Putting the Minimum Wage Debate into Context

We interrupt this holiday season to revisit the minimum-wage experiment going on in various cities and states, paying special attention to those opposed to plans by some locales to eventually adopt a $15 hourly wage.

The forecasts of these critics — that jobs would be lost and businesses would close — have, so far, been proven wrong. Although this is interesting, what’s most important is why they were wrong. In many cases, they suffer from the sort of systemic bias that is typically observed in the self-destructive tendencies of too many investors. To many of these minimum-wage foes, government can do no right, and any effort to ameliorate some of the defects or inefficiencies in the free market will always and everywhere prove counterproductive.

The modern minimum-wage debate traces back to the seminal 1993 research by Alan Krueger and David Card. The two economists looked at employment in the fast-food industry when minimum wages were raised in one market but not in the adjacent market. Their studies found no reduction in job growth in the market where pay was increased, and in fact, the opposite occurred. Many subsequent studies confirmed their findings — modest increases in minimum wages don’t lead to job losses.

Those studies colored my view that taxpayer-funded benefits shouldn’t subsidize the low wages of full-time employees at private-sector companies. This led to my 2013 rant in these pages describing how Wal-Mart and McDonald’s had become welfare queens.

The extent to which taxpayers subsidize profitable public companies that game the safety net is serious business. One study noted that U.S. fast-food workers receive more than $7 billion a year in public assistance; another pegged the Wal-Mart taxpayer subsidy at more than $6 billion. Alan Grayson, a former congressman from Florida, observed:

In state after state, the largest group of Medicaid recipients is Walmart employees . . . the same thing is true of food stamp recipients. Each Walmart ‘associate’ costs the taxpayers an average of more than $1,000 in public assistance.

Politifact reviewed his claims and found them to be “mostly true.”

The economic impact of modest increases in the minimum wage may be well-established, but you wouldn’t know this based on the claims of opponents . . .

 

Continues here: Minimum-Wage Foes Tripped Up by Facts

 


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