My Response To John Patrick On The Minimum Wage

I submitted this to the San Antonio Express-News but it looks like it is not going to get in.

John Patrick, president of the Texas AFL-CIO, wants to raise the minimum wage ("This Labor Day, ponder an agenda for Texas Workers," Sept 6).

 

We all want good outcomes for workers. The question is which policies work and the minimum wage might not be a good one.

 

Patrick mentions "dignity in the workplace, solidarity with other workers looking to improve their lives." We will achieve that if wages go up for some workers.

 

But others either lose their jobs or won't get one in the first place since employers can't afford the higher wage (Patrick supports the "Fight for 15"). A Congressional Budget Office report estimated that a $10 minimum wage would cost 500,000 jobs.

 

What would $15 do? According to Brookings Institution Economist Harry J. Holzer, $15 is so far beyond anything we have studied in the past that a "reasonable guess is that the effects now will be much more negative."

 

Economist Mark Perry recently showed that although restaurant employment went up in Seattle and San Francisco after those cities passed $15 minimum wage laws, those increases were much less in than in previous years over the same months despite strong GDP growth in the second quarter of this year.

 

Also, $15 an hour works out to about $30,000 a year for a full-time worker. Not many employers are willing to hire high school graduates for that amount. Those young people will have a very hard time getting their first job.

 

Patrick also brings up the fact that many families in San Antonio struggle to make a living wage. But  Cornell University economist Richard V. Burkhauser found 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."

 

Patrick also said that "Texas has a harsh climate" for labor. Yet from December 2007 to October 2014 Texas added 1.3 million jobs while all other states combined to have 350,000 fewer jobs. And Texas has no minimum wage besides the federal one.

 

Yes, some are low wage jobs. But Trinity University economist David Macpherson found that "two of three workers who take minimum-wage jobs obtain better-paying jobs within a year because of the job experience they gain."

 

Even Christina Romer, Obama's first chief economic advisor, said the minimum wage "may harm the very people whom a minimum wage is supposed to help." This is due to higher prices being passed on to customers.

 

If businesses had monopoly power over workers, things would be different. But Romer says that our labor markets are largely competitive. So workers get paid what they are worth.

 

What about those workers who never get that first job from being priced out of the market? Boston College economists Andrew Beauchamp and Stacey Chan found that many of them turn to crime. Policies like minimum wage laws often have unintended and unwanted consequences.

 

As an anti-poverty policy, the minimum wage also is inequitable because it is paid for by the firms (lower profits) and customers (higher prices). They are the reason the job exists in the first place. If you never eat at McDonalds or own its stock, you don't have to pay for the policy.

 

The earned income tax credit might be a better anti-poverty policy. The cost gets spread over all citizens. That is something that both Romer and Greg Mankiw, one of George W. Bush's chief advisors, agree on. Seems like we should take them seriously.