More than 500 economists, including three Nobel laureates, signed a letter saying that artificially raising the federal minimum wage to $10.10 per hour through a government mandate, as President Obama has suggested, would have adverse effects on the job chances of unskilled and low-skilled workers.
In an open letter titled "
A Statement to Federal Policy Makers," the group said the fact unemployment is so high and that so many Americans have simply abandoned the workforce has left lawmakers groping for a "silver bullet solution."
However, hiking the minimum wage is a simplistic ploy that ignores the need for meaningful measures to ease the plight of Americans in need, the economists said.
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"To alleviate these burdens . . . we need a mix of solutions that encourage employment, business creation and boost earnings rather than across-the-board mandates that raise the cost of labor," the letter stated.
One of the signers of the letter, Mark Perry, an economics professor at the University of Michigan, wrote in a column for the
American Enterprise Institute, "The tragedy of this well-intentioned, but misguided, legislation is that it would harm and disadvantage the very workers it is intended to help."
Perry said the letter signers were "voicing their collective objection to a government price control for entry-level workers."
"The 500+ economists who have signed the letter are in general agreement that economic reality and the laws of supply and demand are not optional, despite the arrogant attempts of economically challenged politicians and progressives to circumvent or disregard the most basic economic theory, economic laws and economic logic," Perry explained.
The Nobel laureates signing the letter were economists Vernon Smith, Edward Prescott and Eugene Fama.
Many of the signers were noted academic economists, such as Glenn Hubbard of Columbia University and Gary Hansen of University of California, Los Angeles.
Others included former or current public officials such as Robert Heller, a former governor of the Federal Reserve and Warren Coats of the International Monetary Fund, plus a sprinkling of well-known think-tank economists such as George Shultz of the Hoover Institution, who is a former director of the Office of Management and Budget and was Secretary of State under President Reagan.
In their letter, the signers warned that if the federal minimum wage is hiked, "business owners saddled with a higher cost of labor will need to cut costs or pass the increase to their consumers in order to make ends meet.
"Many of the businesses that pay their workers minimum wage operate on extremely tight profit margins, with any increase in the cost of labor threatening this delicate balance."
The economists' letter noted that the Congressional Budget Office estimated that
raising the federal minimum wage to $10.10 per hour would cost the economy 500,000 jobs by 2016 — many of them unskilled positions held by people the law ironically would be intended to help.
In January, seven Nobel prize-winning economists and eight former presidents of the American Economic Association took the opposite position, and signed a letter in support of raising the minimum wage, according to
BusinessWeek.
According to a new
Bloomberg poll, most Americans support raising the minimum wage, but only if it means no loss of jobs.
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