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March 3 2014

Minimum Wage Hits the Road

Patrice J. Lee

“No one who wants to work fulltime should have to raise their family in poverty” reads the White House’s website this morning. We all agree. If only the President was pushing job creation instead of job eradication.

The President is taking his bully pulpit to the states to promote his campaign to raise the minimum wage for American workers. This week he will travel to Vermont for a pep rally with Democratic governors from New England to tout their efforts in lining state minimum wage rates up with what he wants at the federal level.

If you remember, in his State of the Union Address President Obama called on Congress to raise the federal minimum wage from $7.25 to $10.10 per hour. He promptly followed up with an executive order raising hourly pay for some federal contractors. As he’s said, this will be a year of action and he won’t wait around for Congress.

The Hill reports:

Obama’s visit to the Nutmeg State will come a day after he releases his 2015 budget proposal, which will call for increased spending on manufacturing and early childhood education, in addition to the minimum wage hike to $10.10 an hour.

Three of the governors, Daniel Malloy (Conn.), Peter Shumlin (Vt.) and Lincoln Chafee (R.I.), touted their efforts to bring state minimum wages in line with Obama’s request during a conference call on Sunday organized by the White House.

Noting that governors in both parties had lost confidence in Congress’s ability to act, Chafee and Shumlin said there was talk at a White House meeting last week of states acting in concert to raise the minimum wage. In the past, some states have been reluctant to act out of fear that businesses would move to neighboring states where the minimum wage was lower.

In Connecticut, Malloy has called for raising the state minimum wage to $10.10 by 2017, and in Vermont, which already has the third-highest minimum wage in the nation, Shumlin is pushing for a similar target. The Vermont minimum wage this year is $8.73. Connecticut’s is $8.70, increasing to $9 an hour next year.

The President thinks he can win –and help Democrats win- on raising the minimum wage. So this effort is part of his strategy to shore up liberal bases, recover credibility lost in his Administration from sundry scandals and political boondoggles, and institutionalize policy changes that will live beyond his waning Presidency.

He can say that raising the minimum wage benefits more than 28 million workers, but that doesn’t account for how business will respond to a rise in labor costs. As we know, the Congressional Budget Office (CBO) has already predicted that raising the minimum wage could eliminate 500,000 jobs. The white House and Democrats are trying to discredit the CBO’s report, but you cannot discredit economic principle.

As this IWF policy paper explains, raising the minimum wage actually hurts those it purports to help by pricing their labor out of the market. When the cost of doing business rises, employers will figure out ways to adjust and they do so by reducing the number of workers, reducing hours worked, or passing those costs on to consumers. Any way you slice it, someone ends up more miserable, even if someone else is a little happier.

And just who gets hurt most? Young people and part-time workers. Almost two-thirds of workers earning minimum wage (64 percent) work part-time and more than half are between 16 and 24 years of age with nearly one-quarter (24 percent) between the ages 16 and 19.

Do you remember your first jobs in high school or college? In high school I was a receptionist’s assistant and I added barcodes to books for a private library. Neither of those positions was a full-time job and they did not pay much, but they were foundational to my career.

Focusing on boosting the minimum wage is a distraction from the Administration’s failure to reduce unemployment by creating jobs at all skill levels. The unemployment rate has fallen over the past moths only because discouraged workers dropped out of the job market.

At least 21 million people are sitting on the sidelines of the labor force unemployed, unable to find work and discouraged from looking. Raising minimum wage does nothing to get them back to work. The President would do well to turn his attention to them instead of putting on a show for supporters.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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