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June 21, 2006

Seeing the Narrative

-- by Dave Johnson

Senate rejects bid to raise minimum wage

The Republican-controlled Senate refused Wednesday to raise the minimum wage, rejecting an election-year proposal from Democrats for the first increase in nearly a decade.

... Republican critics said the minimum wage was a job killer, not the boon to low-wage workers portrayed by Democrats.

See the narrative: The Democrats only offered the proposal as an election-year tactic, the Republicans opposed it on principal.

Fact: The Democrats offer this every year, and the Repubicans always block it. Fact: Jobs INCREASE every time the minimum wage is increased because we live in a consumer economy and more people with more money to spend increases activity. Fact: No one employs more people than they need to employ, so a small increase in wages does not cause layoffs - as the results of minimum wage increases have ALWAYS shown.

Posted by Dave Johnson at June 21, 2006 12:23 PM

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Tracked on June 21, 2006 6:19 PM


Comments

Out in the real world, facts are substantiated with evidence. In an economy as dynamic as ours, I'd like to see the evidence that purports to tie job increases to a small increase at the bottom of the wage scale.

If you think nobody hires more people than they need, you should drop by the Department of Agriculture someday. Last time I was there, a fellow was loudly sobbing at his desk. I asked him what was wrong, and he said "My farmer died".

Posted by: HappyOD [TypeKey Profile Page] at June 21, 2006 2:41 PM

Economic Policy Institute, troll:
http://www.epinet.org/content.cfm/issueguides_minwage_minwagefaq

EXCERPTS:
A 1998 EPI study failed to find any systematic, significant job loss associated with the 1996-97 minimum wage increase. In fact, following the most recent increase in the minimum wage in 1996-97, the low-wage labor market performed better than it had in decades (e.g., lower unemployment rates, increased average hourly wages, increased family income, decreased poverty rates). Studies of the 1990-91 federal minimum wage increase, as well as to studies by David Card and Alan Krueger of several state minimum wage increases, also found no measurable negative impact on employment. Finally, a recent Fiscal Policy Institute (FPI) study of state minimum wages found no evidence of negative employment effects on small businesses.

New economic models that look specifically at low-wage labor markets help explain why there is little evidence of job loss associated with minimum wage increases. These models recognize that employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.

---

In the past, the minimum wage has been limited in its effects on poverty because many poor families did not have any family members in the paid labor force. However, as welfare reform forces more poor families to rely on their earnings from low-paying jobs, a minimum wage increase is likely to have a greater impact on reducing poverty.

The minimum wage has already proven helpful to former welfare recipients who are entering the workforce. A study of a 1999 state minimum wage increase in Oregon found that as many as one-half of the welfare recipients entering the workforce in 1998 were likely to have received a raise due to the increase. After the increase, the real hourly starting wages for former welfare recipients rose to $7.23.

Another study found that federal minimum wage increases in the 1990s have reduced poverty rates (Addison and Blackburn 1999). Yet another study found that a minimum wage increase from $5.15 to $6.15 would lift nearly 900,000 people out of poverty (Sawhill and Thomas, 2001).

In addition, the minimum wage raises the wages of low-income workers in general, not just those below the official poverty line. Many families move in and out of poverty, and near-poor families are also important beneficiaries of minimum wage increases.

However, it is also important to keep in mind that while the minimum wage is a crucial tool in the effort to end poverty, it is only one part of a larger anti-poverty strategy.

-----------

Oregon raises minimum wage, sees 9th fastest job growth among 50 states in 2003: http://www.ocpp.org/cgi-bin/display.cgi?page=nr051230minwage

Measure 25, adopted by voters in 2002, increased Oregon’s minimum wage to $6.90 on January 1, 2003 and established annual adjustments based on official cost-of-living calculations. On New Year’s Day, the annual adjustment will push the minimum wage to $7.50 an hour, up from $7.25 this year. At $7.50 per hour a full-time worker will gross $15,600 over the course of the year, or $1,300 a month.

“Contrary to the doomsday predictions of minimum wage opponents, Oregon’s annual cost-of-living adjustments in the minimum wage have been compatible with solid job growth,” said Leachman.

According to the OCPP, Oregon added 91,500 jobs between January 2003, when the minimum wage was first increased following voter approval of Measure 25, and November 2005, the latest data available. Oregon’s percentage growth in jobs over this period is the nation’s ninth fastest.

OCPP analysis also indicates that restaurants and farms have seen particularly rapid job growth since the passage of Measure 25. Restaurants and farms each have lobbying associations that have been outspoken critics of the annual inflation adjustments in the minimum wage and both industries have large concentrations of minimum wage workers.

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Fiscal Policy Institute:
http://www.fiscalpolicy.org/press_040421.stm

The overall conclusion of this analysis is that since 1997, employment growth (all nonfarm employment and retail employment) in states with a higher minimum wage than the federal minimum has performed at least as favorably as in states where the $5.15 federal minimum prevails. That is, state minimum wages higher than the federal minimum wages have not adversely affect employment growth over the past few years. This conclusion holds for both the expansion phase of the economy – the years 1998 through 2000 – as well as the years of recession and extraordinarily slow growth since then (2001 through 2003).

In fact, when considered in the aggregate, taking all states together in two groups, employment outcomes have generally been more favorable in the higher minimum wage states than in all other states. Consider these examples:

* Total employment in the higher minimum wage states increased by 6.2 percent from January 1998 to January 2004, 50 percent greater than the combined job growth of 4.1 percent for the other states where the federal minimum wage prevailed; and
* Retail employment grew by 6.1 percent in the minimum wage states versus 1.9 percent in the other states.

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In other words, the GOP is BAD for the economy. No fuzzy math necessary to prove it.

Posted by: Jenius [TypeKey Profile Page] at June 21, 2006 4:12 PM

Additionally, it should be noted that a minimum wage increase was not voted down today.

It was a....wait for it, wait for it....UP OR DOWN VOTE that was rejected. The Republicans are not even willing to DEBATE it.

Posted by: Jenius [TypeKey Profile Page] at June 21, 2006 4:21 PM

A non-partisan EPI: http://www.epionline.org/study_list.cfm

How Did the $8.50 Citywide Minimum Wage Affect the Santa Fe Labor Market? A Comprehensive Examination

This paper finds that Santa Fe's living wage increase led to significant and negative consequences for employees in the city-particularly the least skilled employees. The increased likelihood of unemployment and a decreased number of hours worked were all highest for low-skill employees. Furthermore, there is significant evidence to suggest the displacement of adult employees by unmarried high school age employees. These are all unintended consequences that should give pause to any claims of success of the ordinance.

If you'd like to read a few more, try these:

The minimum wage reduces employment.
Currie and Fallick (1993), Gallasch (1975), Gardner (1981), Peterson (1957), Peterson and Stewart (1969).

The minimum wage reduces employment more among teenagers than adults.
Adie (1973); Brown, Gilroy and Kohen (1981a, 1981b); Fleisher (1981); Hammermesh (1982); Meyer and Wise (1981, 1983a); Minimum Wage Study Commission (1981); Neumark and Wascher (1992); Ragan (1977); Vandenbrink (1987); Welch (1974, 1978); Welch and Cunningham (1978).

The minimum wage reduces employment most among black teenage males.
Al-Salam, Quester, and Welch (1981), Iden (1980), Mincer (1976), Moore (1971), Ragan (1977), Williams (1977a, 1977b).

The minimum wage hurts blacks generally.
Behrman, Sickles and Taubman (1983); Linneman (1982).

The minimum wage hurts the unskilled.
Krumm (1981).

The minimum wage hurts low wage workers.
Brozen (1962), Cox and Oaxaca (1986), Gordon (1981).

The minimum wage hurts low wage workers particularly during cyclical downturns.
Kosters and Welch (1972), Welch (1974).

The minimum wage increases job turnover.
Hall (1982).

The minimum wage reduces average earnings of young workers.
Meyer and Wise (1983b).

I could list 50 more, but you get the idea.

Why don't we try a little common sense. For many years it has been a matter of conventional wisdom among economists that the minimum wage causes fewer jobs to exist than would be the case without it. This is simply a matter of price theory, requiring no elaborate analysis to justify. Were this not the case, there would be no logical reason why the minimum wage could not be set at $10, $100, or $1 million per hour.

Do you believe a $100 per hr minimum wage would not lead to higher unemployment at the lowest end of the wage scale? Do you think people will pay $500 a month to the pool man, or the gardner, or pay $300 to get a car wash.

You know people won't. Therefore, you know a minimum wage at some point hurts employment.

What I don't understand is why you're willing to risk putting the poorest of the poor out of a job while you try to find the tipping point.

Posted by: HappyOD [TypeKey Profile Page] at June 21, 2006 6:47 PM

Dude, the Employment Policies Institute is a PR FIRM! It has one client - the restaurant industry! They pay people to come up with that stuff.

Seriously, explain to us why a company, restaurant, etc. would have the extra employees in the first place, if they are going to lay them off over a small wage increase? Does that really make some kind of sense to you? WHY DO THEY HAVE THE EMPLOYEES IF THEY DON'T NEED THEM?

ALSO, we all saw with our own eyes what happened after the LAST minimum wage increase! EMPLOYMENT WENT UP!!!!! So give it a rest.

Posted by: Dave Johnson [TypeKey Profile Page] at June 21, 2006 8:38 PM

Good Gawd, Happy. Nobody's advocating $100/hour. Just a FAIR WAGE that exceeds the POVERTY LINE. Taking your same ridiculous argument to the other end, we should simply get rid of it altogether and let the market decide how many people are willing to work for 50 cents an hour.

We could all be building iPods! Why should Chinese women and children have all the fun?

Posted by: Jenius [TypeKey Profile Page] at June 21, 2006 9:12 PM

Thanks for the info Jenius!

We have a minimum wage increase comming on the ballot this fall, and early polling indicates that two thirds of Republicans support a raise in the minmum wage, but somebody has been spreading falsehoods about people being thrown out of work by it.

Posted by: grannyinsanity [TypeKey Profile Page] at June 21, 2006 11:07 PM

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