Sunday, October 19, 2014

My Response To The Latest San Antonio Express-News Article In Favor Of Increasing The Minimum Wage

It is on the first page today of the opinion section. But I cannot find it at mysa.com. 

It was written by Shetal Vohra-Gupta, Research Scientist for the Institute of Urban Policy Research

So they have it at their site.


http://www.utexas.edu/know/2014/10/06/states-should-execute-their-state-power-and-raise-the-wage/
 
Several times in the last year they have favored an increase in the minimum wage yet have not printed one opposing article by an economist (they did print an excellent article by Thomas Nichta but I am not aware of any degrees in economics that he may have). You can read that here

http://www.mysanantonio.com/opinion/commentary/article/Focus-on-freedom-instead-of-minimum-wage-5056288.php

I submitted the following to them earlier today:


The Express-News continues to push for a higher minimum wage ("States Should Execute Their State Power and Raise the Wage," Oct. 19, by Shetal Vohra-Gupta).

Let's examine Dr. Vohra-Gupta's claims.

She mentions that 20 states have raised the minimum wage with good results. The idea is that a higher wage for the targeted workers will lead to more spending, spurring economic growth and leading to more jobs.

That report was challenged by two economics students from George Mason University, Liya Palagashvili and Rachel Mace, last August in The Wall Street Journal.

But Palagashvili and Mace say that this is just 2% of the workforce and it will therefore have an insignificant effect. That is a point that Christina Romer, Obama’s first chief economic advisor, has also made

Of the 3 states that raised the minimum wage the most, the job growth was lowest among all states that raised the rate.
 
Those three states, Connecticut, New Jersey and New York, had a lower rate of job growth than the 37 states that did not raise the rate. And “in New Jersey, the state that hiked minimum wage the most—to $8.25 an hour from $7.25—employment actually fell by about 0.56%.”

A statistical test showed there was no significant difference in job growth between the states that raised the minimum wage and those that did not. 9 of the 13 states simply adjusted their minimum wage for inflation, so the increases were very slight and not meaningful.

Texas simply goes by the federal minimum wage. Since December 2007 Texas has added 1.3 million jobs while all other states combined have 1.23 million fewer jobs. 

Dr. Vohra-Gupta also mentions that the Congressional Budget Office found a $10.10 minimum wage would lift some families out of poverty. Yet the CBO also found that it would reduce employment by 500,000. She did not mentions this.

Economist Richard V. Burkhauser of Cornell University has shown that "only 11.3% of workers who will gain from an increase in the federal minimum wage to $9.50 per hour live in poor households." So it is not even a good anti-poverty tool.

Dr. Vohra-Gupta acknowledges that a higher minimum wage will increase prices. Romer found that those higher prices hurt low income people.

Christina Romer has also pointed out that a higher minimum wage might force businesses to require job applicants to have experience. This means that the unskilled cannot get jobs.

What happens to them then? Research by economists Andrew Beauchamp and Stacey Chan of Boston College suggests that many of those workers turn to crime. Policies like minimum wage laws often have these unintended and unwanted consequences.

It is usually retail outlets and fast food restaurants that are affected by the law. Yet those are very competitive industries. Individual firms cannot afford to pay workers less than they are worth since those workers can always find other companies to work for. Again, this is a point made by Romer.

A minimum wage is paid for by either the customers, the firm (including any stock holders) or both. If you don't eat at McDonalds or own stock in McDonalds, you don't have to contribute to this government anti-poverty program. Ideally, we should all have to pay to fight poverty.

Dr. Vohra-Gupta mentions that worker turnover and absenteeism decline with higher wages. But if this is good for firms, the government does not have to force them into it.

Romer advocates expanding the Earned Income Tax Credit.

Workers need is a growing economy. In booming North Dakota, you can start at $17 per hour at the nation's busiest Wal-Mart.

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