Testimony Before the New Hampshire Senate Commerce Committee Relating to the State Minimum Hourly Rate
The Heartland Institute
March 9, 2021
Chairman French and Members of the Committee:
Thank you for holding a hearing on Senate Bill 136, legislation that proposes raising the state’s minimum wage from $7.25 per hour to $12 per hour by January 1, 2024.
My name is Samantha Fillmore, and I am a State Government Relations Manager at The Heartland Institute. The Heartland Institute is a 37-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 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 attempts at all of the aforementioned factors are laudable, minimum wage laws are highly disruptive, artificially manipulating pay and the workforce while harming those it is intended to help. Lawmakers must consider the serious consequences a minimum wage increase can have on employment rates and economic growth.
Minimum wage hikes also impose a myriad of unintended consequences to all businesses, especially small businesses—the essence of the American economy. Minimum wage increases force businesses to reallocate their costs to cover the increase in employees’ wages, ultimately forcing them to alter spending elsewhere to offset their newly increased labor costs. More times than not, this results in less hiring, a reduction in work hours, and increasing prices for consumers. For many small businesses, a minimum wage hike will lead to bankruptcy, as they are no longer able to remain profitable due to substantially increased labor costs.
A recent study by the Congressional Budget Office, titled “The Effects on Employment and Family Income of Increasing the Federal Minimum Wage,” examines how increasing the federal minimum wage to $10, $12, or $15 per hour by 2025 would adversely affect employment and family outcomes. According to the study, the minimum wage hikes do, in fact, boost the wages of some workers. However, this is at the cost of pushing millions of workers out of a job, hitting small businesses the hardest.
Every state experienced some degree of state and federally imposed lockdowns and shelter-in-place orders due to the sudden onset of the coronavirus pandemic, which sent shockwaves throughout the small business ecosystem that are still being felt. Therefore, a minimum wage hike in 2021 could not be more ill-timed. In an analysis based on self-recorded closures in their database, Yelp estimates that 60 percent of U.S. businesses that have closed since the start of the COVID-19 pandemic have shut down permanently. More specifically to your constituents, Officials with Yelp said that 449 businesses in New Hampshire temporarily closed between March 1 and July 10 of last year.
It is paramount for New Hampshire lawmakers to consider the small businesses in the Granite State before mandating wages which may result in businesses closing and increased unemployment, especially when joblessness has skyrocketed due to the ongoing pandemic.
Furthermore, because failed businesses don’t pay property taxes, income taxes, sales and use taxes, and the dozens of other licensing and regulatory fees that governments rely on for revenue, increasing the minimum wage will have effects on government revenue. While seemingly politically popular, the downstream effects of a minimum wage increase will certainly create challenges for municipal and state budgets.
Although attempts to bolster a minimum standard of living and protecting low-skilled workers in a pandemic-world are commendable, the overall economic effects of proposed minimum wage hikes accomplish neither of those worthy goals. Arbitrary minimum wage hikes, out of sync with the laws of supply and demand, would do little to lift Granite Staters from poverty while destroying jobs in the state. As such, legislators in New Hampshire should consider all of the socioeconomic effects associated with Senate Bill 136.
Thank you for your time today.
For more information about The Heartland Institute’s work, please visit our websites at www.heartland.org or http:/news.heartland.org, or call Samantha Fillmore at 312/377-4000. You can reach Samantha Fillmore by email at [email protected].