Policy doesn’t exist in a vacuum, especially when we’re talking about the minimum wage. However, despite the facts, progressives continue to view hiking the minimum wage as some kind of panacea to raising the standard of living and fixing poverty. Some even claim that hiking the minimum wage creates, rather than destroys, jobs. The reason I raise this is that I’ve just read this piece from the New Yorker, yet another cookie-cutter op-ed on why raising the minimum wage is a good idea. Let’s take it apart:
The movement has momentum because most Americans believe that the federal minimum wage—seven dollars and twenty-five cents an hour, the same as it was in 2009—is too low… But political support for higher wages extends well beyond Left Coast enclaves. According to a Gallup poll taken earlier this year, a majority of Republicans favor a minimum wage of nine dollars.
Yes, it is true that most Americans are supportive of increasing the minimum wage. But there’s a catch–if you tell the public that increasing the minimum wage will lead to job losses they oppose it. There’s also a direct correlation between a minimum wage and youth unemployment, which the author addresses here:
For decades, business owners have resisted higher minimum wages by arguing that they destroy jobs, particularly for young people. At some theoretical level, high minimum wages will distort job creation, but the best empirical evidence from the past decade is aligned with common sense: a minimum wage drawn somewhat above the poverty line helps those who work full time to live decently, without having a significant impact on other job seekers or on total employment. (For example, a study of pairs of neighboring counties with differing minimum pay found that higher wages had no adverse effect on restaurant jobs.)
The minimum wage certainly does destroy jobs. This is because employers hire you based on your skills and the value you bring to their business. If you’re straight out of high school, you are unproven, and therefore a higher risk. Most progressives view this debate in the abstract: if an employer needs to fill a job, they’ll fill regardless of whether they’ve been told to pay minimum wage.
This, however, is simplistic. If your skills do not match — or exceed — the value you create, then your employer is losing money by hiring you. That is why the minimum wage has been so devastating for young people – they’re effectively priced out of the labor force. In fact, that was the sordid intent of its early proponents.
Even so, a federal minimum wage of ten dollars or more will not solve inequality. It will not stop runaway executive pay or alter the winner-take-all forces at work in the global economy. Yet it will bring millions of Americans closer to the levels of economic security and disposable income that they knew before the housing bubble burst. The case for a strong minimum wage has always been, in part, civic and moral. Minimum wages do not create new “entitlement” programs or otherwise enjoin the country’s sterile debates about the value of government. They are designed to insure that the dignity of work includes true economic independence for all who embrace it.
As research has found, increasing the minimum wage may boost the incomes of better skilled, higher earners but does very little to improve the well-being of the working poor. When it comes to job losses as a result of higher labor costs, “the working poor face a disproportionate share of the job losses.” Read that again. When the minimum wage is increased it actually exacerbates poverty.
Given the diversity of the U.S. economy it’s seems strange that there would be a federal minimum wage that covers everyone from inner-cities in the north-east (high cost of living) to the rural midwest (low cost of living). One area I do agree with the author on is his (perhaps inadvertent) perspective on federalism: because Washington won’t increase the minimum wage, it’s up to states and municipalities.
This should always be the case. Although I believe a minimum wage is entirely destructive cities and states should be fighting it out for jobs, discovering whether a robust, flexible market is more fruitful than one that shuts people out from earning a living. But finally we should look at this debate around the cost of living. People who live in states with flexible labor markets, particularly those that are right-to-work, earn a higher living. This is because they have lower cost of living expenses, greater opportunities to both enter, learn a trade, and flourish in the market.