July 19, 2019

Raising the Minimum Wage

“House Democrats approved legislation Thursday to raise the federal minimum wage for the first time in a decade, to $15 an hour.” The bill now heads to the Senate, where it is unlikely to pass. AP News

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From the Left

The left supports raising the minimum wage, arguing that it is unlikely to cause major job losses, though many favor a more limited increase in line with local conditions.

“[The CBO report] fails to adequately weight a set of recent studies that suggest its job-loss estimate is too high… ‘CBO's assessment of the literature has simply not yet caught up’… it's not necessarily the CBO's fault. It has a very high bar, as it should, for incorporating ‘new’ information. The latest generation of minimum-wage research is slowly but surely changing the conventional wisdom, but that takes a long time in economics… Policymakers, however, do not have time to wait for such plodding advances. They need to act based on the best, most up-to-date information. When we consider the CBO's findings in that light, there's a strong case for phasing in a $15 federal minimum wage by 2025.”
Jared Bernstein, Business Insider

“It used to be taken for granted that raising the minimum wage would decrease the number of low-wage jobs, and that teenagers would have more difficulty finding part-time work. Economists published research in the 1970s showing that it did happen… But in the past decade, progressive economists have challenged these assumptions with new data that is now available. Dozens of Democratic-held cities and states have increased the minimum wage floor over the years, well above the current federal minimum of $7.25 an hour. Recent research suggests the worst-feared consequences of minimum wage hikes did not come to pass: Employment did not decrease in places where wages went up, and there was actually a residually positive effect on wages for other lower-income workers…

“Big business groups have not been happy about the fight for $15. Neither have their Republican allies in Congress, who have long pushed back against any effort to raise the federal minimum wage. But it’s hard to deny how popular the idea is with regular voters. Poll after poll shows widespread support for raising the federal minimum rate, even among Republican voters. And a majority of voters want at least $15 an hour. It’s no wonder why the vast majority of Democrats running for president have promised to double the federal minimum wage.”
Alexia Fernández Campbell, Vox

“A huge body of research shows that minimum wage increases aren’t massive job killers. One study that looked at 138 increases between 1979 and 2016 found that they basically had no net impact on low-wage jobs. Another that examined increases in 1,381 counties over 16 years found no effect on employment. Yet another that looked at a quarter century of state-level hikes found the same, even when unemployment was already high. A more recent paper studying 138 state-level minimum wage changes between 1979 and 2016 found that the number of low-wage jobs was basically unchanged for five years after an increase, even after large ones…

“[Moreover] if a business can’t afford a wage increase that would allow its workers to make ends meet, then maybe that business shouldn’t exist… A recent paper found that the restaurants that are driven out of business after cities raise their minimum wages are the ones with the lowest customer ratings. The hardship of those businesses’ employees as they face joblessness shouldn’t be glossed over. But as higher wages across the economy put more money in consumers’ pockets, prompting them to spend more and generate more economic activity, those unemployed workers may be able to look forward to more lucrative employment at a company that manages to come up with a business model that both makes money and adequately rewards its workforce.”
Bryce Covert, New Republic

Many, however, note that “what the CBO’s report does, or should, remind lawmakers is that there is a trade-off in raising the minimum wage so substantially — and that, while the upside would accrue to society’s most vulnerable, so would the downside. Those who would lose out, in the form of no job at all, would wind up not with less pay but with no pay…

“If research from University of Massachusetts at Amherst economist Arindrajit Dube is correct, and the optimal minimum wage is 50 to 60 percent of a given regional labor market’s median hourly wage, then employment in Louisiana, where the median wage was $16.05 an hour in 2018, could be badly hurt by an increase to $15 between now and 2025. Puerto Rico, where a $15 minimum wage, if applied, would equal 150 percent of the current median wage, according to Bureau of Labor Statistics data, could be devastated. The federal minimum wage is, indeed, overdue for an update, having lost about 18 percent of its real value since its last increase in 2009. The smart way to do that, however, is by pegging it to local conditions and then having it automatically grow with inflation going forward — no politics needed.”
Editorial Board, Washington Post

“Although there is substantial evidence that modest increases in the minimum wage don’t upend the job market, there is little agreement on what exactly is a ‘modest increase.’ The challenge for lawmakers is to find the sweet spot, or the highest point to which base pay can be raised before employers reduce hours and trim staff enough to undercut the benefit of the minimum wage increase… We’ve supported raising the minimum wage in Los Angeles and California, which will hit $15 an hour in 2020 and 2022, respectively. The reality is that $15 an hour might be essential to live in L.A. or other high-cost regions, but may be unsustainable in Mississippi.”
Editorial Board, Los Angeles Times

From the Right

The right opposes increasing the minimum wage to $15, arguing that doing so will harm workers.

The right opposes increasing the minimum wage to $15, arguing that doing so will harm workers.

“CBO found that a $15 federal minimum wage would reduce family incomes $8.7 billion by 2025. This reduction would result from higher rates of joblessness, price increases for consumers, and reduced economic output (growth) all offsetting wage gains. While individuals below the poverty line would see their family incomes increase by $7.7 billion, families above the poverty line would see a decline of about $16.3 billion, or $8.7 billion more than the benefit for lower income families.”
Andy Puzder, Fox News

Multiple studies have shown that minimum wage hikes hurt the people they intend to help – and those least able to afford it. A team of researchers at the University of Washington examined the effect of Seattle’s wage increase from $9.47 per hour to $13 per hour and, in 2017, concluded that it led to about 5,000 workers losing their jobs and to low-wage workers losing an average of $125 every month…

“But beyond the jobs lost are the jobs never created, and the social costs that go with knocking out the initial rungs on the economic ladder. Minimum wage jobs – such as scooping ice cream, tending a cash register, or flipping burgers – give young and less-experienced workers the experience and habits that can lead to better jobs. These positions teach essential skills, such as reporting to a manager, dealing with difficult customers, and punctuality. Today’s young people and those with limited education will never have the opportunity to learn these skills if we raise the minimum wage and price them out of the market.”
Erica Jedynak, The Hill

“The local neighborhood stores and businesses with razor-thin profits will be forced to raise prices to make up for the addition labor costs. With the increased prices, customers may elect to take their business elsewhere… [Meanwhile] large corporations with big budgets will weigh the increased labor costs and elect to invest in technology to displace workers

“[Minimum wage] jobs are not designed to provide for a family. They’re either for someone looking to get a foot in the door and join the workforce or someone looking for an extra income or a temporary port in the storm, if they’ve lost their job. We are misleading people to think that these lower-rung jobs will afford a sustainable lifestyle… It's as if we are telling a certain segment of the population that they can't achieve greater things. By telling a group of people that it's acceptable to spend your life in a minimum wage job, we’re really saying that we don’t believe that they’re capable of anything more than cleaning toilets, making beds, flipping burgers or mowing lawns.”
Jack Kelly, Forbes

“While all Americans are sympathetic to living paycheck-to-paycheck on modest wages, a majority understand that the benefits of broad minimum wage hikes do not outweigh the consequences that would leave many workers unemployed. Policies should instead encourage people to pursue $50,000 careers – not to expect $15 per hour mandates… [The] severe shortage of skilled workers has contributed to more than 7 million jobs going unfilled jobs in the U.S. If more young people take advantage of trade and vocational education, they will reduce the number of unfilled jobs in the U.S.  And many of the unfilled positions – such as for dental hygienists, mechanics and electricians – often pay nearly double the salary equivalent of a $15 minimum wage.”
Elaine Parker, Fox News

Rep. Kevin McCarthy (R-CA) notes that “even Alan Krueger, the former chairman of President Barack Obama’s Council of Economic Advisers, has warned that ‘a $15-an-hour national minimum wage would put us in uncharted waters, and risk undesirable and unintended consequences’… Since January 2017, 5.6 million jobs have been created with the help of Republican-led tax reform, deregulation, and other pro-growth reforms. The unemployment rate is near a 50-year low with 224,000 jobs added to the economy last month, surpassing economists’ expectations. At the same time, wages have risen over 3% for an astounding 11 consecutive months… The most effective way to continue to unleash our country’s economic potential is by keeping Washington bureaucrats out of Americans’ paychecks.”
Kevin McCarthy, Daily Signal

“The wage hike is a solution in search of a problem. Thanks to Republican pro-growth policies in recent years, average incomes are growing at their fastest pace in a decade. In fact, last year, incomes for the bottom 10 percent of earners — those making the minimum wage or close to it — rose more than twice as fast as the average. Numerous major employers, including Walmart, Target, and Amazon, have recently voluntarily raised their minimum wages to the $12 to $15 range thanks to the booming economy and market forces, with no counter-productive government mandate necessary…

A better policy to help is an expansion of the Earned Income Tax Credit (EITC). The EITC supplements incomes through the tax code, rewarding work while not threatening job opportunities. It helps those who are actually in need, not the teenager in a wealthy household working a summer job… According to the Center on Budget and Policy Priorities, the EITC pushed 5.7 million people out of poverty in 2017 and made 19.5 million people less poor. Legislation that expands this valuable program to further help the small number of adults left behind by the labor market could easily generate bipartisan support.”
Alfredo Oritz, Daily Caller

Worth reading

“Even having done a lot of research, I was shocked by how much more stressful low-wage work had become in the decade I’ve been working as a journalist… As technology progresses, it tends to make life easier for the top of the labor market — those skilled, educated workers with decent salaries and benefits. Often overlooked is how those same technological advances have made it possible to control and monitor unskilled worker productivity down to the second. These technologies are also getting more powerful, and that makes a lot of people’s lives inescapably, chronically stressful. It can be hard to understand the stress of having someone constantly looking over your shoulder.”
Emily Guendelsberger, Vox

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