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National Restaurant Association - Economists: $10.10 minimum wage won't solve poverty

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Economists: $10.10 minimum wage won't solve poverty

More than 500 economists, including three Nobel laureates, many noted scholars and several former White House officials, have signed an open letter warning policymakers that a mandatory minimum wage increase will not reduce poverty in America.

The letter was sent today to coincide with the Senate Health, Education, Labor and Pensions (HELP) Committee’s hearing on a proposal by Sen. Tom Harkin (D-Iowa) to raise the minimum wage to $10.10 over three years.

While many policymakers point to a minimum raise increase as a “silver bullet” to end poverty, only a combination of solutions can effectively address the issue, the economists wrote.

“As economists, we understand the fragile nature of this recovery and the dire financial realities of the nearly 50 million Americans living in poverty,” the economists wrote. “To alleviate these burdens for families and improve our local, regional and national economies, 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.”

A mandatory wage increase would hit business owners, many of whom operate on narrow profit margins, with additional costs that likely will force them to cut costs or increase prices, the economists wrote. That could mean fewer jobs, as was noted in a recent study on wage increases by the nonpartisan Congressional Budget Office (CBO).

“The Congressional Budget Office’s most recent report underscores the damage that a federal minimum wage increase would have,” the economists stated in their letter. “According to CBO, raising the federal minimum wage to $10.10 per hour would cost the economy 500,000 jobs by 2016. Many of these jobs are held by entry-level workers with limited experience or vocational skills, the very employees meant to be helped.”

Signers of the letter included Nobel Laureates Vernon Smith, Edward Prescott and Eugene Fama, Diana Furchgott-Roth, Manhattan Institute senior fellow and former chief economist for the U.S. Department of Labor, Doug Holtz-Eakin, American Action Forum president and former director of the Congressional Budget Office, Glenn Hubbard, dean of the Columbia University Graduate School of Business and former chair of the White House Council of Economic Advisers, and Greg Mankiw, professor of economics at Harvard University and former chair of the White House Council of Economic Advisers.

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