The Pryor Times

February 21, 2014

Benefits of hiking minimum wage are an illusion

Taylor Armerding
CNHI News Service

Editor's note: CNHI newspapers that are not weekly subscribers to Taylor Armerding's column may publish this one if they notify him at t.armerding@verizon.net.

I don’t know anyone averse to making more money.

Sure, I have friends who demonstrate, through words and actions, that money is not the most important thing in their lives. But I haven’t seen one of them turn down a raise.

I wouldn’t, either. (That's just a gentle hint to any employer who wants to heed President Obama’s call to inject more money into the economy by giving some of it to me. I promise to spend it, not save it, because saving is what hurts everybody but the rich.)

Still, I have a hard time believing that if government once again invades the marketplace and declares that nobody can be paid less than $10, $12, $15 per hour – whatever – the economy will rebound, inequality will decline, employment will increase, and happy days, or at least happier ones, will be here again.

If only.

Yes, I’ve heard the pundits who say that putting more money into the pockets of the poor will juice the economy, since they’ll spend it right away, raising demand for products. Factories will ramp up inventories, more people will be hired, and the Great Recession will be a distant memory.

I’ve heard them declare with unshakeable confidence that it will increase the incentives for the unemployed to work because all of a sudden they will be able to make more by getting a job than by collecting government benefits.

I’ve been told that raising the entry cost of labor by 20 to 40 percent will have no impact – none – on hiring decisions or the number of hours that employees work.

In short, it will be like magic, having only positive effects and no unintended consequences.

Companies won’t notice a drain of $150 billion to $175 billion on their bottom lines, and they won’t try to offset it in ways that might hurt the poor. Hey, it might even allow taxes to be cut (try not to laugh at that one) because millions of people will no longer need government subsidies to pay for their food, rent, clothing and other basics.

I want to believe that it could be that simple. Just like I want to believe it when my “progressive” friends tell me that every dollar given to people in government benefits results in $1.70 in economic activity.

Hey, if that’s true, we should all quit working, start collecting benefits and watch the economy soar as we enjoy an endless paid vacation in which we buy products made by people in other countries, since nobody here is working.

But I can’t help but think about all the promises the president made when he was selling us on the $830 billion “stimulus.” Remember, it was going to keep unemployment at less than 8 percent and improve the nation’s infrastructure by funding thousands of “shovel-ready” projects.

Never mind. Sure, with the fifth anniversary of the stimulus just past, the president’s enablers claim it “created or saved” 6 million jobs. But even granting them that fantasy, that’s more than $138,000 spent per job.

Pay no attention to unemployment that was higher than 10 percent for four years, or the fruitless hunt for shovel-ready projects. Look over there at rampant inequality, which is the fault of successful people and former President George W. Bush!

Even the Congressional Budget Office estimates raising the minimum wage will reduce employment by 500,000 to 1 million.

I say this as someone who worked for next to nothing during my high school summers at a camp where I learned carpentry, sailing and cooking for 300 juveniles – and other intangible but invaluable skills like how to meet a deadline and supervise others.

I worked my college summers for electrical contractors and started out making minimum wage. As my productivity and skill increased, my pay increased. That’s the idea behind “entry level” wages.

That is also what happened when I started in journalism, with an “unpaid internship.” Then I got hired - for minimum wage. The publisher/owner fancied himself a liberal but ran his company like a right-wing zealot – something I supported then and support to this day because it was the way to keep the business afloat. I wasn’t so impressed with his rank hypocrisy.

But, again, as I learned the job, my pay increased, with no “minimum wage” pressure necessary. Without that entry-level pay, I might not have been hired in the first place.

A couple of other observations:

If the current minimum wage is so awful, why are millions of people still flocking to the United States from other countries – many of them illegally? I suspect it is because they know that they may start at minimum wage but won't have to stay there. If fewer of them are hired, because it is more expensive to hire them, is that a good thing? Do we want to be the land of less opportunity?

Also, if you’re suddenly making a few bucks more per hour but all the stores where you shop are more expensive because they have to pay their workers more, have you gained anything more than an illusion of increased wealth?

Raising the cost of labor will have consequences. Not all will be good for poor people.

Those who are selling a higher minimum wage owe both taxpayers and workers the whole truth. One of those truths is that the real minimum wage is zero.

Taylor Armerding is an independent columnist. Contact him at t.armerding@verizon.net