Chairwoman Carpenter and Members of the Committee:
Thank you for holding a hearing on House Bill 880, legislation that proposes incrementally raising the minimum wage in Louisiana from its current level of $7.25 to $15 per hour by June 30, 2026.
My name is Samantha Fillmore, and I am a State Government Relations Manager at The Heartland Institute. The Heartland Institute is a 38-year-old independent, national, nonprofit think tank and our mission is to discover, develop, and promote free-market solutions to social and economic problems. Heartland focuses on providing elected officials on all levels with reliable and timely research on important policy issues such as minimum wage hikes.
Minimum wage laws attempt to create a minimum standard of living to protect employees’ health and well-being by mandating a base level of pay from employers to certain covered employees. While these efforts are theoretically laudable, minimum wage laws are highly disruptive, artificially manipulating pay and the workforce while harming those they are intended to help. Lawmakers would be wise to consider the serious consequences a minimum wage increase can have on employment rates and economic growth.
Minimum wage hikes deleteriously impact small businesses, forcing them to reallocate scarce resources from profit-generating enterprises towards higher labor costs. Often, this results in lower hiring levels, work hour reductions, and increased prices upon consumers. A minimum wage hike may even lead to bankruptcy for companies no longer able to make ends meet in the face of such costs.
A recent study by the Congressional Budget Office examines how increasing the federal minimum wage by incremental degrees to $15 per hour by 2025 would adversely affect employment and household incomes. While the study does find that a minimum wage increase boosts some workers’ wages, it also leads to job loss for many others, ultimately hurting small businesses the most.
Each U.S. state experienced some degree of governmentally imposed lockdowns due to the sudden onset of the coronavirus pandemic, with small businesses often bearing the brunt of economic pain. With this in mind, a minimum wage hike in 2022 could not be more ill-timed. A Yelp analysis recently estimated that 60 percent of those U.S. businesses forced to temporarily suspend operations during COVID-19 have since permanently closed.
The country’s continued macroeconomic vulnerability is also important to consider. While the unemployment rate has subsided in recent months as the economy has re-opened, the labor force participation rate has not rebounded in the same way. As of April 2022, two million workers are still missing from the labor force compared to pre-pandemic levels, according to the Federal Reserve. As for inflation, the March 2022 Consumer Price Index (CPI) report reflected an increase of 8.5 percent—a level not matched since the height of “stagflation” in 1981.
Finally, it is important to recognize that a preponderance of small business failures would substantially decrease governmental revenue capture, as failed businesses would no longer contribute property taxes, income taxes, sales and use taxes, and various regulatory fees. While this policy might be politically popular, the downstream effects of a minimum wage increase would create significant budgetary challenges at the state and municipal level.
Although attempts to bolster a minimum standard of living and protect low-skilled workers are laudable in theory, the tangible effect of the proposed minimum wage increase would hurt more than help. Such a policy would do little to lift struggling Louisianans out of poverty, while simultaneously destroying jobs and increasing government dependence. Louisiana legislators should take this into consideration when examining House Bill 880.
Thank you for your time today.
Nothing in this testimony is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, The Heartland Institute’s website provides a great link to many policy resources.
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