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President Barack Obama made good on his State of the Union promise to raise the minimum wage for federal contractors to $10.10 starting in 2015. But he doesn’t have the executive power to do the same for all workers, so the debate among the White House, Congress, economists and business leaders continues.
CNN State of the Union host Candy Crowley asked Steve Forbes, chairman and editor-in-chief of Forbes Media, if raising the minimum wage would be good or bad for the bottom line, economically speaking.
"Remember, in terms of minimum wage, they are often with businesses with small margins, and two-thirds of the people who start out in minimum wage are above the minimum wage within a year, when they get skills," said Forbes, a former Republican presidential candidate.
We’ll leave it to the economists to debate whether or not raising the minimum wage would help or hurt these workers. PunditFact wanted to know if two-thirds of minimum wage workers do start earning more within a year. Forbes didn’t return our request for comment.
We found two papers that directly address his claim. In 2004, economists William Even and David Macpherson published their findings for the Employment Policies Institute, a fiscally conservative nonprofit think tank. Using federal labor statistics from the Current Population Survey, they did find that about two-thirds of workers see wage growth within a year.
However, since that’s pre-recession data, we’ll place more emphasis on a 2013 report. Two Texas A&M University economics professors, Jonathan Meer and Jeremy West, updated Even and Macpherson’s findings using the same data source from 1979 to 2012.
Meer and West reported the following trends of minimum wage workers:
16.55 percent leave the labor force
5.85 percent become unemployed
Of those that remained in the workforce, Meer and West found that 65.85 percent receive higher wages the next year.
So it’s not that two-thirds of minimum wage workers earn more money the following year. It’s two-thirds of those who continue to work, or 51 percent of all minimum wage workers.
Minimum wage earners may choose to leave the labor force because they figure they can do about as well without a paycheck, but with government benefits, said Tara Sinclair, a George Washington University economics professor. There’s a lot of flow in and out of the labor market that complicates Forbes’ claim, she said.
Sinclair also pointed out that there’s selection at play in this statistic. Individuals who keep their minimum-wage jobs for one year are proving that they’re dedicated employees who can hold down jobs. That might speak more to why they’re getting a raise than anything else, Sinclair said.
Forbes said two-thirds of people working for the minimum wage earn more money within a year. The real figure is 51 percent, because some people leave the labor force or lose their job.
Forbes’ claim is partially accurate. We rate it Half True.
CNN State of the Union, "Is it time to raise the minimum wage?" Feb. 16, 2014
Email interview with Jonathan Meer, Texas A&M University economics professor, Feb. 16, 2014
Employment Policies Institute, "Wage growth among minimum wage workers," June 2004
Heritage Foundation, "Most minimum-wage jobs lead to better-paying opportunities," Jan. 21, 2014
Phone interview with Tara Sinclair, George Washington University economics professor, Feb. 16, 2014
Reuters, "Obama signs order to raise minimum wage for federal contractors," Feb. 12, 2014
Texas A&M University, "Effects of the minimum wage on employment dynamics," December 2013
Voice of San Diego, "Fact check: Pay hikes for minimum wage earners," Feb. 10, 2014
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