February 23, 2014

Cornell Divided Over Effects of Potential Minimum Wage Increase

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Last Tuesday, the Congressional Budget Office conducted an official assessment to consider the possible ramifications of raising the federal minimum wage from $7.25 to $10.10 an hour, a change that would also affect many of Cornell’s student employees.

The controversial bill –– largely popular with the Democrats and President Obama while lacking support with Republicans –– has significant projected effects on income, employment, and the federal budget, according to The New York Times.

“As a student with debt, any bit helps, but for non-student workers throughout the state with minimum wage jobs, it could make a much greater difference.” — Kendra Hayes ’15

Prof. Richard Burkhauser, policy analysis and management, was one of the seven outside advisers asked to review and comment on the Congressional Budget Office report on this topic.

“The minimum wage has been eroded by inflation, and this is a proposal to raise it back up to its historic highs relative [to] the average wage,” Burkhauser said. “The Democrats believe that this is a good way to help the working poor.”

However, Burkhauser said he disagrees with the Democrats’ views on the proposal.

“While this will increase the wages of most low wage workers, the great majority do not live in poor households so it is not a very effective way to help the working poor,” Burkhauser said.

Raising the federal minimum wage is estimated to cut 500,000 jobs by the second half of 2016, while also lifting 900,000 families out of poverty and increasing the weekly incomes of 16.5 million low-wage workers, according to the New York Times.

Burkhauser projects more adverse effects on total employment, estimating that the number of lost jobs will be higher and the number of households lifted out of policy will be less than estimated.

“The CBO believes there is a two-thirds chance that the number of jobs lost will be between almost none and one million,” he said. “I think the number will be much closer to one million and could be more, because I think the best research … suggests more sensitivity to employment effects than the CBO projects.”

Bill Lim ’15, a student worker at the Statler Hotel, also expressed concern with job reduction as a result of minimum wage increases.

“While I obviously wouldn’t mind getting paid more –– and other students probably wouldn’t either –– you have to think about how business might react,” Lim said. “They might cut jobs and people may actually lose jobs instead of benefiting from the increased wage.”

In lieu of increasing the federal minimum wage, Burkhauser advocates for the increase and broadening of the Earned Income Tax Credit, a tax credit that gives refunds to working people who have low to moderate income, according to the Internal Revenue Service.

“When you arbitrarily increase the wages of the lowest skilled workers in the USA, this will mean that some of them will lose their jobs. This does not happen when you increase the [EITC],” Burkhauser said.

Students working at the University may also be affected by the proposed minimum wage raise proposal.

Zoe Memel ’15, a former student employee on campus, said that she “strongly” supports the changes.

“In California, the minimum wage is much higher, and I was shocked that it was so low when I came to Cornell,” Memel said. “Especially as a working student, it’s unacceptable, there’s a huge difference between the minimum wage and the living wage.”

Memel said she thinks that the proposed change would help many student workers at the University.

“Moving towards the $10.10 wage would help the ‘working poor’ — not necessary myself, but a good portion of American citizens — and it would definitely affect me and other students on campus,” Memel said.

Memel also noted the distinction between “living wage” — the cost for a single person working full-time to live in Tompkins County, which is $12.62 per hour, according to the Ithaca Times — and minimum wage.

Kendra Hayes ’15, another student worker on campus, echoed Memel’s sentiments.

“Raising the minimum wage is a great idea — the closer we get to a living wage, the better,” Hayes said. “As a student with debt, any bit helps, but for non-student workers throughout the state with minimum wage jobs, it could make a much greater difference.”