people being hired. Not only will job loss result in a minimum wage hike; job growth will also begin to dissipate.


Myth: The minimum wage stays the same if Congress doesn’t change it.

Not true: Congress sets the minimum wage, but it doesn’t keep pace with inflation. Because the cost of living is always rising, the value of a new minimum wage begins to fall from the moment it is set. 

You heard it here first, folks. The Dept. of Labor basically just annulled every point they’d made by saying that raising it is pointless.

Raising it automatically, will mean raising the cost of  living automatically and at what rate will we stop before we realize that we’ve mandated that companies are paying their employees too much?


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