The Intra-Conservative Minimum Wage Debate

by Reihan Salam

Robert Costa and Karen Tumulty report on the growing number of Republicans who favor an increase in the federal hourly minimum wage. Several former Republican presidential candidates, including Tim Pawlenty, Rick Santorum, and Mitt Romney, have endorsed a minimum wage hike, as have a number of current GOP candidates for the House and Senate. As a general rule, these Republicans don’t offer substantive arguments for raising the federal minimum wage, and let’s be clear that state governments are free, as they’ve been for some time, to set state minimum wages that exceed the federal minimum wage. Rather, they focus on appearances, as when Pawlenty, president and CEO of the Financial Services Roundtable, an organization that lobbies on behalf of the financial services industry, frets that the GOP often looks like “the party of Scrooge.” I appreciate Pawlenty’s concern. And I actually do think that there is a political case for Republicans to accept a modest minimum wage increase and indexing the minimum wage to inflation, even though there is good reason to believe that a higher minimum wage would reduce net job growth.

But let’s be clear as to why there is a case for conservatives to get behind some compromise position on this issue. It is not because a higher minimum wage is the best, least harmful way to raise market incomes or employment levels, because it’s not. What we need are tighter labor markets, and to get there we need a combination of more aggressive monetary policy, housing and tax policy reform, and an immigration policy designed to increase demand for less- and mid-skilled workers currently residing in the U.S. If anything, we ought to consider lowering the federal minimum wage, or at least lowering it for the long-term unemployed and young workers, while modernizing (and expanding) federal wage subsidies, as Michael R. Strain of AEI has argued. By making work more accessible and more attractive, Strain’s approach will raise employment levels among less-skilled workers. Yet it might also depress market wages, at least in the short term, which is why increasing wage subsidies is crucial. Better monetary policy and structural reform are the best way create an environment conducive to productivity growth and wage growth, though this process will take some time. In an ideal world, these would be the labor market strategies the right would pursue. The political challenge is that Strain’s jobs agenda requires some increase in spending, and spending increases are anathema to most conservative lawmakers, even if Strain’s spending increases actually yield savings over time by encouraging skill accumulation (it’s much easier to gain skills when you’re working), which will in turn reduce anti-poverty spending (because only those who make it on the first rungs of the jobs ladder will be able to climb it, and to become economically self-reliant). 

The irony is that the conservatives who might be amenable to something like Strain’s approach — let’s not risk excluding workers from the formal labor market by raising the statutory minimum wage, but let’s spend intelligently to get people back to work — are the ones who are embracing a minimum wage increase as (essentially) a proxy for some better mix of policies, or as a way of signaling that they care about the well-being of American workers and that they’re willing to use the power of government to improve their well-being. And most of the conservatives opposed to a minimum wage increase are also disinclined toward active labor market policies of the kind Strain has in mind, including an expansion of federal wage subsidies, on the grounds that such policies represent big government overreach, or that they involve spending money we don’t have. It’s no wonder that low- and middle-income voters are skeptical as to whether conservatives are doing enough to defend their interests. The real case for a minimum wage compromise is not that it’s good policy. Rather, it’s that conservatives in Congress and in the states have done such a poor job of offering alternatives. That has to change.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.