How Democrats’ “Better Deal” leaves American workers worse off

Original Article:

  • Author: Michael Saltsman

  • Publication Date: July 2017

  • Newspaper: The Hill

  • Topics: Minimum Wage

Congressional Democrats’ new “Better Deal” might be a poll-tested marketing slogan, but the policies behind it will leave many Americans worse off.

Need proof? Consider the centerpiece of Democrats’ wage-raising package: A 107 percent increase in the federal minimum wage to $15 — double the inflation-adjusted historical minimum wage of $7.40. This component of the plan mirrors Senator Bernie Sanders’ “Raise the Wage Act,” and also includes an unprecedented 604 percent increase in the base wage for tipped employees.

The inspiration for Democrats’ wage-raising proposal comes from the so-called Fight for $15, a campaign to organize the fast food industry funded by millions in union cash — over $90 million to date, according to one estimate based on government filings. After picking off some low-hanging fruit in liberal enclaves, the campaign has suffered recent setbacks in locales such as Cleveland, Baltimore, and Montgomery County (Md.) — as even left-of-center legislators take a close look at the policy’s consequences.

In Maine, thousands of tipped employees and a bipartisan coalition of legislators rallied to undo the kind of dramatic tipped wage hike that Democrats are now proposing nationally, when the affected servers pointed out that it would leave them with less take-home pay.

This isn’t just business owners and employees crying wolf. A Congressional Budget Office report from 2014, based on a review of 60 different minimum wage studies, showed that a federal minimum wage increase to $10.10 would kill 500,000 jobs. Policymakers interested in what happens at higher levels should consult the research from Seattle and San Francisco. For instance, a recent study from researchers at Harvard Business School and Mathematica found that in Nancy Pelosi’s Bay Area backyard, restaurants closures have accelerated as the mandated wage rate climbs higher.

Further north in Seattle, a city-funded research team at the University of Washington found that affected employees experienced a nine-percent drop in hours worked — leading to $125 less per month in take-home pay, on average. And in Sen. Chuck Schumer‘s home state of New York, government data show that restaurant growth has fallen off a cliff since the state began its minimum wage experiment. (The empirical evidence is backed up by hundreds of real stories.)

So much for that “better wages” component of Democrats’ “Better Deal.”

News media and policymakers with questions about the consequences of $15 are directed to comforting analyses from the Economic Policy Institute. The Institute is the research arm of Big Labor, and its board of directors includes the president of the labor union funding the Fight for $15. Its reports predict broad gains and very little pain from a $15 wage mandate — a conclusion at odds with the published research, not to mention the studied opinion of labor economists of all political stripes.

But the Institute’s credibility is ultimately undermined by its own words. In a recent marketing memo sent to supporters with the headline, “$15 minimum wage under attack,” the Institute’s president boasted that their work had “enabled” the success of $15. He even called their work the “special sauce” that helps support new wage mandates.

To extend his metaphor, the cities and states now experiencing the consequences of a new wage mandate, rather than the supposed benefits, may be left wondering, “Where’s the beef?”