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LETTER: College students be warned

By Greg Schenk
On March 17, 2014

To the editor:

In his State of the Union address, President Obama announced his intention to use his executive powers to raise the minimum wage for federal contractors from $7.25 an hour to $10.10 an hour. In 30 states, there are also bills being pushed that would increase the minimum wage; one such bill including a $1 hike in minimum wage here in Utah. Suddenly, we college students have an issue at hand over which we must be greatly concerned. Minimum wage should not be raised, not at the state level, nor at a federal level.

As a poor college student, I can understand an increase in minimum wage could at first be intriguing, especially since as we tend to work minimum wage jobs. However, statistics have shown that after the minimum wage raise of 2007, unemployment in youth increased from 15 percent to 27 percent by October 2009. While it may be intriguing, it is very likely that instead of benefiting from the increased minimum wage, we will end up as casualties to the increase.

With an increase in minimum wage, the costs to a company are driven upward. In an effort to reduce production costs, most companies will find ways to do the same job with fewer people, thus decreasing the need for minimum wage employees and in turn will lay off workers.

As Carli Dimino, a policy analyst from Boston College points out, “Studies have consistently shown that increasing the minimum wage results in a loss of low-wage jobs, harming the very workers it is intended to help.” A study by the U.S Labor Department’s Bureau of Labor Statistics shows that in 2012, 40.9 percent of minimum wage employees were 25 or younger. This means we as students make up a large portion of minimum wage employees; the employees who are at risk of losing their jobs if minimum wages are increased. I do not see why raising minimum wage would be considered if it will most hurt the group it is intended to help.

Another effect of an increase in minimum wage on college students would be a decrease in our buying power. With an increase in minimum wage, prices of goods will also increase. In a study done by Daniel Aaronson, vice president and director of microeconomic research at the Federal Reserve Bank of Chicago, research suggests “a 0.12 percent to 0.16 percent increase in hamburger and chicken prices for every 1 percent increase in the minimum wage.” In the case of Obama’s planned increase of minimum wage to $10.10, this signifies a 39.3 percent increase in minimum wage.

This will cause a hamburger that currently costs $5 to increase in price to $5.23. Our purchasing ability is important since in 2012, 57.5 percent of students received some form of financial help here at USU, and in some cases, that is all they have to live off of. If the money they receive from scholarships does not increase but the amount of goods they can purchase with that money decreases, then what is the good in raising minimum wage?

Finally, an increase in minimum wage will make it more difficult to find a job in an already tough job market. From a simple demand curve, we learn that as the price of labor increases, the quantity of labor demanded decreases significantly. A decrease in the number of jobs will not benefit anyone.

I do not see any reason to raise minimum wage when it will hurt the labor force it should be helping by limiting job opportunities while managing to raise the prices in the market. I rely on scholarships and know it would be devastating to lose buying power via price increases. In conclusion, we college students must not allow minimum wage to be raised or we will suffer.

Greg Schenk

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