Much has been written about the ignorance, impracticality, and offensiveness of many of the Republican front-runners’ policy proposals. Not nearly enough has been written about the ignorance, impracticality, and offensiveness of the policy proposals emanating from the Democratic side, some of which, unlike Donald Trump’s Mexican-financed wall and Muslim ban, could actually become law.
Consider the race to hike the minimum wage. Bernie Sanders wants it to get to $15 as soon as possible. Hillary Clinton wants to get there almost as soon as possible.
In last week’s Democratic debate, Sanders denounced Clinton for her insufficient ardor in racing to $15. Clinton took umbrage, and the shouting match that ensued led CNN’s Wolf Blitzer to admonish them both: “If you’re both screaming at each other, the viewers won’t be able to hear either of you.”
With the exception of some very cynical labor unions that support a higher minimum wage because it amounts to an indirect subsidy of their members’ earnings and some politicians who know it is bad economics, the Fight for 15 movement is entirely well-intentioned. But good intentions do not automatically translate into good policy.
Last week, the Los Angeles Times reported that California’s recent decision to raise the minimum wage to $15 by 2022 is already having nasty consequences, accelerating the demise of the local apparel industry. “I used to pay $5 to get this sewn, and now it costs $6.50,” Felix Seo, the owner of L.A.-based Joompy told the Times, holding up a patterned dress. “But my customer doesn’t want to pay that, so I can’t sell it anymore.”
To stay in business, Joompy will probably have to start importing its clothes. “It will be impossible to make clothes in Los Angeles,” Seo said.
This is an old story. My grandmother was a seamstress in New York’s garment district. Those jobs left for the South almost 100 years ago, as costs in New York became prohibitive. They started leaving the South for Asia shortly thereafter.
Businesses don’t have to send their work to low-wage countries. They can simply hire robots. Already, many restaurants facing mandated wage hikes are moving to replace human cooks and servers with machines and iPads.
The Times article had a great little infographic breaking down “Who Gets a Raise” under the minimum-wage hike by age and race. Latinos got the biggest share, with 54 percent. Unfortunately, there wasn’t a companion chart showing how many of those Latinos will simply lose their jobs, resulting in the real minimum wage: zero.
#share#Ironically, one of the original arguments for the minimum wage was that it would push nonwhites — and women — out of the labor market. Stanford sociologist E. A. Ross defended the minimum wage on the grounds that “the coolie [i.e., Chinese laborers], though he cannot outdo the American, can underlive him.” Some argued that employers should be required to pay immigrants twice the wage of American-born worker so that no firm would hire them.
Simply put, a minimum wage is no different from a tax on firms that use low-wage and unskilled labor. And if there’s anything that economists agree upon, it’s that if you tax something you get less of it.
Even California governor Jerry Brown understands this. He just doesn’t care. When he signed the new minimum-wage law, he proclaimed, “Economically, minimum wages may not make sense. But morally, socially, and politically, they make every sense because it binds the community together to make sure parents can take care of their kids.”
This amounts to grotesque cowardice. If Brown understands that his policy doesn’t work economically, he understands that the moral benefits will not materialize (though he’ll reap political benefits from those aforementioned unions).
Assuming it’s in everyone’s interest to raise the wages of low-income workers, then the government can subsidize those wages without penalizing businesses that give jobs to those most in need of work and work experience. We could, for instance, boost the Earned Income Tax Credit or pay businesses to bump up their payrolls. These approaches have drawbacks too, but they stand a better chance of achieving the moral goals that Brown, Sanders, and Clinton have in mind.