As expected, President Obama announced in his State of the Union speech that he will be issuing an executive order to raise the minimum hourly wage to $10.10 for workers who contract with the federal government. This is the first sortie in what is being billed as his “year of action.” Of course, the president hopes this will put pressure on Congress and state governors to follow suit and raise the minimum wage for all workers.
But declaring it illegal to pay an employee below a certain threshold does nothing — nothing — to create jobs that pay above that threshold. At best, raising the minimum wage creates a trade-off between higher-paying jobs for some of the still employed and higher unemployment; and it is the least-skilled and least-experienced workers who are hit the hardest.
In many parts of the U.S., such as the Washington, D.C., metro area, it would be tough to provide for a family of four with one full-time job that pays only $10.10 an hour. So why does the president not call for raising the minimum wage for all workers to, say, $50 an hour? Because such a policy would lead to massive and demonstrable unemployment among those whose labor is worth less than that. The fact that the president is calling for a minimum wage of only $10.10 an hour suggests that he understands these economic realities can’t be dissolved by executive order. The proposed wage hike would still harm the least-skilled workers, but at $10.10, that harm will be much harder to identify.
If the purpose of this “action” is to help the lowest income-earners — the “least of these,” our brethren (Matthew 25) — this isn’t the way to do it. If its purpose, on the other hand, is to get low-information voters to focus on something other than the cancellation of their health-insurance policies and the declining prospects for employment, then I suppose it makes sense.