Moderating the harm from a higher minimum wage
Author: Michael Saltsman
Publication Date: May 2016
Newspaper: The Hill
Topics: Minimum Wage
Voters in several states, including Colorado, Washington, and Arizona, may face dramatic and irresponsible minimum wage initiatives on their ballots this fall. Understandably, the business community in these states and elsewhere has attempted to moderate the damage with competing proposals of their own.
Labor union-backed groups like the National Employment Law Project have feigned outrage at these efforts, writing most recently in Newsweek that they are “deceptive,” “bogus,” “tricks” and a “sham.” (They used that last word three times in the same piece–no points for originality.)
The real deception comes from organizations like NELP, which argue contrary to the best evidence that dramatic and unprecedented wage hikes will have no consequences for employees.
The playbook works like this: NELP cites a handful of outlying studies (sometimes funded by labor groups) to support the notion that past, smaller minimum wage hikes haven’t reduced job opportunities; then, it applies those minority conclusions to the unprecedented minimum wage proposals now being considered by city and state legislative bodies. I’ve witnessed this tactic first hand in minimum wage hearings in places like Kansas City, MO, and Trenton, NJ.
In reality, even small minimum wage increases have reduced employment for less-skilled employees, according to a summary of the economic literature published by the Federal Reserve Bank of San Francisco. Understandably, economists are wary of a new generation of minimum wage proposals that more than double the historical inflation-adjusted wage standard. A University of New Hampshire survey of U.S.-based labor economists finds that nearly three-quarters of respondents oppose a $15 minimum wage. And five-in-six respondents say that a $15 minimum wage would reduce job opportunities for young employees.
Even left-of-center economists, who have worked in the Clinton and Obama administrations and are on the record supporting more modest minimum wage increases, have come out against a broad $15 mandate. Former Obama adviser Katharine Abraham wrote that she is “concerned about what a $15 minimum nationwide would do to employment.” And former Clinton administration economist Harry Holzer called a $15 minimum wage “extremely risky.”
Residents of places that have already passed major minimum wage increases are experiencing the consequences of these experiments first hand. Numerous small businesses in West Coast cities like San Francisco, Oakland, and Seattle have been forced to reduce hours, lay off employees, or even close entirely because of the costs associated with significant local minimum wage increases.
In San Francisco, which passed a $15 minimum wage last year, trendy restaurants like Abbot’s Cellar, Source, Luna Park, and Roosevelt Tamale Parlor have closed their doors, citing the minimum wage increase as a determining factor. Across the Bay in Oakland, which raised its minimum wage to $12.25 last year, childcare providers in low income neighborhoods have been forced to reduce hours and shifts, and Chinatown restaurants and grocery stores have been forced to close.
These aren’t just anecdotes but part of broader trend that NELP willfully denies. (Additional stories can be found on Facesof15.com.)
NELP argues that voters “favor larger rather than smaller increases in minimum wages.” But this claim is not backed up by the polling data, which repeatedly finds that voters support more modest increases. In fact, Pew has found that only 11 percent of the public supports a $15 minimum wage compared to other, lower alternatives.
NELP offers another misleading talking point when it suggests that business owners support raising the minimum wage. But the surveys that support this narrative include businesses who aren’t affected by minimum wage increases and therefore have no incentive to oppose them. Surveys of business owners actually affected by wage hikes tell a different story. For instance, a Duke University poll of minimum wage paying firms finds that 75 percent of respondents would reduce job opportunities if a $15 minimum wage were passed.
NELP quotes Alice in Alice’s Adventures in Wonderland, writing that the tactics of those who admit the consequences of dramatic minimum increases are getting “curiouser and curiouser!” Not really. They are just offering small business owners and jobseekers a less destructive alternative. More apt — to borrow NELP’s allusion – minimum wage proponents’ tactics are becoming more like the Red Queen, who believes “six impossible things before breakfast.”