A Statement to Federal Policy Makers The “recovery” from the Great Recession has been anemic. Business growth, job creation, and consumer spending remain tenuous. Since the official trough in June 2009, median income has fallen, real wages have barely risen, unemployment remains elevated, and because so many Americans have left the workforce entirely, the fraction of the population working is below the pre-recession level. To address the very real concerns of out of work and low-wage workers, many of our nation’s policymakers point to raising the minimum wage as a “silver bullet” solution. Although increasing wages through legislative action may sound like a great idea, poverty is a serious, complex issue that demands a comprehensive and thoughtful solution that targets those Americans actually in need. As economists, we understand the fragile nature of this recovery and the dire financial realities of the nearly 50 million Americans living in poverty. To alleviate these burdens for families and improve our local, regional, and national economies, we need a mix of solutions that encourage employment, business creation, and boost earnings rather than across- the-board mandates that raise the cost of labor. One of the serious consequences of raising the minimum wage is that business owners saddled with a higher cost of labor will need to cut costs, or pass the increase to their consumers in order to make ends meet. Many of the businesses that pay their workers minimum wage operate on extremely tight profit margins, with any increase in the cost of labor threatening this delicate balance. The Congressional Budget Office’s (CBO) most recent report underscores the damage that a federal minimum wage increase would have. According to CBO, raising the federal minimum wage to $10.10 per hour would cost the economy 500,000 jobs by 2016. Many of these jobs are held by entry-level workers with limited experience or vocational skills, the very employees meant to be helped. The minimum wage is also a poorly targeted anti-poverty measure. Extra earnings generated by such an increase in the minimum wage would not substantially help the poor. As CBO noted, “many low-wage workers are not members of low-income families.” In fact, CBO estimates that less than 20 percent of the workers who would see a wage increase to $10.10 actually live in households that earn less than the federal poverty line. For these reasons, we encourage federal policymakers to examine creative, comprehensive policy solutions that truly help address poverty, boost incomes from work, and increase upward mobility by fostering growth in our nation’s economy. Sincerely, Vernon Smith Edward Prescott Eugene Fama Robert Lucas Daniel Benjamin Seth Bied Nobel laureate Nobel laureate Nobel laureate Nobel laureate Clemson University New York State Department of Taxation Burton Abrams Donald Alexander Dick Armey John Barrett Michael Bennett and Finance University of Delaware Western Michigan Retired Majority Leader, University of North Curry College University U.S. House of Alabama Andrew Biggs Eric Abrams Representatives William Beranek American Enterprise McKendree University William Allen Lowell Bassett University of Georgia Institute UCLA Nathan Ashby University of Washington Richard Adams University of Texas El Roger Betancourt Bob Bise Oregon State University John Anderson Paso Robert Battalio University of Maryland, Orange Coast College University of Nebraska- University of Notre Dame College Park Doug Adie Lincoln Ban Banerjee Bob Blewett Ohio University University of Wisconsin- Stacie Beck Sanjai Bhagat St. Lawrence University Wayne Angell Platteville University of Delaware University of Colorado Francis, Ahking Former Member of the Cecil Bohanon University of Connecticut Board of Governors Chris Barnekov Robert Beekman Miles Bidwell Ball State University Federal Communications University of Tampa Bidwell Associates William Albrecht JJ Arias Commission, Retired Michael Bond University of Iowa Georgia College Donald Bellante University of Arizona University of South Florida Donald Booth Patrick Button Warren Coats Harold Demsetz John Estill John Garen Chapman University University of California- International Monetary UCLA San Jose State University University of Kentucky Irvine Fund, Retired Geoffrey Booth Joseph DeSalvo Ayse Evrensel Stanley Garthoff Michigan State University Per Bylund Peter Colwell University of South Southern Illinois University of Akron Baylor University University of Illinois Florida-Tampa University Edwardsville Donald Boudreaux Urbana-Champaign Ramya Ghosh George Washington Charles Calomiris William Dewald Hugo Eyzaguirre Drexel University University Columbia University Roger Congleton The Ohio State University Northern Michigan West Virginia University University Joseph Giacalone John Boyd Colin Campbell Bob DeYoung St. John's University Florida International Dartmouth College Robert Connolly University of Kansas Frank Falero University University of North CSU Adam Gifford Victor Canto Carolina Arthur Diamond Cal State Northridge John Boyd La Jolla Economics University of Nebraska at Liliana Fargo University of Minnesota Kathleen Cooper Omaha University of Chicago Ann Gillette Robert Carey Former Undersecretary, Alumna Kennesaw State Genevieve Briand Clemson University Department of Commerce John Diamond University Washington State Rice University Ken Farr University Richard Cebula Mike Cosgrove Georgia College and David Gillette Jacksonville University University of Dallas David Dittman State University Truman State University Alex Brill Cornell University American Enterprise Don Chance Tyler Cowen Joan Farre-Mensa Vance Ginn Institute Louisiana State University George Mason University Jeffrey Dorfman Harvard University Texas Public Policy University of Georgia Foundation James Brown Beryl Chang Steven Craig Susan Feigenbaum Retired Columbia University University of Houston LuAnn Duffus University of Missouri-St. Peter Gioia College of Wooster Louis Connecticut Business and Don Bruce Myong-Hun Chang Mark Crain Industry Association University of Tennessee Cleveland State Lafayette College Joseph Duncan Randall Filer University Chairman, Micro Mite Hunter College & the Fred Goddard Eric Brucker Nicole Crain Information Research CUNY Graduate Center University of Florida University of Delaware Barry Chiswick Lafayette College George Washington Jerry Dwyer Silverio Zebral Filho Charles Goetz Lawrence Brunner University David Cushman Clemson University Organization of American University of Virginia Central Michigan Westminster College States University Susan Christoffersen Richard Eastin John Goodman Philadelphia University Larry Dann University of Southern Garry Fleming National Center for M. 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