It’s a cliche of politics that the name of a proposed bill or
initiative depends largely on its name. (More on this later.)
It’s also a cliche now that free market advocates expecting
Republicans to control the growth of government shows the triumph
of hope over experience, but these days the Bush Administration
doesn’t seem to even pretend to fight. On Wednesday, the President
announced that he would support a hike in the
federal minimum wage, from $5.15 to $7.25 an hour, in exchange for
the Democratic Congress providing “targeted tax and regulatory
relief” for small businesses.
The minimum wage hike is popular and enjoying political
momentum, so President Bush is trying to make the best of a bad
situation. But it’s very bad strategy to announce what you’re
willing to go along with before you’ve even started negotiating.
Further, the President could actually gain politically by opposing
the minimum wage might hike. Here’s why.
Politicians love the minimum wage. It is a perfect issue on
which to demagogue, since it promises benefits to the public while
requiring no tax dollars to be spent, because the costs fall
entirely on private businesses. And its costs on workers are hidden
— there is no organized political pressure group of people who
would have occupied jobs that an increased minimum wage kept from
coming into being.
But policies that create good political opportunities for
populist grandstanding are often bad policy, and that’s true with
the minimum wage. It is economic nonsense, premised on the idea
that government can mandate a free lunch: It would be nicer for
everyone to make more money, so there ought to be a law!
WHAT COULD THE PRESIDENT GAIN politically by outright opposing the
minimum wage hike? First, he would appear bold and principled,
willing to spend political capital to oppose bad policy. Second, he
could use this fight as an educational opportunity to tell the
American people about the job losses that a higher minimum wage
would create — a move that would help Bush regain considerable
support among his party’s conservative base. And there are very
good reasons to oppose the minimum wage hike.
As the Economist noted recently, the minimum wage is a
“blunt instrument” that “won’t help many poor people,” since only
about 5.5% of the U.S. workforce would gain directly from a rise in
the minimum wage — and 30% of those are teenagers, many from
middle-class families.
Yet the minimum wage is not only not helpful, it is downright
harmful to the most vulnerable workers: those possessing few or no
skills. “Minimum wage laws restrict the employment of low-skill
workers when the wage rate exceeds the worker’s marginal
productivity,” notes George Mason University economist Thomas
Rustici. “By doing so, the law prevents workers with the least
skills from acquiring the marketable skills necessary for
increasing their future productivity, that is, it keeps them from
receiving on-the-job training.”
In other words, a higher minimum wage makes it more difficult
for workers to enter the job market for the first time. And this
can have long-lasting negative consequences.
LIBERAL DEMOCRATS AND THEIR ORGANIZED LABOR ALLIES have done a
great job selling the minimum wage policy snake oil. Yet President
Bush can create an opportunity for himself by opposing it. He can
oppose the hike and communicate directly to the American people the
negative effects of the minimum wage.
He can tell the real-world stories of people like Michael
Wiggins, owner of Granny Shaffer’s Family Restaurant, in Joplin,
Missouri, who told a reporter from the Columbus Dispatch
that a hike in Missouri’s state minimum wage is forcing him to lay
off two teenage employees. “They’re good kids. They’re hard
workers,” he said. “But I really can’t afford to do that. If I’m
going to pay $6.50, I’m going to get someone with more of a skill
level.” So much for on-the-job training.
Now, back to the cliche about the fate of proposed legislation
depending largely on its name. The President could go on TV and
boldly say to everyone watching:
“I need your support to stop the Entry-Level Job Elimination
Act.”
