With frightened Republicans scattering like bunny rabbits at the sound of distant thunder, a job-killing minimum-wage increase is probably inevitable. Only 63 House Republicans voted to maintain the budgetary discipline that prevented President Obama from breaking the budget into even tinier pieces. The early, unconditional surrender in the House sends a message that these congressmen will throw good policy overboard at the first sign their re-election could be imperiled. The Republican cynicism stands proud and naked. It’s enough to make a speaker cry.
With a bully pulpit backed up by friends in the media, the president owns the agenda in Washington. If he can fool Republicans into voting for a tax and spending increase in return for gossamer spending reductions to take place someday, maybe in a future decade when many of the congressmen voting for it will be dead, anyway, there’s no limit to what he can do.
Taking his case to Twitter, Mr. Obama said: “Here’s how to improve our economy and create hundreds of thousands of jobs: Raise the wage.” He claimed a $2.85 increase in the federal minimum would create $32.6 billion in new wealth and 140,000 new jobs. If mandating salary increases is what it takes to create wealth, why not raise the minimum wage to $28.50 and create 1,400,000 new jobs?
It’s a nonsensical proposition because governments don’t create wealth but merely move it from one place to another. The extra $2.85 that goes into someone’s paycheck doesn’t fall out of of thin air. It comes from a business that will have less capital available to hire new employees. Small businesses won’t be able to expand, and many will dismiss existing workers or cut hours and benefits for everyone to survive.
Most economists realize this is what happens in the real world, but politicians ignorant of basic economics use a minimum-wage increase as a wedge issue to draw support from low-income voters. Proponents such as Christine L. Owens, executive director of the National Employment Law Project, argue that one of the “best ways to get the economy going again is to put money in the pockets of people who work,” and the way to do it is to create a higher minimum wage. The money that goes into one person’s pocket must be taken from someone else’s pocket.
The underemployed, especially minority youth, find this out when they look for work. When government makes it 39 percent more expensive to fill the entry-level positions that give teenagers their first shot at becoming productive and prosperous, those are the first positions to go. Instead of finding jobs this summer, 16.3 percent of youth found themselves idle. Among young blacks, the unemployment rate was 28.2 percent.
There may be more than mere populist politicking behind the president’s latest big idea. The unions, which don’t have to make a business work, are the No. 1 advocates of raising the minimum wage. There’s a simple reason for this. Buried in many union contracts are provisions that peg negotiated wages to the minimum wage. The collective-bargaining agreement with one particular union states that “whenever the federal legal minimum wage is increased, minimum wages … under this Agreement shall be increased so that each will be at least fifteen percent higher than such legal minimum wage.” The poorest may lose a chance to put money in their pockets, but union bosses won’t.
That might sound like a good deal to the president, but those struggling to survive his mangled economy know better. Republicans must man up when the administration increases the pressure for raising the minimum wage early in the new year. It’s a small hope, but it’s all we’ve got.