April 20, 2015--Minimum Wage

Republican candidates for the presidency are being asked about the minimum wage--whether they are in favor of raising it. This in the context of concern about inequality.

Even GOPers are taking note of widening disparities in income and saying we have to do something to help the middle class close the income gap. Basically what they recommend is cutting corporate taxes and taxes on job-creating high earners and getting government off the backs of small businesses so they can grow and then hire more people. In other words, 2015-style trickle-down economics.

Hillary Clinton and other Democrats for the most part see raising the minimum wage as one part of a strategy to reduce inequality.

There is a lot of demagoguery and made-up economic theory and data being flung around--mainly by conservatives--that are going substantially unchallenged by the press covering the various campaigns.

Jeb Bush, for example, campaigning in New Hampshire late last week, was clearly uncomfortable when asked by Kasie Hunt of MSNBC if he favored raising the minimum wage. In addition to claiming it's a issue for the states, not the federal government, he added that he personally is against it since it will cost jobs. Rather than being required to pay a few more dollars an hour companies will take their businesses overseas. Just how a McDonald's in Tulsa might do that he both wasn't pressed about.

Also unchallenged by Ms. Hunt was his claim that raising the minimum wage costs jobs and leads to more unemployment. There are challenging questions to ask about that, challenging questions derived from a myriad of studies that show doing so does not lead to loss of jobs. In many instances, the opposite. More motivated workers are generally more motivated and productive than those who feel underpaid and taken advantage of.

Before glancing at some of these studies, what is at issue in regard to the current situation?

The federal minimum wage as of July will be $7.25 an hour. (A number of states such as California and Massachusetts  pay more--$9.00.) This means that if someone works a 40-hour week, 50 weeks a year, her or his pretax income in July will be $290 a week or $14,500 a year. Far from enough to live with even a modicum of security or comfort.

The poverty rate, as a point of comparison, for a family of four is an annual income of $23,283. So working full-time at the July minimum wage will mean living considerably below the poverty line. Not impressive in a country with the strongest national economy in history.

The best study published in the Review of Economics and Statistics of the effects of raising the minimum wage is by a team of researchers from the University of Massachusetts Amherst, the University of North Carolina, and UC Berkeley, "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties." It closely analyzed 16 years of employment trends among various categories of low-wage workers in the retail and food services industries, where most minimum-wage workers are concentrated.

Key to the study was to track data from geographically adjacent counties where the wages were different to see if there was a migration of employment opportunities to the higher-wage sides of the borders and as a result an increase in the unemployment rate.

The study shows conclusively that increasing the minimum wage had no negative effects on high-wage employment, significantly increased the income of workers, and had no impact on unemployment rates.

There are many other studies that reach similar conclusions. So when candidates such as Jeb Bush claim the opposite to be true they should be confronted by the findings of studies of this kind and pressed to move beyond their factless talking points.