For liberals, raising the minimum wage is always a good election year tactic. It is easy to explain to voters. The compassionate voter in each of us, ever willing to be free with others’ money, sees it as the least we can do to help the working poor. Not only that, but it plays well to the unions that traditionally support liberals. While few union workers earn anything close to the minimum wage, unions know that every jump in the minimum wage flows into a jump in union wages across the board. This necessarily leads to inflation that eventually erodes the wage increases.
For conservatives, this is a horrible issue. It is difficult to explain both the economics and morality behind their stance against raising the minimum wage. And each time this comes up, some conservatives hurt their cause by suggesting that we are headed for cataclysmic economic problems if we raise the minimum wage. Of course, this has never happened in all of the times the minimum wage has been raised, so it hurts conservatives’ credibility.
But subtle economic changes have occurred every time the minimum wage has been raised. More on that later.
The Standard Examiner Editorial Board contends that raising the minimum wage is “a simple matter of fairness,” since Congress continually raises its own wages. Never mind the fact that the control of Senators’ and Representatives’ compensation is one of the responsibilities enumerated to Congress in Article I, Section 6 of the Constitution, while the document is completely silent on the right to regulate wages outside of government service.
Personally, I have a problem with all of the things we allow the federal government to control as “a simple matter of fairness,” when the Constitution does not specifically enumerate the right to do so. If we really think the federal government should regulate something beyond what is enumerated, we should get the gumption to amend the Constitution to reflect these values, rather than have the intent of the document eroded year after year by well-intentioned laws and regulations.
Sadly, these arguments are quite moot, since we have a long history of allowing the government to meddle where it is not permitted by the Constitution. (In fact, our federal elected officials spend so much time frolicking in these arenas that they have little time left for the hard issues with which the Constitution actually tasks them.) So, let’s look at economic issues.
The WSJ Editorial Board notes here that “Only a tiny fraction of Americans--perhaps 3% to 5%--get paid the current minimum of $5.15 an hour.” That is actually one of the reasons raising the minimum wage appeals to voters, because the price tag seems small.
But the WSJ Ed Board asks a cogent question: what is the motivation for raising the minimum wage? Ostensibly, the answer must be to reduce poverty. But, claims the board, “no one has ever demonstrated that raising the minimum wage reduces poverty.” The reason for this is that about 87% of minimum wage earners are not poor, as well as the resultant wage-eroding inflation mentioned above.
The board notes that most low wage earners live in multiple earner households that have a combined income far above poverty level. Many of these folks are teenagers working in entry-level jobs. “A significant number of them have high-income parents.” Raising the minimum wage actually makes it more difficult for our lowest skilled people (including teenagers) to get jobs, since it makes those jobs more attractive to more experienced workers. Mind you, this doesn’t happen in every market, but it impacts those on the margins.
“The implications are especially profound for poor and inner-city black kids. Starting at a disadvantage, they have the most to gain from an introduction to the world of work skills. They also face the most predictably bleak future if they miss this foothold.”In other words, the people we aim to help by raising the minimum wage are actually hurt the most by the action. By mandating an increase in the minimum wage, we don’t help the broader poor and we don’t help the middle class, but we do hurt those that are most vulnerable. The WSJ Ed Board quotes University of Georgia and Cornell's Richard Burkhauser as saying, “What we are doing with a minimum-wage increase [is making sure] that for the folks who don't have the skills to be worth $7.25, they are not going to have a job.”
But, hey, it gives us a warm fuzzy. And this is what we call compassion?