A new state-by-state study finds that a federally mandated $15 minimum wage would kill around 7 million jobs.
A new study out of the Heritage Foundation look at the effects of a federally mandated $15 minimum wage on the nation’s job growth, as many states test and cities implementing the $15 dollar minimum wage.
Businesses hire new employees when the cost of an individual’s labor does not exceed the additional profit created by their labor. For example, if a worker produces $10 an hour in output and their wage is $8 an hour, then there is a $2 an hour profit for the company. The company will therefore likely consider employing them because the trade-off is profitable.
If a business hires a worker at $15 an hour, that worker must produce in excess of “$38,700 a year in value for their employers (including wages, employer payroll taxes, and Obamacare-mandate penalties),” according to the Heritage study. While this could be possible in some respects, such a high minimum wage would make it very difficult for less skilled workers and workers with less experience to get hired.
Experts expect that states with lower costs of living would experience greater job losses. The new study compares New Jersey and Georgia, which have similar employment numbers, and finds that Georgia would lose 159,000 jobs more than New Jersey.
Experts find the current states with minimum-wage increases (California, New York, and Oregon) would lose 2 million jobs by 2021, according to the Heritage study.
After implementing the $15 minimum wage in Seattle, Washington saw jobs drop markedly from around 405,000 to around 395,000 over the nine-month course of it’s implementation.
If the minimum wage were raised nationally to $15 an hour, it would cover roughly “one-third of U.S. wage and salary workers—considerably more than the minimum wage has ever covered.” As recent examples of clothing manufacturing in California or McDonald’s moving to automated robots, both jobs are lost and prices are raised to compensate for profit losses.
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