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Minimum wage an issue of morality as well as economics



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According to a study released Tuesday by the Congressional Budget Office, gradually raising the minimum wage from $7.25 to $10.10 an hour by 2016 would cost the economy 500,000 jobs.

It would also provide enough additional earning power to lift 900,000 families above the federal poverty line, and increase earned income for 16.5 million workers.

Not surprisingly, opponents of increasing the minimum wage immediately seized on the job-loss number. “Raising the minimum wage could destroy as many as one million jobs, a devastating blow to the very people that need help most in this economy,” said Sen. Mitch McConnell.  “If and when Democrats try to push this irresponsible proposal, they should be prepared to explain why up to a million Americans should be kept from having a job.”

That "million jobs lost" number represents the CBO's worst-case projection. For obvious reasons, McConnell seized upon that and didn't mention the CBO's best-case assessment, which is that the minimum-wage increase would have negligible impact on job numbers.

The Obama White House, for equally obvious reasons, immediately challenged the mid-point projection of 500,000 lost jobs, claiming that the most recent economic research on the subject estimates minimal or no job loss from a minimum-wage increase.

So who's right? Maybe nobody. The answer is so muddled that even the CBO notes that it has merely a 66 percent confidence level that the jobs impact will be between its projected range of neglible and 1 million jobs lost. There's a 33 percent chance the policy could have an impact on either end of that range.

That uncertainty was also reflected in a survey of top economists by the University of Chicago's Booth School of Business last year. Asked whether an increase in the minimum wage to $9 an hour "would make it noticeably harder for low-skilled workers to find employment," 34 percent of the economists said yes, 32 percent said no and the rest said they didn't know.

Given all that, I'm willing to accept the CBO projection of 500,000 jobs loss as a reasonable, neighborhood guesstimate of the tradeoffs involved in raising the minimum wage. If we keep squabbling over that number, we never get to the more interesting and productive debate, so let's set it aside for the moment.

If the job-loss numbers are vague, the economic benefits are much more solid and easy to measure. In addition to raising 900,000 working families out of poverty and increasing the earnings of another 16.5 million low-wage workers, the CBO projects that the increase to $10.10 an hour would have the following effects:

-- Annual income for those below the poverty line -- that's $18,700 or less a year -- would increase by $5 billion a year.

-- For families with incomes of one to three times the poverty level -- that would be $18,700 to $56,100 for a family of three -- earned income would jump by $12 billion. Another $2 billion a year would accrue to households making $56,100 to $112,200.

-- Families above the $112,200 income level would see a decline in income of roughly $17 billion, or an average reduction of 0.4 percent.**

 Looking at the benefits and projected tradeoffs, I'm persuaded that raising the minimum wage is good policy. The economists polled by the Booth School came to that same conclusion. Although they disagreed on whether an increase would cause noticeable job losses, they were much more emphatic on whether it was "desirable policy." Forty-seven percent supported the increase as an overall benefit to the economy, while just 11 percent opposed it.

Let's look a little closer at why they may have come to that conclusion:

-- A low minimum wage represents a taxpayer subsidy of low-wage employers, because their workforce has to be supported through means such as food stamps, housing vouchers, Medicaid, the Earned Income Tax Credit and other programs funded by taxpayers. That's hardly a novel notion.  In a landmark 1937 case, the U.S. Supreme Court found minimum-wage laws constitutional in part because ,government has the right to prevent "the exploiting of workers at wages so low as to be insufficient to meet the bare cost of living."

"... (it) is not only detrimental to their health and wellbeing, but casts a direct burden for their support upon the community. What these workers lose in wages, the taxpayers are called upon to pay. The bare cost of living must be met."


-- It has become standard conservative theory that poverty is caused by a lack of incentive to work, rather than a lack of work itself. Raising the minimum wage from $7.25 to $10.10 an hour would significantly increase the incentive to work and also reward a work ethic. It addresses the problem through the private sector, through paychecks that are earned for actual labor, rather than through government support programs.

-- Assuming that the 500,000 job-loss projection is correct, it would represent a decline of 0.3 percent in the number of Americans working come 2016. Conceivably, we could take the opposite course and reduce the minimum wage or even eliminate it altogether, as some on the right suggest.

That might allow creation of more jobs, but at much lower pay, with many more people working jobs "insufficient to meet the bare cost of living," as the Supreme Court put it. And while some employers would find that kind of world more profitable, I'm not sure it's a place in which most of us would want to live, given the choice.

Among other things, it would confront us with a choice: Put an additional burden on taxpayers to subsidize a basic living for those workers, or simply allow a significant increase in abject poverty, even for those working full time. (Abolishing the minimum wage would also lower the pay of those who do not work for minimum wage, but whose pay is influenced by the minimum.)

Personally, in a country as prosperous as this one, I'm persuaded by the argument that someone who works full time ought to be able to support himself or herself. Even at $10.10 an hour, somebody working full time would barely make $20,000 a year.

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**The identity of those who earn the minimum wage is also a matter of considerable debate. As the CBO points out: "Minimum-wage workers are sometimes thought of primarily as teenagers from nonpoor families who are working part time, but that is not the case now. Of the 5.5 million workers who earned within 25 cents of the minimum wage in 2013, three-quarters were at least 20 years old and two-fifths worked full time."

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