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Posted: February 13th, 2013
Erie-area experts: There’s a downside to higher minimum wage

In his State of the Union Address Tuesday, President Barack Obama said people who are working full time deserve to live above the poverty line.

That sounds logical, but is boosting the minimum wage from $7.25 to $9 an hour the right way to do it?
The proposal has to sound like good news to the 1.7 million Americans who earn the federal minimum wage. That extra $1.75 an hour adds up to a healthy increase of 24 percent.

But a pair of local experts say the proposal could face an uphill battle and might create some unintended consequences.

Jim Kurre, professor of economics at Penn State Behrend and director of the Economic Institute of Erie, said he opposes the plan.

Michael Federici, professor of political science at Mercyhurst University, said the extra money could provide a welcome boost for low-income workers.

“But like most policy,” he said, there are two sides to it. It cuts more than one way.”

As a professor of economics, Kurre gives the proposal high marks for good intentions.
“I think it has good intentions, but it will have bad results,” he said. “It does not make workers worth any more. It doesn’t make them more productive or worth $9.”

A higher minimum wage means employers will set a higher threshold for employment. If a particular job is worth $7.25, but not $9 an hour, that job will likely go unfilled. Other people could lose their jobs, Kurre said.

“People who keep their jobs will wind up better off. But you will have a much larger group end up worse,” he said.

Federici doesn’t disagree.

“It means businesses would have to pay more,” he said. “If they don’t hire as many people or they actually fire people, that it not a good thing for the economy.”

But on an individual basis, the increase could still be a good thing, he said.

“For people who receive the minimum wage, it would be a boost a time when they really need it,” he said.

From a political standpoint, Federici said he wasn’t surprised by the move.

“It makes sense from where he stands politically. The big theme of the State of the Union was to improve the lives of the middle class.”

Ultimately, though, Federici said President Obama may have a tough time getting the proposal through Congress.

“The President shouldn’t expect to get everything he wants,” he said.

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