How to Grow the Middle Class

1,250,506 Views
Sep 22, 2017

Politicians are always talking about growing the middle class. But what policies can actually accomplish that goal? Watch this short economics video to find out. 

This video is part of a collaborative business and economics project with Job Creators Network and Information Station. To learn more, visit informationstation.org.

How do we grow the middle class? Not by raising the minimum wage, which kills jobs, but by raising employees’ earning potential.

  • In 2016, less than 1 percent of the 79.9 million hourly employees earned exactly the federal minimum wage, with another 1.4 percent earning below the minimum wage. Among those earning minimum wage or below, more than half are over the age of 25 and earning entry-level wages for entry-level work like cashiers and waiters.View Source
  • In response to this stagnation, many workers unions and politicians are calling for a 15 dollar an hour minimum wage.View Source
  • According to the Congressional Budget Office, increasing the federal minimum wage from $7.25 an hour, to $10.10 per hour would cost about 500,000 jobs.View Source
  • There will be 2.5 million of these middle-skill job openings by 2017. They boast an average salary of $50,000 per year.View Source
  • To get better paying jobs, workers must accrue experience and training. The real gap in the country is not a wage gap but a skills gap.View Source

Raising entry-level wages increases labor costs, making it harder for small businesses to keep employees and hire new ones. 

  • Proponents of increasing the minimum wage argue that large corporations can afford to pay workers more with no repercussions. But most businesses in America are not large corporations. 99.7 percent of all U.S. firms are small businesses.View Source
  • Businesses don’t have infinite stores of cash to pay workers. They will react to forced wage increases by decreasing the number of hours worked, firing more, and hiring less.View Source
  • Businesses could also respond by raising prices. Raising prices only hurts the supposed beneficiaries of the minimum wage increase.View Source
  • According to the Congressional Budget Office, increasing the federal minimum wage from $7.25 an hour, to $10.10 per hour would cost about 500,000 jobs.View Source
  • According to economist James Sherk, a $15.00 an hour minimum wage requires workers to generate $38,700 a year in value for an employer. This is a high target for new and inexperienced workers, and businesses will not hire at a loss.View Source
  • WATCH: A study on Seattle's minimum wage hike shows $100M a year in lost payroll for low earners – Business InsiderView Source

Instead of concentrating on raising the floor for low-skilled jobs, we should focus on raising the ceiling of what people can make. 

  • The modern economy is rapidly changing with technology driving growth. While reaping the benefits of lower prices, many low skilled workers will get left behind if they don’t increase their skill set.View Source
  • From 1990 to 2013 the share of men with a high school degree or some college working full time fell from 76 to 68 percent. The percentage of these men who did not work grew from 11 to 18 percent.View Source
  • Better career opportunities require more than a high school degree, but less than a four-year college degree. They create high value and are difficult for businesses to fill.View Source
  • There will be 2.5 million of middle-skill job openings by 2017. They boast an average salary of $50,000 per year. We should focus on training up low-skill employees to be able to fill those jobs.View Source

The real fight should not be for a $15 minimum wage, but for the creation of more middle-class jobs. 

  • The real fight should be for true middle-class jobs that earn $50,000 or more a year.View Source
  • There will be 2.5 million of these middle-skill job openings by 2017. They boast an average salary of $50,000 per year.View Source
  • To get better paying jobs, workers must accrue experience and training. The real gap in the country is not a wage gap but a skills gap.View Source

The entry-level wage should be seen as a training wage, which helps employees with few skills prepare for higher-paying jobs.

  • Employers do not hire to give a living wage, but instead because of how much value a worker will provide to an organization. When workers increase their value, employers can increase their pay.View Source
  • When the minimum wage is increased, it requires entry level workers to generate more value than they previously had to for employers, raising the barrier to entry. This makes it more difficult for new workers to gain experience.View Source

The real gap in the country is not a wage gap but a skills gap. To get better paying jobs, workers must accrue experience and training. 

  • Low paying, low skill jobs teach employees important “soft skills”, such as dependability, accountability and cooperation.View Source
  • To get better paying jobs, workers must accrue experience and training. The real gap in the country is not a wage gap but a skills gap.View Source

If Democrats and Republicans can agree on anything, it’s stagnating wages. Median family income dropped from $57,790 in 2000 to $56,516 in 2015.

To address the problems, some have pushed to raise the minimum wage to $15 an hour. But only 1.7 percent of the 77 million hourly employees even earn the minimum wage, and just 395,000 are over the age of 25 and earning entry-level wages for entry-level work like cashiers and waiters.

What activists don’t tell you is that raising the entry-level wage increases labor costs for small business owners making it harder for them to keep employees, and hire new ones. This makes it harder for younger employees to gain the skills they need to climb the career ladder, and earn much higher incomes.

Instead of concentrating on raising the floor for low-skilled jobs, we should be focusing on helping people get the skills to raise the ceiling of what people can make. The real fight should be for true middle-class jobs that earn $50,000 or more a year, what we call the Fight for 50. These jobs allow people to save more money, and better support their families.

There are going to be 2.5 million of these middle-skill job openings next year. These career opportunities require more than a high school degree, but less than a four-year college degree, boasting an average salary of $50,000 per year.  These jobs include automotive technicians, nurses, and plumbers.

While entry-level employees don’t have the necessary skills to succeed right away in higher-paying roles, they often learn them quickly. One of our most famous politicians started out by scooping ice cream at a Baskin Robbins, and made it all the way to the Oval Office in the White House.

In other words, the entry-level wage should be thought of as a training wage, which employees with few skills can use to prepare for a $50,000 a year, or more, career. Let’s raise wages by putting Americans back to work, and fighting for $50,000.

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