Among tried and true politically safe policy proposals, this is one of the safest. It is popular year in and year out, decade after decade.
“Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9 an hour,” President Obama said in his State of the Union address Tuesday. “This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank, rent or eviction, scraping by or finally getting ahead. … In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up while CEO pay has never been higher. So here’s an idea that Gov. Romney and I actually agreed on last year: Let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.”
It’s natural to assume most of this statement is true and good. Who in their right mind wouldn’t want to give the working poor a raise? But it doesn’t work that way. Raising the minimum wage, an arbitrary increase in the price of labor, means fewer jobs, higher unemployment especially among the young, and does little to help the poor. Economists are not united in these conclusions, as if economists are ever united, but the preponderance of evidence and the fundamentals of supply and demand suggest it is true. Raise the cost of hiring entry level workers, and fewer will be hired. Set a wage above the economic value that worker produces, and the job will go away. Obama proposes nearly a 25 percent increase in the federal minimum wage, from $7.25 to $9 per hour. It’s safe to say that this will be popular, and that it will cost jobs.
To begin with, most of the people working for minimum wage are not poor. Census data shows about 10 percent of minimum wage workers come from households below the poverty line. Michael Strain of the American Enterprise Institute quotes statistics provided by the White House itself, that show on average minimum wage workers earn less than half their family’s income. Two-thirds come from families with income more than twice the federal poverty level. They are teenagers, said Strain. They are spouses working part-time. They are retirees earning extra income. Raise the minimum wage and some of those people will be grateful for their higher pay. Some won’t have any pay at all. They won’t have a job.
But isn’t it true that we in Washington have tied our minimum wage to the cost of living, and it has risen automatically to $9.19 an hour at present, and we have suffered no consequences? It depends on who you talk to. Unemployment among Washington teens a year ago was nearly 30 percent, the fourth highest in the nation, according to the Employment Policies Institute. Employers, especially in small businesses, struggle to pay entry-level workers more than their labor is worth, and consequently hire fewer of them. This is one of the major problems that Senate Bill 5275 attempts to rectify. It would allow small businesses to pay 10 percent of their workers a temporary “training wage” at 75 percent of the state minimum, or equal to the federal minimum wage, whichever is higher. Right now it would be $6.89 per hour.
Raise the minimum wage and the people most affected will be the beginners, the people looking for their first job, those trying to find someplace, anyplace, in the working world and begin their long and difficult climb to greater prosperity. Raise the minimum wage and you will reduce their opportunities.
Unemployment is still at crisis levels in the United States. Unemployment among the young is worse. We can congratulate ourselves for raising the minimum wage. We shouldn’t feel good about pricing people out of the job market.
Tracy Warner’s column appears Thursdays and Fridays. He can be reached at email@example.com or 665-1163.