The President’s Misleading Minimum Wage Op-Ed

The White House this week is distributing an op-ed signed by President Obama that promises “millions” of Americans will be raised out of poverty if the minimum wage is increased to $10.10. Unfortunately, the President’s rhetoric doesn’t match up with the research from the nonpartisan Congressional Budget Office (CBO).

Far from pulling “millions” out of poverty, the CBO projects just 900.000 fewer people will be in poverty–and at the cost of 500,000 to one million jobs. Put differently, that means a $10.10 minimum wage could cause one person could lose their job for each person pulled out of poverty. That’s a far less rosy picture than the President portrayed in his op-ed.

The President also was less-than-honest when he provided examples of other businesses that hire employees above the current minimum wage. One of those employers–Costco–has a customer base that pays to shop there, and openly boasts of its low staffing levels. As a result, the company has a profit-per-employee that’s over four times greater than a full-service restaurant, and a business model that permits it to pay a higher starting wage.

The President also mentioned Shake Shack as an example of a food-service company that pays a starting wage above the federal level. Again, the details matter: Shack Shack is a high-end concept that charges over four times more for a double cheeseburger than McDonald’s does–and over 40 percent more for the equivalent Double Quarter Pounder. If a typical fast food restaurant thought it could enact that kind of dramatic price increase without losing sales, it would have done so already.

Assuming a diner in the Midwest faces the same pricing structure as a tony quick-service restaurant in Washington, DC, is foolish–and a surefire way to reduce job opportunities.