By Michael Tanner
Wednesday, April 22, 2015
Last week, while most Americans were scrambling to make
sure that their taxes were paid on time, protesters across the country took to
the streets to demand that the minimum wage be increased to $15 an hour. The
protests — which featured fast-food workers, Walmart employees, home-care
workers, and a truly oppressed group: adjunct college professors — took place
in some 350 cities and received widespread media attention.
There is no doubt that the protests resonate with the
American public. Voters might not be quite ready for a $15-an-hour minimum
wage, but, according to a Pew poll from last year, they support an increase in
the base wage by a 73-to-25 percent margin. In 2014, even as Republicans swept
to victory in Congress, voters in such deep-red states as Alaska, Arkansas,
Nebraska, and South Dakota raised their state minimum wages.
Yet, at the same time, the evidence continues to build
that, on this issue at least, the voters are wrong.
Anecdotal evidence has started to trickle in from Seattle
and San Francisco, both of which voted to raise their minimum wages to $15.
Both cities have seen an unusual increase in the number of restaurants going
out of business since the hike, although it is extremely hard to link the
closings directly to the new minimum wage, which hasn’t yet been fully phased
in. It is likely still too early to tell.
Still, a survey of Seattle-area small businesses did find
that 42 percent of surveyed employers were “very likely” to reduce the number
of employees per shift or overall staffing levels as a direct consequence of
the law. Similarly, 44 percent reported that they were “very likely” to scale
back on employees’ hours to help offset the increased cost of the law. There
has also been a sharp fall-off in the number of firms seeking a business
license in the city that has roughly corresponded with the passage of the
minimum-wage hike.
Better evidence comes from a Government Accountability
Office report on minimum-wage hikes in American Samoa. Three 50-cent hikes in
the territory’s minimum wage since 2007 have been followed by an 11 percent
decrease in overall employment. Employers, especially in the important
tuna-canning industry, attributed cutbacks directly to the increased minimum
wage.
If that’s not enough, the body of economic literature
showing the relationship between an increase in the minimum wage and job loss
continues to pile up. For instance, a National Bureau of Economic Research working
paper by Jonathan Meer and Jeremy West found that, while we may not see an
immediate hit from raising the minimum wage, “minimum wage reduces job growth
over a period of several years. These effects are most pronounced for younger
workers and in industries with a higher proportion of low-wage workers.”
We also know that the type of minimum-wage earner
highlighted by the protesters, struggling to support a family on $7.25 an hour,
is the exception, not the rule. Fewer than 5 percent of minimum-wage earners
are adults working full-time trying to support a family. Minimum-wage earners
might not be college kids earning summer beer money anymore, but neither are
they hard-pressed single parents. In fact, the average family income for a
minimum-wage worker is $53,000/year.
We also know that few workers earn the minimum wage for
long. Of those starting a job at minimum wage, two-thirds will be earning a
higher wage within a year.
But it’s not just that a minimum-wage hike is an
inefficient way to raise wages for the poor. A hike may actually hurt the very
people it’s designed to help. A study by Jeffrey Clemens and Michael Wither of
the University of California, San Diego, found that large minimum-wage hikes
reduced employment, average income, and the economic mobility of low-skilled
workers. Most troubling, low-skilled workers affected by minimum-wage increases
were 5 percentage points less likely than other low-wage workers to reach
lower-middle-class earnings over the medium term, meaning that raising the minimum
wage could actually block the road to the middle class for some workers.
All of this poses a problem for GOP candidates. So far,
among presidential candidates or near-candidates, only Rick Santorum supports
an increase in the minimum wage. Bobby Jindal has said he is not “ideologically
opposed” to raising the federal minimum wage, but he opposes doing so now,
while the economy is weak. Marco Rubio’s position is similar, saying that he is
not opposed to the minimum wage conceptually but opposes proposed increases.
Most of the other leading candidates, including Ted Cruz, have also come out
against any increase, although only Rick Perry and, surprisingly, Jeb Bush,
called for eliminating the federal minimum wage altogether. Bush takes a
federalist approach, saying that he would let each state set its minimum,
although he would prefer to “leave it to the private sector.” Rand Paul could
also be put in that camp. He has not explicitly advocated repeal but says that
setting wages “is none of the government’s business.” Scott Walker, on the
other hand, has said that while he thinks the minimum wage “serves no purpose,”
he would not repeal it.
With Hillary Clinton firmly in favor of a minimum-wage
hike, the eventual Republican nominee is going to have to find a way to marry
good policy with what might be bad politics. Whether candidates can stick to
the right position even when voters lean the other way, and whether they can
explain their reasons why, will be a good test for GOP primary voters.
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