Why minimum wages aren’t the answer for the US workforce, according to the Federal Reserve.
The country’s largest bank said in a report on Tuesday that “lowering the hourly wage may be possible, but it would not solve the US unemployment problem”.
The Federal Reserve, the country’s central bank, said it was examining the issue “to ensure the wage is sustainable for workers”.
“If we were to do anything, it would be to reduce the wage for lower-skilled workers who have to work at the lower end of the wage spectrum,” said Fed President Jerome Powell in a speech at the Economic Club of New York.
The central bank’s chief economist, Esther George, also said that “it is unlikely that a wage hike in the current situation could be a sufficient inducement for businesses to hire new workers”.
It is not the first time the Fed has sounded a warning against raising the hourly rate, and it is likely to be the last.
The US Federal Reserve has raised interest rates twice in the last six years, in 2009 and 2013.
But there is growing evidence that the rate hike that the Fed proposed last year to help keep inflation in check could do more harm than good, and could have a far-reaching negative impact on US workers and businesses.
“Raising the minimum wage would make no economic sense,” said the bank’s president, Jerome Powell.
“It would be like lowering the wage of a child to pay for a college education, or raising the cost of gasoline to offset rising costs of transportation.
We think raising the minimum is not an effective way to deal with our current unemployment problem.”
A report published by the US Department of Labor in April found that the wage gap between men and women had widened since the late 1980s.
Women earn about 60 cents for every dollar men earn, compared with less than 60 cents in 1979.
A study published by US economists in March found that if the US were to hike the minimum, the US economy would see its GDP shrink by $4.4 trillion (£3.7 trillion).
Economists have warned that the US could have as many as two years of a severe recession, with the economy contracting at a rate of 4 per cent or more.