The war over the minimum wage

If the Federal minimum wage is increased, and Mr. [Warren] Buffett is correct that you do lose some employment as you increase the minimum wage, it will likely impact only a fraction of those 2.6% of American workers, a tiny amount.  So why not just do it?  Tomas Mega, our US Correspondent,explains

In April, Democrats suffered two defeats in their effort to gradually raise the Federal minimum wage from $7.25 an hour to $10.10 an hour.  The first defeat was expected, as the U.S. Senate voted against the measure.  Despite Democrats controlling the Senate, they needed sixty votes to overcome a Republican filibuster of the bill.  They got fifty-four.  Even if they got the required sixty votes, the measure would surely have died in the Republican controlled U.S. House of Representatives.

The second defeat was less expected:  that was the statement by Democratic supporter Warren Buffett, the third richest man in the world (as ranked by Forbes Magazine, May 2014).  In an April 24 interview with CNN, Buffett stated he “wasn’t sure” if the minimum wage should be raised.  He went on to say:  “You do lose some employment as you increase the minimum wage, if you didn’t I would be for having it $15.00 an hour.”  You don’t get to be the third richest man in the world by being ‘not sure’ about stuff like this, so that sounds like he doesn’t think raising the minimum wage is a good idea.  Liberals were gutted that the billionaire Democrat who complained that his secretary had to pay more in taxes on a percentage basis than he does seemed to dawdle on the minimum wage issue.

 According to the Bureau of Labor Statistics, 2.6% of American workers make the minimum wage or less.  So why all the fuss about gradually raising the minimum wage for such a small number of workers?  Doesn’t that mean 97.4% of American workers are earning more than the minimum wage?  Ninety-seven plus percent of anything seems to be a pretty good number, even for Liberals.  And twenty-one states currently set their minimum wage above the $7.25 per hour rate mandated by the Federal minimum wage.  So why are we even talking about this issue?  Do we really need a higher Federal minimum wage when the current minimum wage impacts such a small number of workers?  Do Democrats really think that putting just a little more money in the pockets of such few people is going to rescue our anaemic economy?

 But wait; there is another way to look at this.  If the Federal minimum wage is increased, and Mr. Buffett is correct that you do lose some employment as you increase the minimum wage, it will likely impact only a fraction of those 2.6% of American workers, a tiny amount.  So why not just do it?  Let the market sort out the winners and losers.  Yes, there will likely be some job losses but Democrats are willing to sacrifice those folks.  Republicans shouldn’t really care because those workers are going to vote Democratic anyway, and Republicans may even earn some good-will for not being so mean spirited, which could translate into votes.  Raising the Federal minimum wage sounds like a “win-win” for both political parties.

So is raising the Federal minimum wage an issue needing a solution, or is it a solution in search of an issue?  For Democrats, the answer to both questions is likely “yes,” because it’s all about politics, and the ability of both parties to play to their base constituencies.  Six months before the mid-term Congressional elections, Democrats are desperate for an issue to clobber Republicans with.  They have to push for an increase in the Federal minimum wage not because it benefits so few people, but because it’s one of the few issues their constituency can get excited about.  It’s part of the core beliefs of Liberals and Democratic voters have to turn out in record numbers in November to avoid a walloping.  They need an issue they hope will do that.  The majority in the U.S. Senate is at stake.        

Republicans have no incentive to support a rise in the Federal minimum wage.  Those 2.6% of Americans don’t vote Republican.  And we’ve seen repeatedly that any measure that benefits the poor, addresses the plight of immigrants, or causes small business any type of perceived stress sends the base constituency of Republicans into fits.   They insist that a raise in the federal minimum wage would hurt businesses and would not be a substantive step in addressing poverty.  Indiana Republican Senator Dan Coats took a page from Mr. Buffett’s waffling on the issue when he said:  “Raising the minimum wage creates winners and losers – it will raise the wages of some but result in job losses for many low income workers.”

Interestingly, recent polls show that the majority of Americans support a rise in the minimum wage.  In a March 2014 Bloomberg News Poll, 69% of Americans favoured an increase.  Democrats are exploiting this with some disingenuous rhetoric.  House Minority Leader Nancy Pelosi said that the defeat in the Senate on raising the minimum wage was evidence of “Republican disregard for the working people of our nation.”  Well, perhaps a disregard for 2.6% of workers, some of whom may lose their job if the minimum wage is hiked.

Occasionally in politics you win by losing.  Democrats have suffered recent defeats on equal pay for women, immigration reform and hiking the minimum wage.  Polls show that the majority of Americans favour these measures.  By losing, Democrats hope to paint Republicans as mean spirited and out of touch with every-day Americans.  Maybe, but it all depends on whether Democrats turn out to vote in November.  If voter apathy among Democrats surfaces and a strong turnout doesn’t materialize, more than the war over the minimum wage, equal pay for women and immigration reform will be lost.  Democratic control of the U.S. Senate may be lost too.