Wednesday, May 11, 2016

Issues 2016: Minimum Wage

The minimum wage will probably be a big issue in this year’s presidential campaign. Increasing the minimum wage is so popular that Democrats from Hillary Clinton on down will use the issue like a sledgehammer to beat down Republican opposition. Already Donald Trump, the Republican presumptive nominee, has admitted that he doesn’t see how anyone can live on the current Federal minimum wage of $7.25 an hour. He would only leave it to the 50 states to set their own minimum wage level.

In the campaign it will do no good for economists or journalists to point out that increases in the minimum wage will cause many low-income employees to lose their jobs, and find that their wage reduced to zero. Just this day in trying to deal with an issue about the delivery of our Wall St. Journal, we discovered that the phone representative was in Manila.

Nor will it do any good to point out that most people who earn the minimum wage are not just living on the minimum. Often the minimum wage earner is not the sole support of a family. Often, their wages are supplemented by employee benefits or government subsidies and tax credits. Any such arguments will be drowned by placard waving protestors.

Donald Trump doesn’t need any help from me but I would suggest that he ask the progressives who support doubling the minimum wage to $15 an hour to pay for it themselves in the same way that he wants the Mexican government to pay for the Wall on the border.

He could ask university professors to reduce their salaries in order to increase the wages of the miserably underpaid “adjunct” instructors or graduate assistants that universities hire to save money. He could ask university students to pay increased fees in order to raise the salaries of the cafeteria ladies. He could even ask so-called public service employees to take a cut in pay in order to raise the minimum wage for the people they serve.

Of course, all of the above would be met with the greatest resistance. When progressives call for increases in the minimum wage, they always expect and want someone else to bear the cost. The professors and the students can be excused for their innocence, but the unions have a baser reason for supporting increasing the minimum wage.

Suppose you were running a small business and you hired a high school or college student to do basic office work like filing papers. Suppose you even started the student at $10 an hour, 40% more than the minimum. You might have other employees in the office making $20 an hour. What would these employees think if you had to raise the student’s pay to $15 an hour? Wouldn’t you have to raise their pay to $30 an hour because the work they were doing was twice as valuable as the student’s?

Actually, this is the reason why unions are big supporters of increases in the minimum wage. Union employees all earn more than the minimum wage but every time the minimum is raised, they insist on, and usually get, corresponding increases in their own pay scales. They could care less about people who are actually earning the minimum wage. They even care little about their own members who are at the bottom of the wage scale. Rather than cut their own pay or benefits, they will normally acquiesce in the layoff of younger, recently hired union members when times get tough.

This scenario is being played out right now in my own state of Connecticut. Once again the State is facing a massive budget deficit but the Democrat governor and legislature are in bed with the public service unions. The State faces cutbacks in public spending as well as layoffs of largely lower salaried employees. At the same time, there is no growth in private sector jobs as companies like General Electric have chosen to leave the State. Currently, the State is ranked as one of the least attractive for business in the country. One of the reasons could be that the State has a minimum wage level higher than the Federal level. At $9.60 an hour it is 30% higher than the Federal level, and scheduled to go even higher.


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