Nothing reasonable about big jump in minimum wage: Guest commentary

Original Article:

  • Author: Michael Saltsman

  • Publication Date: March 2016

  • Newspaper: LA Daily News

  • Topics: Minimum Wage

In a recent guest commentary, Congresswoman Loretta Sanchez refers to California’s $15 minimum wage proposal as a “reasonable, measured approach.”

Let’s be clear: There’s nothing reasonable or measured about a 50 percent increase in entry-level labor costs. That much is clear when taking a closer look at the congresswoman’s arguments.

Sanchez begins by suggesting that paying a few more cents for your burger or fries will allow businesses to offset the cost of the wage increase. Voters have heard this bogus argument before: In the city of Oakland, for instance, labor union-aligned researchers claimed that a $12.25 minimum wage would cause restaurant prices to rise by just 2.5 percent. But the East Bay Express reported that many establishments were raising prices substantially — some by 20 percent or more.

These spectacularly bad estimates stem in part from flawed methodology. The Purdue study that Sanchez cites, for instance, makes a basic math mistake by confusing median values with mean (or average) values. As researcher James Sherk pointed out, this error helps “absorb” a majority of the projected cost increase — thus making it appear as though a $15 minimum wage is no big deal.

Sanchez continues her case for $15 by arguing that taxpayers will save money — billions of dollars, in fact — when the policy takes effect, by reducing spending on public support programs. The congresswoman is entitled to her own opinions, but this claim is simply untrue. Economists at San Diego State University examined 35 years of government data across a number of different data sets to explore the effects of past minimum wage increases on government assistance receipts. They find that, on net, minimum wage increases have little to no effect on spending on — or participation in — a range of social welfare programs. So much for that theory.

Sanchez concludes her argument by dismissing “doomsday” predictions from other California cities that have pursued higher minimum wage, including Oakland and San Francisco. As a native Californian, she should know better than to assume a city in the Bay Area is comparable with, say, El Centro — where even the median hourly wage is below $15, and the unemployment rate is a staggering 19 percent. More to the point, she’s clearly missed the headlines in those aforementioned Bay Area cities, where the harm of the higher wage continues to ripple out. In Oakland’s Chinatown, at least 10 businesses, including four restaurants and six grocery stores, closed down in part due to the wage hike. Multiple child care providers in the city were forced cut hours and employees. Across the Bay in San Francisco, restaurants like Abbot’s Cellar, Luna Park, Source, and Roosevelt Tamale Parlor have closed, citing the minimum wage as a factor.

Oh, and the restaurant prices in that high-wage paradise of San Francisco? The San Francisco Chronicle just reported that they’re up a shocking 52 percent in the last decade.

The University of New Hampshire Survey Center conducted a survey of labor economists last year regarding their opinions on this topic, and found that nearly three-quarters opposed a broad $15 mandate. Given the evidence, this shouldn’t come as a surprise. Before Congresswoman Sanchez takes another bold stand for $15, she might want to consult with economic experts rather than her political strategists.