President Obama misleads on minimum wage in Milwaukee

Original Article:

  • Author: Michael Saltsman

  • Publication Date: September 2014

  • Newspaper: Milwaukee Journal Sentinel

  • Topics: Minimum Wage

President Barack Obama made a high-profile stop at Milwaukee’s annual LaborFest on Monday to push Congress to raise the minimum wage to $10.10 per hour. To critics concerned that the policy could hurt jobs, he pointed to 13 states that recently raised their minimum wages and still “had higher job growth than the states that didn’t raise the minimum wage.”

It’s not the first time the president has used this example, but it should be the last. It might work as a rhetorical device, but as economic evidence it’s so faulty that not even supporters of higher minimum wage will defend it.

Economists have been studying the minimum wage since at least the 1940s. The theory they’re testing, in a nutshell, is whether demand for employees earning at or near the minimum wage falls as the cost to hire them rises. That’s why young adults, for instance, are often the focus of research on the minimum wage—not because economists have a particular interest in their well-being, but because (according to the Bureau of Labor Statistics) half of the people who currently earn the federal minimum wage are between the ages of 16 and 24.

These young people, and their older counterparts who also earn the minimum wage, are needles in the 145 million-person haystack that is the United States’ employed workforce. (In 2013, just over 1% of this workforce earned exactly the federal minimum wage of $7.25.) Any analysis of the impact of a higher minimum wage that focused on too broad a measure (e.g. overall state job growth) would produce meaningless results, because changes in employment for minimum wage earners would be dwarfed by trends in the broader economy.

This fact is so uncontroversial that even the lead economist at the labor union-backed Center for Economic and Policy Research — the organization responsible for the president’s Milwaukee talking point — has affirmed it. In a widely cited paper released last year, he explained that “no researchers … believe that the minimum wage levels prevailing in the United States have had any impact on the overall level of employment.”

It’s like finding that states with a higher minimum wage have more carrot sales, or TV purchases – it’s a curious fact, but it also has nothing to do with whether or not a minimum wage increase hurts less-skilled job seekers. That’s why no serious economist in the minimum wage debate has actually made President Obama’s claim.

Of course, it’s easy to win an argument when you mischaracterize your opponents’ position, and that’s exactly what the president did in Milwaukee this week. By intimating that opponents of a higher minimum wage have predicted an overall decline in job growth following an increase, he created a “straw man” to knock over with his misleading talking point.

The facts tell a very different story. Roughly 85% of the careful, unbiased economic studies since the early 1990s confirm that a higher minimum wage does indeed have a negative employment impact on directly affected employees. Recently, a study from economist David Macpherson of Trinity University estimated that over 16,000 fewer Wisconsinites would have job should a $10.10 minimum wage become a reality.

To honestly judge whether or not a higher minimum wage impacts job growth for less-skilled employees, policy-makers and the public would do best to listen to the experts rather than the President’s election-year rallying cry.