Q: With the steady improvement of the country's economy and its current low unemployment rate, some politicians and the government are calling for an increase in minimum wage. Why has this become such a polarizing issue for business and their employees?
A: Families are feeling the effects of wage stagnation, so it's no surprise activists have mobilized. Politicians have seized the issue in an attempt to garner votes. Coast-to-coast, calls for $10 minimum wage were replaced by calls for a $12 minimum wage. Now a $15 minimum wage is the rallying cry. Cities and states have begun debating and implementing this higher wage, some immediately, some incrementally. But no one is asking if this is really the solution we need. Is a $15 minimum wage, more than double the current federal minimum wage, the right way to lift incomes? There is a strong body of evidence to suggest that increasing the minimum wage actually would reduce employment opportunities, especially for low-skilled, entry-levels workers.
Q: How would a minimum-wage increase impact low-skilled, entry-level workers?
A: A lack of experience and available applicants are two reasons why open jobs go unfilled in businesses across America. Many low-skilled entry-level workers will be pushed out of consideration due to a minimum-wage increase as employers seek to hire a more advanced job applicant for their available jobs. It's already happening. In a first quarter survey we conducted, almost two-thirds of employers indicated they don't have enough applicants or don't have applicants with the right experience to fill their available jobs. There is a mismatch between job seekers and available jobs, and raising the minimum wage further complicates this mismatch.
Q: If the minimum wage increases, how would that impact hiring trends?
A: Job seekers will turn down jobs for which they are qualified because they believe they should earn a higher wage, but are then turned down for positions that garner a higher wage due to a lack of skills or training. In a recent survey conducted by Express, it was revealed that 30 percent of applicants decline job opportunities because of “low pay,” followed by 13 percent indicating “lack of advancement/opportunity.” It's clear that pay and advancement remain top motivators for job seekers. As the labor market tightens, businesses have to be even more aware of what may prevent them from making a good hire.
Q: So, what should the next step be in the conversation about a minimum-wage increase?
A: I recommend a few things for policymakers. First, pay attention to the unintended consequences, such as the small business owners who will struggle to survive and the employee who will either get a pink slip or their hours cut. Then, avoid cookie-cutter solutions. Ask the right questions. What may work in one state may fail in Oklahoma. What are the negative consequences and would the economy be stronger without the higher wages? Would raising the minimum wage cause employers to move out of the state or country? Most importantly, policymakers need to focus on getting the economy to grow faster, and higher wages will follow. This means developing our workforce by equipping workers with in-demand skills. That not only will improve their employability, but also their potential to earn more for their families, regardless of minimum wage laws.