Building an Economy that Works for Everyone

Players and refs say minimum wage is a winner – but a few rich owners want a replay

By many accounts, the 2012 Super Bowl was a close game – but there’s still another big (political) football kicking around: the minimum wage. The players workers actually on the field job say it’s a clear winner – and so do the referees researchers who are closely watching the effect of this important rule. But a few rich owners are calling for a replay.

The Politics

On Wednesday, presidential hopeful Mitt Romney confirmed to the Associated Press his support for raising increasing the federal minimum wage automatically each year to keep up with the rising cost of living. (It’s currently fixed at $7.25 an hour, or about $15,000 a year for a full-time worker.) Newt Gingrich, now the GOP’s 2nd leading aspirant for the nation’s highest office, blasted that position on Meet the Press the following Sunday.

Romney’s position looks moderate – until you look at the stats. Tying today’s minimum wage to inflation would effectively pin a family of three under the poverty level. It’s just too little, too late. Regardless, the eventual Republican nominee will face a tough go on the issue against President Obama, who in 2008 endorsed raising the minimum wage to $9.50 in 2011 and then indexing it to inflation. (There’s still room for an even better rule: if the federal minimum had been indexed to the Consumer Price Index in 1968, it would be more than $10.30 today.)

Locally, Washington’s best-in-the-nation minimum wage was a big issue in the 2008 race for governor. In 2010, backed by a legal opinion issued by state AG Rob McKenna, it was the subject of an unsuccessful lawsuit by business groups seeking to block a 12-cent minimum-wage increase. But so far in 2012, neither McKenna nor Rep. Jay Inslee have had much to say on the issue – save for Inslee tweeting his approval of opposition to three Republican bills in the Washington legislature that proposed weakening the state’s minimum wage.

The Policy

The political debate centers on whether the minimum wage is good for jobs – which is an odd question for two reasons: 1) you’d be hard pressed to find any worker earning minimum wage now who thinks a pay cut will make their job better, and 2) in study after study, there’s no debate at all: higher minimum wages boost incomes without reducing employment or slowing job creation.

That’s true even for teens, who make up less than a quarter of low-wage workers directly affected by the minimum wage – but are often the poster children for proponents of a minimum wage cut. Today’s high teen unemployment is driven by the aftermath of the Great Recession and macroeconomic trends shaping the labor market, not by the minimum wage.

This and other research published over the past twenty years has largely discredited the studies generally relied on by those who support minimum wage cuts. Those studies failed to control for basic differences in population and job growth trends across regions of the country, like population migration from the Rust Belt to the Sun Belt. Control for that – by focusing on neighboring counties, which by their nature have similar economies) with different minimum wage rates – and any correlation between higher minimum wages and slower job growth vanishes.

Is Momentum Shifting?

It’s possible we’re watching a minimum wage increase move into the playoffs, if not the big game (a substantial federal increase plus indexing to inflation) quite yet.

Last Monday New York Assembly Speaker Sheldon Silver introduced a bill raise the state minimum wage to from $7.25 to $8.50 and then index it to inflation. Tuesday, Connecticut House Speaker Chris Donovan introduced a bill to raise the Connecticut minimum wage from $8.25 to $9.75 and then index it to inflation.  New Jersey Speaker Sheila Oliver is pushing legislation to raise the minimum wage to $8.50 and index it to inflation. Last week the Delaware Senate passed legislation to raise their state minimum wage from $7.25 to $8.25.

Similar proposals are already pending in Illinois, Massachusetts, Hawaii and California. Community members in Missouri and San Jose, California are gathering signatures to put measures to increase the minimum wage on the ballot in November. Eighteen states and the District of Columbia have raised their minimum wages higher than the federal level of $7.25 per hour.  Ten states have enacted measures to annually adjust their minimum wage to keep pace with the rising cost of living.

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