After calling for a $9 minimum wage in his State of the Union address in February, President Obama has now announced his support for $10.10 — a 39 percent increase over the current $7.25.
According to the White House, the rationale behind such a dramatic increase is simple: It would give “hard-working Americans” a “decent wage for a day’s work.”
This sentiment is laudable, but a minimum wage hike is not the right public policy for helping the working poor. In fact, the vast majority of economic research indicates that a wage hike would be disastrous for employees who work at the minimum wage and the businesses that employ them.
Instead of acknowledging the trade-offs inherent in raising the cost to hire and train entry-level employees, the president’s Department of Labor has unveiled a “Minimum Wage Mythbusting” campaign geared to debunk what it claims are misconceptions about raising the minimum wage.
Unfortunately, this campaign focused on busting myths is itself chock full of them.
Start with the Department of Labor’s claim that “the typical minimum wage earner is not a high-school student earning weekend pocket money.” The Labor Department used this to set up a discussion about minimum wage earners supporting families.
But this is misleading: High school or not, the Bureau of Labor Statistics — which at last check is part of the Department of Labor — says that minimum wage earners “tend to be young.”
More than half are between the age of 16 and 24, and about one in four is a teenager. (The ratio of teens to adults is 1 in 20 for the entire hourly workforce.)
In other words, the “typical” minimum wage earner is either in high school, or is a young adult who’s just a few years out of school. By contrast, very few — about one in six of those currently earning the federal minimum — is a single parent supporting children.
Those individuals also have access to the Earned Income Tax Credit (EITC), which boosts their wages through the tax code without the unintended consequences of minimum wage hikes.
Taking this policy into consideration, the minimum wage for a single parent in Texas is already above $9 an hour.
But the Department of Labor’s misdirection on this “myth” pales in comparison to its academic malpractice on the question of minimum wages and employment.
They label “not true” the claim that wage hikes reduce employment for less-skilled job-seekers, even though the most comprehensive study on the topic — by David Neumark of UC-Irvine and William Wascher of the Federal Reserve — demonstrated that 85 percent of the best economic research on this subject from the last two decades says otherwise.
The Labor Department also ignores the findings of Congress’s Minimum Wage Study Commission, which established conclusively in a seven-volume report that each 10 percent increase in the minimum wage reduces employment for young people by as much as 3 percent.
None of this data so much as gets a footnote in the Department of Labor’s analysis, a baffling omission coming from the government agency whose job it is to understand how labor markets work.
Labor Secretary Thomas Perez announced recently that the higher minimum wage was “job one” for the administration — a curious priority, given the still-stagnant labor market and the double-digit unemployment rates faced by our country’s young adults.
It’s unfortunate that the president and his Labor Department are more interested in raising barriers to job creation rather than lowering them.