The bogus backlash against Montgomery County’s minimum-wage report

Original Article:

  • Author: Michael Saltsman

  • Publication Date: August 2017

  • Newspaper: The Washington Post

  • Topics: Minimum Wage

A new report finding substantial job loss from a proposed $15 minimum wage in Montgomery County has drawn scorn rather than self-reflection from the policy’s supporters.

The backlash came primarily from the proposal’s champion, County Council member Marc Elrich (D-At Large), who was none too pleased to see a neutral third party identify the negative consequences. “It’s not a valid study,” he huffed in an interview with The Post. The Montgomery County report was conducted by Philadelphia-based consultancy PFM, which has performed work for both Democratic- and Republican-controlled states and other localities. PFM surveyed employers in the county to estimate their reactions should a $15 minimum be enacted. Based on these responses, PFM estimated that roughly 45,000 jobs would be lost in the county by 2022.

Every research design has potential flaws; in this case, some businesses surveyed by PFM might overstate the policy’s harm — just as union-commissioned surveys of employees might overstate complaints about working conditions. The consultancy gave a boost to its critics a few days ago when it informed the county it had inadvertently omitted some employer responses. In its forthcoming study revision, predicted job losses are expected to be closer to 20,000.

PFM’s original estimate of proposed job losses is high, but an impact this large is possible. A 2015 report, based on the work of the nonpartisan Congressional Budget Office, and economists at the University of California at San Diego, on the impact of a federal $15 minimum wage estimated job losses of 3.3 million to more than 16 million. A quick calculation suggests Montgomery County could shoulder roughly 11,000 to 56,000 of those lost jobs; PFM’s original estimate and its expected revision fall in this range.

 Given the lack of a historical precedent for a $15 minimum wage it, it’s not unreasonable to think that an extreme increase would lead to extreme consequences. But even if the consequences of the policy were half as large as PFM’s original study predicts, it would still leave thousands of employees worse off.

Don’t tell that to the fighters for $15. The Economic Policy Institute, the D.C.-based research arm of the country’s largest labor unions, seized on PFM’s decision to survey employers in a commentary now clutched by PFM’s critics. The institute researcher dismissed its findings because it was based on feedback from affected business owners.

His preferred methodology is based on zero feedback from employers — in fact, it’s based on little empirical evidence. Rather, the institute simply calculates the number of people who earn less than $15 an hour and assumes they’d all see a pay increase when the wage floor rose. Using this approach, a $25 or $50 minimum wage would appear to provide even greater benefits to the county and the country.

In the real world, new mandates carry costs and force employers to cut back on staffing when they can’t offset those costs through higher prices. Empirical research on minimum-wage experiments in Seattle and San Francisco finds that an even higher wage mandate leads to even larger consequences.

There’s a playbook for responding to studies that are critical of higher minimum wages, and advocates are following it page by page. In 2011, when then-New York Mayor Michael Bloomberg commissioned a study from a highly lauded research team, a union-backed advocacy coalition launched a public relations campaign to convince legislators that it was “fundamentally flawed.”

In 2014, when the CBO estimated that a $10.10 minimum wage would cost the country a half-million jobs, some of the same players marshaled PR efforts to falsely describe it as “an outlier that flies in the face of overwhelming empirical evidence.” And more recently in Seattle, when a city-funded research team produced a report that was critical of the city’s minimum-wage experiment, the mayor’s office and advocates for $15 worked to undermine it by requesting a less credible competing study. The same advocates who were active in New York in 2011 dismissed it as — you guessed it — “fundamentally flawed.”

Advocates for $15 aren’t interested in what the people who would pay for the policy have to say about it. That’s why Elrich reintroduced his $15 proposal, vetoed in January by County Executive Isiah Leggett (D), before the county’s impact study had even been released. In Seattle and San Francisco, advocates for $15 asked the public to take their word for it on the policy’s benefits; subsequent research has shown the folly of that decision.

Those debating PFM’s methodology shouldn’t lose focus on the well-documented consequences of a higher minimum wage.