Thursday, August 10, 2017

‘Free lunches’ like the $15 minimum wage may hurt the people they’re meant to help

By Catherine Rampell. In The Washington Post. Excerpt: 
"Progressives generally support better labor protections"

"But lately, as Democratic leadership has increasingly embraced the far-left impulses of its base, I’ve become convinced that the left needs to think harder about the unintended consequences of such benevolent-seeming proposals.

In isolation, each of these policies has the potential to make workers more costly to hire. Cumulatively, they almost certainly do.

Which means that, unless carefully designed, a lefty “pro-labor” platform might actually encourage firms to hire less labor — or at least to shift toward contract labor that’s exempted from these cherished protections.

These are not mere hypotheticals. A two-tier labor market, in which some lucky workers are entitled to generous compensation and job security and the rest are hung out to dry, already plagues countries, such as France and Japan, with traditionally stronger labor protections than the United States.

But these are not outcomes that lefty politicians and policy wonks seem keen to grapple with. It’s easier, or perhaps more politically convenient, to assume that “pro-worker” policies never hurt the workers they’re intended to help.

Take the proposal to raise the federal minimum wage to $15 an hour, a policy endorsed in the Democratic Party’s new “Better Deal” platform.

An increase in the federal minimum wage, stuck at $7.25 for eight years, is long overdue. But more than doubling it would likely result in massive job losses and cuts in work hours.

We’ve already seen preliminary evidence that raising wages in Seattle to $13 has produced sharp cuts in hours, leaving low-wage workers with smaller paychecks. And that’s in a high-cost city. Imagine what would happen if Congress raised the minimum wage to $15 nationwide.

In West Virginia, the median hourly wage is just $14.79; in Arkansas, it’s $14.48; and in Mississippi, it’s a depressingly low $14.22. A $15 minimum wage could be binding on more than half of jobs in these states. In fact, in every state (not including D.C.), it could cover at least a quarter of positions.

That might seem like good thing. Why wouldn’t you want to improve the living standards of as many people as possible?

he answer: You won’t actually be helping them if making their labor much more expensive, much too quickly, results in their getting fired."
Related posts:

Alan Blinder, Economic Advisor To Democrats, Warns Against $15 Minimum Wage

Former Obama White House economist (Alan Krueger,): $15 minimum wage is a ‘risk not worth taking’

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