Dems should follow Bill Clinton’s lead on minimum wage hike

Original Article:

  • Author: Michael Saltsman & Samantha Summers

  • Publication Date: January 2019

  • Newspaper: The Hill

  • Topics: Living Wage

One of the Democrats’ top priorities in the new Congress is a $15 minimum wage — a 107-percent increase over the current standard. Before embracing a federal wage mandate for which there’s no historical precedent, party leaders should take a lesson from former President Bill Clinton.

Clinton was a champion of a higher minimum wage, and in 1996 he signed into law a 21-percent federal wage hike. (In today’s terms, this would be the equivalent of raising the minimum wage from $7.25 to roughly $8.75.)

Just two years later, Clinton was confronted with a second wage hike from the late Sen. Ted Kennedy (D-Mass.). This time, Kennedy envisioned raising the wage by roughly 40 percent. (This would be the equivalent of raising the minimum wage further to $12.25.)

Clinton wasn’t so quick to embrace this proposal. White House memos, subsequently made public, revealed that the president’s entire economic team thought a 40-percent increase would be “too aggressive” and “prove damaging to the employment prospects of low-skilled workers, as well as to the general macroeconomic performance of the economy.” The president took their advice and didn’t champion the Kennedy plan.

Clinton’s caution is relevant to our current situation. Similar to today, the economy was healthy; unemployment was at 4.6 percent and on its way down to the same levels we’re enjoying today.

The youth unemployment rate, which is typically higher than the overall unemployment rate, was holding steady below 14 percent. But even in this environment, Clinton and his Democratic economists understood that a sharp wage hike wasn’t wise.

Clinton’s thinking back then was guided in large part by Princeton economist Alan Krueger, who with his colleague David Card had released a study suggesting that employment in New Jersey had increased following a minimum wage hike.

Card and Krueger subsequently walked back that conclusion, after a follow-up study from another team of economists identified serious flaws in their underlying data.

But even Krueger, who chaired President Obama’s Council of Economic Advisers, penned a New York Times op-ed warning that a $15 minimum wage would “risk undesirable and unintended consequences.”

His skepticism has been mirrored by other Obama and Clinton economists. Harry Holzer of Georgetown called a $15 minimum wage “extremely risky” and Katherine Abraham of University of Maryland stated that she is “concerned” about its impact on employment.

This may be due to a complete lack of historical precedent for a minimum wage of this level. Adjusted for inflation, the minimum wage has been as high as $10.90 in 1968 and as low as $3.93 in 1948.

However, over its 80-year history, the average minimum wage has been roughly $7.40 an hour — only $0.15 more than its current rate, and nearly half of the proposed $15 figure.

Many localities that have embraced the $15 wage have already begun to experience the unintended consequences. In a study of over a dozen cities in the San Francisco Bay Area, researchers with Harvard Business School and Mathematica Policy Research noticed that each dollar increase in the minimum wage was associated with a 14-percent increase in closure rates for the typical 3.5-star rated restaurants.

In a new book published by our organization, economists from Miami and Trinity University estimate that up to 2 million jobs would be lost in 2020 should a $15 minimum wage be implemented.

Today’s Democrats would be wise to take advice from skeptics in their own party — not to mention the economic experts — and proceed with caution on a national $15 minimum wage.