Five hundred economists, including three Nobel laureates, on Wednesday urged Congress to junk President Obama's proposal to boost the minimum wage to $10.10, claiming it will cut jobs and raises prices.
Instead, the 500 urged in a letter to Congress that Washington pass a comprehensive package to deal with poverty.
“One of the serious consequences of raising the minimum wage is that business owners saddled with a higher cost of labor will need to cut costs, or pass the increase to their consumers in order to make ends meet. Many of the businesses that pay their workers minimum wage operate on extremely tight profit margins, with any increase in the cost of labor threatening this delicate balance,” they warned.
Among the signers were economists from major schools, including Obama’s alma mater, Nobel laureates Vernon Smith, Edward Prescott and Eugene Fama, and George Shultz, who was secretary of State, Treasury secretary, and a former top budget chief.
It was timed to coincide with a Senate hearing on legislation to boost the minimum wage, which the Congressional Budget Office warned could lead to thousands of job cuts.
“To address the very real concerns of out of work and low-wage workers, many of our nation’s policymakers point to raising the minimum wage as a ‘silver bullet’ solution,” the economists wrote. “Although increasing wages through legislative action may sound like a great idea, poverty is a serious, complex issue that demands a comprehensive and thoughtful solution that targets those Americans actually in need.”
While they did not lay out an anti-poverty agenda in the letter provided in advance to Secrets, they did argue that the minimum wage wouldn’t relieve poverty.
“The minimum wage is also a poorly targeted anti-poverty measure. Extra earnings generated by such an increase in the minimum wage would not substantially help the poor. As CBO noted, ‘many low-wage workers are not members of low-income families.’ In fact, CBO estimates that less than 20 percent of the workers who would see a wage increase to $10.10 actually live in households that earn less than the federal poverty line,” they email@example.com.