A minimum wage of $15 if phased in at the state or federal level could cost South Carolina between 165,000 and 179,000 jobs, a Washington D.C.-based conservative think tank concluded.
Raising the minimum wage to $15 an hour by 2021, as proposed by mostly Democratic politicians and activists, would result in many states losing hundreds of thousands of jobs and would considerably curtail employment opportunities, especially for less-skilled workers, the Heritage Foundation’s Data Analysis Center reported..
“You don’t have to be an economics professor to understand that the government’s efforts to continue to raise costs on employers kills American jobs,” South Carolina Chamber of Commerce President and CEO Ted Pitts told Palmetto Business Daily.
Pitts added, “Politicians should be focused more on improving education and workforce training and less on more mandates that would be the final blow to many of our small businesses.”
Few major studies have been carried out on the impact of a $15 minimum wage on jobs.
A study released earlier this year by the University of California, Berkeley, looked at the potential impact of New York state’s planned increase from a $9 hourly minimum to $15 an hour by 2021.
It would increase wages an average 23 percent for 3.2 million workers, or about 37 percent of the state’s workforce, the study concluded.
Employers’ higher payroll costs would be partly offset by lower worker turnover costs and increased productivity, the study claimed. An 0.14 percent increase in prices would offset the rest.
The non-partisan Congressional Budget Office in 2014 studied the impact of an increase to $9 and $10.10 at federal level.
It reported a $9 minimum wage would lift 300,000 workers above the poverty line, but cost 100,000 new jobs. A $10.10 minimum would lift 900,000 workers above the poverty line, but cost 500,000 jobs nationwide.
The report by the Data Analysis Center, authored by senior fellow, James Sherk, pointed out that U.S. Sen. Bernie Sanders (I-VT) has introduced the Pay Workers a Living Wage Act, which would raise the federal minimum wage to $15 per hour over four years. Further, he wrote, the Democratic Party has formally included a $15-per-hour minimum starting wage in its 2016 campaign platform.
The Obama Administration has previously expressed support for the Raise the Wage Act, which would have increased the minimum wage to $12 by 2020.
Sherk calculated the impact on jobs by looking at how businesses respond to higher wages overall. 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, Sherk said.
Using that as a foundation for the study, he concluded that in South Carolina, 40.2 percent of the labor force would be directly affected by the increase, and that 165,000 full time jobs would not be available in 2021, compared to the equivalent if the minimum wage remains at the same level as today.
The minimum wage in South Carolina is $7.25, the federal mandated hourly rate.
The numbers are slightly higher if South Carolina as a state raised the minimum wage to $15. This is because state law would cover farm workers, unlike federal. Sherk claimed the $15 rate will cost 7 million jobs nationwide.
“Starting wages of $15 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),” Sherk wrote.
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.
A number of states and cities have already introduced plans to increase minimum wages to $15 an hour, including California, which is phasing it in over five years to 2021.