Sen. Lathrop and Members of the Business and Labor Committee:
I write on behalf of the Lincoln Independent Business Association to express our opposition to LB 943 and 947.
LIBA would be just as happy as anyone else if Nebraska could pass a law that mandates everyone make more money with no adverse consequences. However, actions do have consequences. Raising the minimum wage has little potential to reduce poverty, it will cause wage inflation and limit employers’ economic ability to hire low skilled and inexperienced workers.
A majority of the workers who would gain from this increase, 63 percent, live in households earning more than three times the poverty line.[i] These statistics indicate that increasing the minimum wage is not the best way to help the working poor.
A minimum wage increase will limit the amount of work available. Employers cannot pay their workers more than the value they produce. If the cost of a job increases while the value of that position remains stagnant that job will no longer exist. The employer can no longer afford to hire employees with little education or experience because their starting value will be less than their initial cost. Thus, when wages are increased hiring decreases and the jobs cut are the entry level jobs that are a gateway to a career.
Minimum wage jobs operate as the pathway into the workforce. Fifty-five percent of Americans began their careers earning within one dollar of the minimum wage.[ii] These jobs are just a starting point, of those workers earning minimum wage two thirds will make more than minimum wage within just one year.[iii] Increasing the minimum wage will force employers to curtail hiring and limit access to entry level opportunities.
An increase in the minimum wage will not only decrease hiring but also cause hardship within existing organizations. This increase will force most employers, including those who hire at rates above the minimum wage, to increase wages across their organization. For example, a LIBA member in the waste hauling industry pays above the minimum wage for entry level positions. If the minimum wage were increased he would be forced to raise entry level wages to attract the same caliber of applicant. Further, this results in wage compression and necessitates salary increases throughout the organization. We have heard from other LIBA members including a non-profit who have said they will be forced to cut back on part-time workers.
To echo the words of Bill Gates “You have to be a bit careful. If you raise the minimum wage … it does cause job destruction. If you really start pushing [minimum wage increases] then you’re just making a huge trade-off.”[iv] The bottom line is that these trade-offs — wage inflation and fewer entry level jobs — are trade-offs Nebraska simply cannot afford to make.
President, Lincoln Independent Business Association
[i] “Most of the Benefits of A Minimum Wage Increase Would Not Go To Poor Households” Meagan Clark, 15 Jan 2014; International Business Times; http://www.ibtimes.com/most-benefits-minimum-wage-increase-would-not-go-poor-households-1541342
[ii] “Most Minimum-Wage Jobs Lead to Better Paying Opportunities” James Sherk; 21 Jan 2014; The Heritage Foundation; http://www.heritage.org/research/reports/2014/01/most-minimum-wage-jobs-lead-to-better-paying-opportunities
[iii] “Most Minimum-Wage Jobs Lead to Better Paying Opportunities” James Sherk; 21 Jan 2014; The Heritage Foundation; http://www.heritage.org/research/reports/2014/01/most-minimum-wage-jobs-lead-to-better-paying-opportunities
[iv] “Bill Gates: Raising the Minimum Wage Can Destroy Jobs” Ericka Andersen; 23 Jan 2014; The Foundry; http://blog.heritage.org/2014/01/23/bill-gates-raising-minimum-wage-can-destroy-jobs/