The Last Thing We Should Do Right Now Is Raise The Minimum Wage

The Last Thing We Should Do Right Now Is Raise The Minimum Wage

Our economy's urgent moral crisis is not insufficient returns from full-time work. It is insufficient access to full-time work.
Andrew Quinn
By

Scattered across the country, a group of Democrats are locked in competitive battles for seats in the U.S. Senate. We might forgive them for feeling uneasy.

After all, public esteem for President Obama, the leader of their party, is cratering. Some prominent media voices and independent voters seem to be tiring of the “war on women” cliché sooner than their strategists had hoped. According to recent polling, more Americans trust Republicans to handle the economy, federal spending, jobs, taxes, foreign policy, and immigration than trust Democrats. And the empirical evidence suggests these unfavorable dynamics are coming home to roost: The web journalists most respected for statistical analysis agree their party is likelier to surrender its Senate majority than retain it.

At this point, the content of these Democrats’ policy platforms is not among their chief concerns. Reporters and the voting public are entranced by meta-memes and horserace trivia that bear little relationship to substantive policy. This is utterly predictable, of course, but it is still a shame. And even if the candidates were fretting over their substantive proposals, they would be probably wondering whether they wagered the wrong way on hot-button issues like Obamacare or the Keystone pipeline. The last stance they would expect to give them trouble is raising the minimum wage.

Democrats committed to this policy early in the election cycle. Except a few candidates running in the most red-tinted of purple states, nearly all their Senate nominees vocally support it. That’s no surprise: the party deliberately chose the minimum wage terrain as the spot to make its ostensibly populist stand. This was probably an astute political decision. This spring, Pew reported that fully 50 percent of voters said they would be “more likely” to vote for a candidate who called for a minimum wage hike; only 19 percent said “less likely.” In a separate survey, 73percent of respondents backed raising the federal minimum to $10.10.

So a minimum-wage hike would seem to be a popular policy. That does not make it a prudent policy. To borrow Pope Benedict’s pithy phrase, “Truth is not determined by majority vote.”

The Minimum Wage Hardly Helps The Neediest Workers

To the extent that the American economy has “recovered” under President Obama, it has recovered almost exclusively for rich people. This is true for the economy as a whole, and it is especially true for the labor market. By 2011, unemployment rates for the wealthiest Americans had already bounced back to full employment levels of 3-4 percent. Meanwhile, the lowest-earning Americans still faced a 25 percent unemployment rate that rivaled the worst of the Great Depression. According to the researchers who tabulated those statistics, “the highly regressive nature” of the labor market’s recovery is “unprecedented in recent experience.”

To the extent that the American economy has ‘recovered’ under President Obama, it has recovered almost exclusively for rich people.

People with little wealth, few skills, and little education are trapped in a uniquely fruitless labor market. This matters a great deal. Having the opportunity to work is a singularly important ingredient in a human life. Notwithstanding the constant talk about “the working poor,” only 2.7 percent of people who work full-time, year-round wind up living in poverty.

Think about that statistic. If as many Americans work full-time for the minimum wage as Democrats seem to suggest, then apparently it is a sufficient wage to keep people out of technical poverty. Alternatively, if the minimum wage really isn’t enough to keep families out of poverty, then it follows that very few people who work full-time earn the minimum. Whichever story is true, jacking up the minimum wage is a really ineffective way to reach those who are struggling to stay afloat. And sure enough, the best research finds that only 11 percent of the workers who would benefit from a minimum wage increase live in poor households. (Nearly two-thirds would be second or third earners from comparatively well-to-do families.)

So the urgent moral crisis in today’s economy is not insufficient returns from full-time work. It is insufficient access to full-time work. This is financially accurate for the reasons just spelled out, but the reality runs deeper than money. Add in the well-documented psychological costs of unemployment and the unique economic scarring that comes with lengthy spells of joblessness, and you have a nice, neat recipe for a full-bore human tragedy.

It is undoubtedly true that millions of Americans who do work full-time are having trouble making ends meet. We can and should implement economic reforms designed to boost their wages and lower their costs of living. But it would be wrong to advance that goal at the expense of the millions of our neighbors who have it even worse: those who are unemployed, can only find part-time employment, and have lost hope and fled the labor force entirely. We need to get these suffering people off the sidelines. Reintegrating them into the economy must be our top priority.

Raising the minimum wage would make that task even more difficult.

Minimum Wage Hikes Reduce Job Opportunities for the Vulnerable

Nobody opposes pay raises for hardworking people. But those raises should not come by legislative fiat if the policy would victimize those who have it even harder. Unfortunately, that’s exactly what a minimum-wage hike would do.

If you support raising the minimum wage, you support reducing the number of job opportunities for unemployed people in order to give presently employed people a raise.

Making workers slightly more expensive to hire brings pay raises to the people who keep their jobs in exchange for slightly reducing the number of such jobs available. Rooting for minimum-wage hikes means you think that X layoffs plus Y hypothetical job openings that will never come into existence are worthy price for Z people getting a raise.

Now, economists dispute the relative sizes of these variables. Left-leaning scholars say that X is way smaller than Republicans claim; most center-right economists feel that Democrats understate the values of X and Y. To my reading, the best research suggests the reduction in job opportunities would be larger than progressives want to believe. But the literature is admittedly mixed.

But while academics argue about the magnitude of this tradeoff, no mainstream voices deny that the tradeoff exists. So let us have clarity. If you support raising the minimum wage, you support reducing the number of job opportunities for unemployed people in order to give presently employed people a raise.

Given the current economic climate, do you think that is an ethically defensible position?

If You Want to Redistribute, There Are Far Better Ways

You don’t have to oppose redistribution to see the Democrats’ minimum-wage proposal for the morally dubious proposition it is. Even if you believe that government should transfer more resources to people at the bottom of the income distribution, you can still believe that hiking the minimum wage right now is a terrible idea, for the reasons outlined above.

The last five years’ non-recovery and our abysmally unequal public schools have hammered low-income Americans. Making it more expensive to hire them would be wrong.

If citizens and their elected officials decide we should use government to inflate low-skilled workers’ take-home pay, that is a social goal. Instead of pretending corporations are doing something wrong when they hire labor at the going rate, we should own up to that social judgment and bring it to fruition as a society. By expanding the Earned Income Tax Credit—a policy leaders in both parties favor—government adds to the wages that workers earn after the fact, without distorting the labor market. Where a minimum-wage hike would price vulnerable people out of job opportunities and encouraging automation, the EITC boosts workers’ pay without making them artificially expensive to employ.

Some policy wonks from across the political spectrum prefer a new policy of direct wage subsidies to an EITC expansion. As a philosophical conservative, I am much more skeptical about opening a brand-new, untested avenue for flowing out public largesse. If I were convinced that we should increase net redistribution, the EITC would be my policy lever of choice. But whether you’re a die-hard leftist who thinks poor people deserve much more of wealthy people’s money than they’re getting, a libertarian right-winger who feels we should curtail redistribution dramatically, or a moderate voter who is simply interested in policies that do the most good and the least harm, we should all be able to agree that we should not raise the minimum wage.

The last five years’ non-recovery and our abysmally unequal public schools have hammered low-income Americans. Making it more expensive to hire them would be wrong. Proposing this under the guise of pro-poor advocacy is doubly wrong.

Desperate Senate Democrats are agitating for a higher minimum wage because the argument helps their own job prospects. But the policy they’re proposing would do just the opposite for the most vulnerable people in this country. Talk about unethical tradeoffs.

Follow Andrew on Twitter, @AndrewCQuinn.

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