The following editorial published on July 19 in the Orange County Register:
On Thursday, the House of Representatives voted to raise the national minimum wage to $15 an hour by 2025.
Given the realities of the U.S Senate and the White House, the vote for all practical purposes amounts to a mere political stunt.
But it does serve as a reminder that far too many in elected office are still all too willing to confuse their good intentions with sound public policy. Almost always, the well-intended politician resorts to a top-down government-coercion program, and almost always, the result falls hardest on those least able to endure it.
A recent Congressional Budget Office analysis offers plenty of data to dissuade even the most ardent backer of a higher minimum wage. It won’t, but the data are there.
The minimum wage law attacks the poorest and least skilled among us. It tells those people not to enter the labor market because their abilities are not worth the hourly wage they’d be paid. Efforts worth $7.25 an hour (the current federal minimum, since 2009) may be worthwhile to an employer. But more than double that wage, to $15 an hour, and the employer could well conclude the price is just too high.
Some of the people such a law is intended to help will live a little better, to be sure. CBO says 1.3 million people will be lifted out of poverty by raising the wage to $15 an hour.
But look at the debris it scatters. CBO says if the wage is raised to $15 an hour by 2025, as many as 3.7 million people who might otherwise have jobs will not be working. Presumably, some fraction of that number will fall into poverty.
All consumers will pay higher prices for goods and services, as much as businesses can pass along. Businesses will produce fewer goods and services because the cost of production will be higher. The law will cause businesses to look at alternatives, like robotics, to hiring people.
Worse still, real income would rise about $8 billion for families below the poverty threshold but will decrease about $16 billion for those above the poverty line. The net national result would be lower family income.
So in addition to all the other damage it causes, it’s an inefficient redistribution program dressed up as a labor issue. The bottom line is, for every $2 the government confiscates from those above the poverty line, it will generously redistribute $1 to the intended beneficiaries. That other dollar must cover a lot of overhead.
Now about a distraction in CBO’s data. The agency says 1.3 million people – not families, people – would be lifted out of poverty. But everywhere else in the analysis, CBO uses the term “family” as though most people who work in minimum-wage jobs are supporting whole families. Yet 94% of people from 16 to 19 are low-wage workers; 30% of those over 19 are. About 7 in 10 low-wage workers have not graduated from high school.
So essentially, we are talking about a redistribution law that would lower the aggregate family income, reduce the goods-and-services economy, raise costs for all consumers, kick millions out of the workforce and inefficiently distribute benefits to a targeted class consisting of a fraction of young people without high school diplomas.
Somehow, that’s not how it’s going to sound on the campaign commercial of the candidate bragging about “courageously standing up to big business.” And still the people who really do need help can’t get a job.