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Pro-Minimum Wage Study Filled with Flaws

August 17, 2016 Posted by Patrick Marvin - No Comments

Recently, advocates of increasing Maine’s minimum wage published a study highlighting the alleged benefits of raising Maine’s minimum wage to $12 per hour.

However, this study is riddled with inaccuracies and outright distortions. It makes several ridiculous arguments which have little to no basis in economic reality. Worst of all, this study has been accepted as fact by many supporters of raising the minimum wage and even by members of the Maine media.

Some of the study’s most egregious errors include:

Ignoring the fact that raising the minimum wage would hurt small businesses

The underlying argument made by the study – which is that an increase to the minimum wage would be good for small businesses – does not hold up to any level of scrutiny.

Small businesses would be hardest hit by a minimum wage increase. They spend a higher percentage of their revenue on payroll and have much less of an ability to cope with an increase in labor costs. In order to stay afloat, many would be forced to shed workers, cut benefits, or raise prices. And those which could not cut costs would be forced to close their doors forever – eliminating many Maine jobs.

Unfortunately, this study makes no mention of these basic facts, leading the reader to believe that small-businesses would benefit from a minimum wage increase.

Using cherry-picked statistics

The study also utilizes cherry-picked statistics in order to make the case that a majority of businesses which pay below the minimum wage are large corporations. The study concludes that in order to help small businesses, we should raise the minimum wage, and force big businesses to pay higher salaries.

But that is blatantly false – and the opposite is actually true.

Across Maine’s entire economy, large employers are paying higher wages to workers. These employers have larger revenue streams, more resources and a greater ability to pay higher wages for top talent.

Most individuals who are earning minimum wage are actually working at small and very small businesses. Thus, increase to the minimum wage would not ‘level the playing field’ or aid small businesses, but would instead greatly harm those individuals this policy is designed to help.

Failing to analyze the entire Maine economy

Not only does the study cherry-pick statistics, but it also fails to provide comprehensive analysis of Maine’s entire workforce. Instead of analyzing all industries and employers, the study only examines the retail industry – and consequently concludes that large businesses employ the most workers, but pay the least amount.

But (again) this is far from true. It’s only by analyzing a small, sub-section of Maine’s economy that the authors of this study are able to make these foolish conclusions.

In reality, a majority of Maine workers are employed by small-businesses. These companies are the backbone of our economy and our growth and prosperity is largely dependent upon their success.

Many of these small businesses currently lack the means and ability to pay their workers competitive wages. Firms which employ 10 – 19 workers offer some of the lowest salaries of any Maine businesses, while firms with 500 or more employees offer some of the highest.

Contrary to what this study claims, a minimum wage increase would hurt Maine’s small businesses the most – and it would have the least impact on those large businesses the authors of this study are attempting to demonize.

An absence of information on negative effects

Lastly, this study neglects to describe the negative impacts of raising the minimum wage.

It fails to mention the price increases which have accompanied minimum wage increases in other cities. It does not describe the killing of jobs, the closure of small businesses, thecutting of hours for workers, or the slashing of benefits.

But at this point, that is hardly a surprise.

It’s clear that the minimum wage is a classic example of a well-intentioned policy which is actually quite destructive. Rather than aiding or assisting needy individuals and their families, it harms workers and minimizes economic opportunity.

Supporters of this policy will continue to use this study as evidence of the benefits for small businesses and workers – but it should be completely disregarded. Voters should learn the truth, and realize the harm they would be doing on small-businesses when they vote on raising Maine’s minimum wage in November.