money management

Wage laws hurt young and poor

President Obama this year has been making noise about wanting to hike the federal minimum wage to $9 per hour and then indexing the wage to inflation. That means the hourly wage would go up every time the cost of living goes up.

The latest Gallup poll finds that over 75 percent of Americans would support raising the hourly minimum wage to $9. Voters in New Jersey backed up that data earlier this month when they voted to raise the Garden State’s minimum wage to $8.25 and tie future increases to inflation.

It might be politically popular, but raising the minimum wage is terrible policy.

Minimum wage laws hurt the very people they’re intended to help. The poor who would benefit most from an entry level job find themselves shut out as employers have fewer dollars to devote to new hires.

Teenagers looking to grab that first rung on the career ladder are presented dwindling choices as jobs for young people with little experience become increasingly scarce.

Teen employment rates are dismal and they’re getting worse. In 1999, more than 50 percent of teens age 16-19 had a summer job. By the summer of 2013, only 32 percent of teens were off the couch and earning a buck, prompting one economist to call this “a Great Depression for teens.” For all of 2012, Arizona’s teen unemployment rate was a staggering 28.9 percent, one of the highest in the country.

Young people are the most likely to seek out minimum wage-level positions and to be hurt by wage hikes that eventually freeze them out of the job market. Just over half of minimum wage earners are between 16 and 24.

While the president’s proposal is unlikely to gain traction in a GOP-controlled House, Arizona unfortunately has already chosen to go with the automatic inflation index option. Passed by voters back in 2006, Arizona law says that employees earning the minimum wage get an automatic raise every January based on the consumer price index. In January 2013, workers saw the minimum wage go from $7.65 to $7.80. In a matter of weeks when we flip the calendar to 2014, the hourly rate will go up another 10 cents to $7.90.

As the Gallup data indicates, momentum around the country is solidly behind a minimum wage hike. With federal action unlikely, states are pushing a higher minimum wage. Five states this year, either through legislation or ballot measure, have hiked their minimum wage. Cities are instituting their own minimum wage laws, too, including our neighbors in the New Mexico cities of Albuquerque and Santa Fe. SeaTac, the community of 27,000 around the Seattle airport, just passed a $15 minimum wage, and Seattle’s mayor-elect says he wants his city to adopt a $15 minimum wage, too.

There is not only a real opportunity for business community leadership on this issue, but a responsibility, too. Unless the business community leads a conversation over the destructive power of minimum wage laws, employers will soon be saddled with unsustainable entry-level wages that will squash job growth, hurt the poor and stifle teens looking for a start. It’s time we make a move to change the momentum before it’s too late.

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry. Garrick Taylor is the senior vice president of government relations and communications at the Arizona Chamber of Commerce and Industry.