Fresh off their recent report on Obamacare that predicted a decline in the workforce of 2.5 million (partially as a result of employer cutbacks, mostly as a result of people leaving jobs due to high effective marginal rates), the CBO today issued a report on the effect of raising the minimum wage.
Raising the U.S. minimum wage would lead to the loss of about half a million jobs by late 2016 but lift almost a million Americans out of poverty, the Congressional Budget Office forecast in a report on Tuesday that reignited debate over one of President Barack Obama’s top priorities this year.
Buoyed by polls showing three-quarters of Americans in favor of a minimum wage hike, Obama and his fellow Democrats advocate raising the minimum hourly wage to $10.10 from the current $7.25 in a move to boost the stagnant wages of millions of low-income workers.
In the long term, Democrats also want to tie future minimum wage increases to inflation, avoiding the legislative fights over wages for lower-paying jobs.
The political flacks at the White House and AFL-CIO are disputing this, claiming they know more about economics than the CBO does. In fact, much of the Left Wing has declared the debate on minimum wage and employment to be over. Last week, Bill Maher said the idea that raising the minimum wage cost jobs was completely discredited. This isn’t, of course, reflective of the view of any, you know, economists. The most they will argue — as Krugman has — is that the effect is small. But no honest economist will argue that the law of supply and demand is magically suspended when it comes to low-wage jobs.
In fact, the connection between the minimum wage and unemployment is so natural that one of the honest liberals, Matt Yglesias, had this to say:
If the White House genuinely believes that a hike to $10.10 would have zero negative impact on job creation, then the White House is probably proposing too low a number. The outcome that the CBO is forecasting—an outcome where you get a small amount of disemployment that’s vastly outweighed by the increase in income among low-wage families writ large—is the outcome that you want. If $10.10 an hour would raise incomes and cost zero jobs, then why not go up to $11 and raise incomes even more at the cost of a little bit of disemployment?
Yglesias is uncorking the argument many conservative have: if raising the minimum wage has “little to no impact” on unemployment, why not raise it to $20 or $50 an hour? If you can’t countenance such hikes, then you are implicitly admitting that raising the minimum wage costs jobs.
Anyone who is honest about the issue will admit that there’s a tradeoff: how many fewer workers are you willing to put up with for an increase in the wages of those still employed? I would argue, given the present labor market, that the number is zero; that we should, at minimum, hold off until the labor markets recover (if that ever happens). Of course, in a recovered labor market, wages will go up anyway because employees will be scarcer than jobs.
Supporters of the minimum wage like to point out that the low minimum wage means we are subsidizing jobs at places like Walmart, where some employees qualify for food stamps. This is circular logic, of course. Food stamps, Medicaid, EITC — these were expanded specifically to give access to the working poor. You can’t then turn around and complain that that more people are taking advantage of them when that was the entire point.
But setting that aside: isn’t having subsidized jobs for four million people better than having unsubsidized jobs for two million? Someone who has job — even it’s a bad one — has an opportunity to prove themselves, to advance, to aspire. But someone who doesn’t have a job has no opportunities and no hope.
We’ve seen this kind of snobbery before and we’ve seen it hurt poor people before. Building codes are designed to outlaw cheap apartments — and then we wonder why poor people can’t find anywhere to live. Health insurance regulations are designed to outlaw cheap insurance — and then we wonder why millions aren’t insured. And now we want to outlaw low-paying jobs. And then we’ll wonder why low-skill workers can’t find employment.
It’s easy for someone who already has a job to say that no one should have to take a job at Walmart for $7.25 an hour. It’s a lot harder to say that when you have no prospects and you’re falling further and further behind the rest of the country. For many people, that “bad” job can be a lifeline.
I sometimes think that Stephen Bainbridge is right when he says we are headed toward a society like Jerry Pournelle’s CoDominium where we have one group of citizens totally dependent on government and another who work. Only in our CoDominium, the welfare recipients get to vote.
We need to make sure everybody has skin in the game, not just the top few percent. Everybody ought to vote and everybody ought to pay taxes.
And everyone ought to work, too. Even it’s just part-time and pays a shit wage, no able-bodied adult should go through a week without putting at least a few hours into the grindstone (preferably around 40, but at least more than 0).
I’m somewhat supportive of programs that help the working poor — that give them the means to bring themselves up out of poverty. The minimum wage is not that. It benefits some working poor while putting other completely out of work at a time when jobs are very very hard to come by.
Making progress easier for low-wage workers is one thing — we’ve talked about the guaranteed income and negative income tax proposals circulating around. But throwing 500,000 more people into the jobless hopeless class is just a recipe for disaster.
The numbers are in. And it’s time to shelve this bad idea.