Joe Biden and the $15 Question

Original Article:

  • Author: Michael Saltsman

  • Publication Date: September 2015

  • Newspaper: Wall Street Journal

  • Topics: Minimum Wage

Vice President Joe Biden joined New York Gov. Andrew Cuomo at a media event in New York City on Thursday. They were there to celebrate the state’s newly minted $15 hourly minimum wage for fast-food restaurants, which will phase in over the next few years. Mr. Biden, who is weighing a run for the White House, seems to be courting organized labor just in case. Taking the stage, he praised the minimum wage as “smart” and “reasonable.”

Unions might cheer, but Mr. Biden may find less enthusiasm among some left-of-center economists. The $15 minimum wage could be too pricey even for them.

President Obama used his State of the Union address in 2013 to call for a 24% minimum wage increase to $9 an hour, up from $7.25. A year later he embraced the $10.10 wage level promoted by then-Congressmen Tom Harkin (D., Iowa) and George Miller (D., Calif.). This spring congressional Democrats raised their demand to $12 an hour with the “full and enthusiastic” support of the White House. Now the administration is applauding the $15 wage warriors.

This rapid escalation may have left some Obama allies feeling uneasy. In 2014 the White House touted a letter signed by economists who supported a $10.10 minimum wage. The list featured Cornell’s Ronald Ehrenberg, Georgetown’s Harry Holzer (a former Clinton appointee), and the University of Maryland’s Katharine Abraham (a former Obama adviser).

But when Bloomberg last month asked Ms. Abraham and Mr. Ehrenberg if they supported a $15 mandate, they said no. Ms. Abraham said she was “concerned about what a $15 minimum nationwide would do to employment.” Mr. Holzer, in a July opinion piece forFortune magazine, described a $15 minimum wage as “extremely risky.”

Arindrajit Dube, an economist at the University of Massachusetts Amherst, has published controversial research suggesting that past increases in the minimum wage have had a minimal effect on employment. His work has been cited by the White House andcongressional Democrats.

But $15 may be too much for Mr. Dube. In a 2014 paper for the Brookings Institution, he suggested that states could set “thoughtful” minimum-wage levels at half of the states’ full-time median wage. In a majority of states, this methodology produces a recommended wage level under $10 an hour. In no state does Mr. Dube’s recommendation rise to $15.

These prominent economists won’t deter unions from their quest to enact $15 wage floors around the county. But it should give pause to Democrats, presidential candidates in particular, who risk becoming unmoored from economic reality.