Affleck is ‘Dazed and Confused’ over Kennedy’s minimum-wage bill
Author: Craig Garthwaite
Publication Date: May 2004
Newspaper: The Hill
Topics: Minimum Wage
The clash over increasing the minimum wage has begun. In one corner stands noted labor economist Ben Affleck, whose credits include such films as “Dazed and Confused.” In the other, Federal Reserve Chairman Alan Greenspan.
In 2001, Greenspan told Congress that a minimum-wage increase would destroy jobs. The evidence on that, he said, is overwhelming. In the three intervening years, America has experienced a soft economy and has lost more than a million jobs. Yet Congress is poised to do just what Chairman Greenspan warned against — raise the minimum wage.
Affleck has joined Sen. Edward Kennedy (D-Mass.) in a high-profile push for a 36 percent minimum-wage increase. Republicans have countered with a 21 percent hike. Whatever the ultimate compromise, this triumph of election-year politics over sound public policy will inevitably result in job losses for those who lack the skills to match their new, mandated wage.
Kennedy first tried to attach his minimum-wage proposal to the reauthorization of welfare reform. The irony is that the minimum wage undermines welfare reform. A University of Wisconsin study revealed that welfare mothers in states that raised their minimum wages remained on public assistance 44 percent longer than those in states where the minimum wage was not raised. And research from the University of Chicago shows that for every extra year a mother spends on welfare, her daughter will spend an average of 274 additional days on welfare as an adult.
Following minimum-wage increases, employers often replace less-skilled employees with machines, or simply reduce the level of service to customers. Businesses automate their telephone receptions. Fast-food diners bus their own tables. Gas stations go self-service. Shoppers scan and bag their own groceries.
Employers also react to minimum wage hikes by replacing low-skilled adults with teenagers from high-income families, who are drawn into the job market by the better pay. Decades of research confirm what President Roosevelt’s Department of Labor found just one year after the minimum wage made its debut in 1938: “In a number of instances there have been reports that workers who had been receiving less than [the new minimum wage] had been laid off, and replaced by more efficient workers.” Studies from Cornell University and the University of Connecticut, for example, revealed that a 10 percent increase in the minimum wage — a fraction of even the Republican alternative — resulted in an 8.5 percent cut in employment for African-American young adults and teenagers.
Low-skilled adults who are terminated because of a minimum wage increase lose more than their salaries; they also forfeit their federal earned income tax credits. These programs pay up to $4,000 tax-free to those on low incomes — provided they have a job.
Perhaps more important, employees who are let go also lose the opportunity to improve their skills and raise their wages as a result. According to economists at Miami University of Ohio and Florida State University, two-thirds of employees making the minimum wage receive a pay increase sometime during their first year on the job. Over the course of that year, the median full-time minimum-wage employee got a 14 percent raise. These statistics give the lie to Kennedy’s classist view that entry-level employees are unable to earn a pay raise without a minimum-wage increase.
Sensible anti-poverty programs should provide the bulk of their benefits to the hard-working poor. But families living below the poverty line received just 17 percent of the benefits from the last minimum wage hike. Only a quarter of such increases go to the poorest fifth of families, while over a third goes to the richest two-fifths. “After all,” President Clinton’s first labor secretary, Robert Reich, admitted, “most minimum-wage workers aren’t poor.” Indeed, the average minimum-wage employee’s family income is over $43,000.
By increasing the minimum wage, Congress would raise the bar even higher for less-skilled employees and welfare recipients, who struggle to find work at the existing minimum wage. That would cause many more to exchange their paychecks for welfare checks — for as long as those benefits last.
After such flops as “Gigli” and “Paycheck,” perhaps Affleck should pay a little more attention to his own job and stop advocating policies that would destroy the jobs of those who need them the most.
Garthwaite is director of research at the Employment Policies Institute, a nonprofit research organization dedicated to studying public policy issues surrounding entry-level employment.