by William Teach | April 6, 2016 7:18 am
A little bit of common sense from the Washington Post Editorial Board, though, one gets the idea that they might be a wee bit upset that this might affect their own operations soon
$15 is the wrong goal for minimum-wage advocates
GOVERNORS OF the nation’s most and fourth-most populous states, California and New York, respectively, have signed a$15-per-hour minimum wage into law. In the District, a judge has just ruled that proponents can try to get a $15 minimum on the ballot in November; Mayor Muriel E. Bowser (D) supports accomplishing the $15 goal legislatively. What the success of the $15 minimum wage movement shows, in part, is that politics abhors a vacuum. In the absence of action by the Republican-controlled Congress to raise the federal minimum wage, states and cities encompassing about 65 percent of the U.S. population have decided to enact higher minimums, though usually less than $15. Maybe the GOP should have taken President Obama up on his request for a $9 minimum when he offered it back in his 2013 State of the Union address.
Perhaps Obama should have offered an actual plan, rather than a sticky note/box checking bit of a fluff. Furthermore, let’s remember that it was the GOP who raised the minimum wage the last time, as they slipped it into a defense spending bill that virtually every Democrat voted against.
Another lesson, however, is that, when it comes to public policy, popular and wise are not necessarily the same. Stuck on $7.25 per hour since 2009, the federal minimum is due for an increase, especially in light of stagnant wages and income inequality. The magnitude of that increase, however, is a matter for caution, given the widely varying labor-market conditions across the country and the likelihood that sharp mandatory wage hikes would reduce the supply of jobs. Also, the minimum wage is not an especially well-targeted way to help the working poor, because — unlike the earned-income tax credit wage subsidy — it benefit.
It’s simple economics: if you artificially raise the cost of labor, in many cases it will be a 50% to over 100% increase, businesses will have to cut back on the workers or raise costs. Which do you think business owners will choose, especially when it regards low-skilled or un-skilled labor? Sure, the worker might have skills, but they aren’t necessary for the jobs. Of course, proponents of the increase will say that the company should just have lower profits. But, the proponents did not put their lives on the line in opening the business. They aren’t the ones working long hours, and responsible for paying the loans, nor responsible for the operations. The owners could lose it all in a heartbeat.
Even phased in over a few years, $15 would represent a major departure, about which existing economic research offers little solid guidance. This might be why Alan B. Krueger, the minimum-wage expert who formerly headed Mr. Obama’s Council of Economic Advisers, has written: “A minimum wage set as high as $12 an hour will do more good than harm for low-wage workers, but a $15-an-hour national minimum wage would put us in uncharted waters, and risk undesirable and unintended consequences.” The obvious risks — borne disproportionately by the very-low-income workers whom minimums are meant to help — are apparent even to advocates of the $15 minimum, as the many loopholes and caveats built into the California and New York increases implicitly demonstrate.
Businesses that can move will move. Low wage workers will be let go. Those who were out blowing off work to protest against their own businesses will surely be the first let go, and said businesses will surely look for cause in order to avoid unemployment payments. Many will be replaced with automation. Others will outsource. Part time positions will disappear. We already see this in Seattle, where the unemployment rate has spiked, yet, in the surrounding areas without the minimum wage raise have seen jobs increase.
There’s an old saying about being careful what you wish for, because you might get it. It’s not a positive saying. There will be quite a few people taking one for the team to make this wage happen.
Crossed at Pirate’s Cove. Follow me on Twitter @WilliamTeach.
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