Minimum Wage Increases: The Left s Magic Boat Strategy for Higher Wages Western Pallet Association Palm Springs, January 15, 2017
Compassionate Innumeracy The minimum wage debate is basically a fight between good intentions and common sense. Most Americans (unfortunately) support increases because they think higher wages are a nice idea. Though unions have a more narrow agenda cascading and competition.
A Simple Economics Lesson
Winning the Minds of Leftists Ask what share of workers will lose their jobs with a minimum wage of $1,000 per hour? Then $500 per hour? Then $100 per hour? Then $50 per hour? Lather, rinse, repeat.
Doesn t Win their Hearts Critics thought it was big news when the left-leaning Congressional Budget Office admitted a higher minimum wage would destroy 500,000 jobs. Leftists shrugged and said it was more important that millions of workers would get a pay increase.
Academic Evidence Doesn t Matter The clear majority of academic studies show that higher minimum wages hurt low-skilled workers. Neither the public nor policy makers care. In part because they can always cite studies on the other side. In part because nobody believes academics.
Impact of GOP Control? In theory, Republican control of House, Senate, and White House should kill any chance of a minimum wage hike. Maybe There was no minimum wage increase during Reagan s presidency. But GOP Congress in mid-1990s approved an increase.
Impact of Donald Trump? Trump has been all over the map. For a $10 minimum wage. For no change. For letting states decide. If Trump sells out, enough other GOPers will capitulate. Wild card: Andrew Puzder (Trump s pick for DoL) is very sound on issue.
Don t Ignore the States The left and unions are having considerable success with initiatives to mandate higher minimum wages. In 2016 Voters in Arizona, Colorado and Maine approved $12 wage mandate by 2020 Voters in Washington okayed $13.50 Expect more initiatives in 2018.
Other Considerations: Inequality The left is fixated on inequality. They think the economy is a fixed pie, so the rest of us are poorer because Bill Gates is rich. As such, they think a minimum wage hike is simply a way of letting lower income people have a bigger slice of the economic pie.
Other Considerations: Distribution Related to inequality, but this is really about long-run share of income to labor and capital. In recent years, income earned by capital has grown faster than income earned by labor. The left views this as a bad/sinister development and wants intervention.
Other Considerations: Culture Wars Identity politics is very important on the left. To the extent that women and minorities are over-represented among those earning the minimum wage, they view that as bad/sinister. They think government should enforce equality of outcomes.
Other Considerations: Keynesianism Proponents of Keynesian economics think that consumer spending drives the economy. They therefore believe that a higher minimum wage will boost growth since lower-income people have a higher propensity to consume. Perpetual motion machine economics.
Other Considerations: Monopsony Many people on the left think that employers have vast powers to dictate wages. Minimum wages therefore are needed to prevent a nation of wage slaves. But if employers have this power, why do 90 percent-plus of workers earn more than the minimum?
My Favorite Min Wage Cartoon
The Bottom Line Based on 2016 election, there shouldn t be a threat of a minimum wage hike. But Trump is a less-than-dependable wild card. States will continue boosting wage mandates. As Thomas Jefferson warned, Eternal vigilance is the price of liberty.
Conclusion Website: www.cato.org Blog: www.danieljmitchell.wordpress.com Policy videos: www.youtube.com/afq2007 Twitter: @danieljmitchell