Weak argument against raising the minimum wage

Tom Blackburn

Cox News Service, 1/16/07

WEST PALM BEACH, Fla. — The House passed a bill raising the minimum wage last week. If the Senate also approves, trade association lobbyists have told us what they think will happen.

Nobody actually is paid the minimum wage, they told us. Only high school students in their first jobs get the minimum wage. And most of them, according to the lobbyists, are from suburban families with BMWs. If the wage is raised, employers won't hire as many people for minimum-wage jobs, so the working poor will lose opportunities. If employers pay minimum wage, they will raise prices, so the poor people in the minimum-wage jobs will be worse off.

That can't all be true. The spiel is inconsistent from one sentence to another. If high school students are the only people with minimum-wage jobs, killing the jobs can't affect the working poor. Adding a weak argument to a weak argument doesn't strengthen a weak case. It puts a spotlight on the weakness in the first argument.

If what they are saying is true, raising the minimum wage should lead to more unemployment and more inflation. In fact, we have been raising the minimum wage, off and on, since Congress set it at 25 cents an hour in 1938. The same trade association lobbyists made the same dire predictions they make today in 1938. They repeat them every time the subject comes up. Not only has no one been able to show the ominous predictions coming true, there is some evidence that raising the minimum wage actually creates a few jobs through its (mildly) stimulating effect on the bottom of the economy.

The last time Congress raised the minimum wage, in two steps, was 1996 and 1997. What happened? The economy grew and created jobs faster than it has created them lately. That is not to say one caused the other. The minimum wage is too inconsequential to have that much effect. But if events had gone the other way, the lobbyists still would be shouting, "Told you so."

Why do they claim to believe what never has been true? As we have seen, one insurance company can raise most people's cost of living more in a morning than the whole minimum wage can raise it in a year. How much money does it take to hire someone to babble patent nonsense about the minimum wage on political talk shows? More than the minimum wage, you can bet.

You can find anecdotes about employers who won't be able to add jobs if they have to pay $6.55 an hour instead of $5.15. The Senate Finance Committee heard some of the stories last week, and the witnesses weren't necessarily lying. But in the overall scheme of things, their anecdotes are offset by the employers who need to add jobs to get the work out.

Paying ousted chief executive Bob Nardelli $210 million to just go away probably means that Home Depot won't be able to hire a few hundred people who would know what you need for your do-it-yourself home repairs, but the Finance Committee won't hold baleful hearings over that. There are hearings about the alleged effects on the economy when the poor get a raise, not when the rich get a windfall.

To an employer, people who will work for $6.55 all look pretty much alike. If the government doesn't negotiate for them, they have no leverage at all in the marketplace.

That is why civilized countries started setting minimum wages in the first place. Keeping such countries civilized is, however, another

matter, mostly political. Congress and the president have allowed the minimum wage to drift down to 31 percent of the average hourly wage in the private sector, the lowest it has been since 1949. The liberal Center on Budget and Policy Priorities computed that the minimum has been as high as 52 percent of the average, and it rose from 36 percent to 39 percent during that Clinton-era boom when it didn't cause the unemployment the business lobbyists are still assuring us will come if the wage rises.

There is a fact-based case for raising the minimum wage, but experience is enough. Every time Congress raises the minimum wage, business lobbyists say the sky will fall. Congress has passed seven raises since 1956. Step outside and look up. Case closed.

Tom Blackburn is a columnist for The Palm Beach Post.
Copyright 2007 Palm Beach Post