The union-backed campaign to raise the minimum wage has migrated to the state level after failing to gain necessary support nationwide. Four states proposed raising the minimum wage in 2014, and a number of others are considering similar initiatives.
The debate may be taking place on different turf, but the bad arguments being used in favor of a wage hike are still the same.
Take Sen. Elizabeth Warren (D-Mass.), for instance, who has argued that the minimum wage should be raised in Massachusetts, along with other states, to keep up with broader productivity increases in the economy. There's no doubt that some sectors of the economy have seen remarkable productivity gains in recent decades. (If you’re reading this on a smartphone, you know what I mean.)
However, the restaurant industry, which employs nearly half of American minimum-wage workers, isn't one of those industries. According to the Bureau of Labor Statistics, the productivity gains in foodservice have been small or nonexistent over the last 20 years. Warren's belief that high-tech industries’ productivity gains should drive restaurant labor rates is a nonstarter.
Another variation of this argument popularized by labor union spokespersons is that the minimum wage should be raised because it is lower now in real terms than in 1968. Advocates cherry-picked the year 1968 for one reason: It’s an outlying year where the real minimum wage hit its high point. There were unique, nonrecurring reasons for that 1968 rate.
If we take other, more logical years as our baseline, we find that today’s minimum wage is actually high by comparison. For example, the minimum wage in 1938 — the year it was established — is only about $4.20 today in real terms.
The main rhetorical argument used in favor of raising the minimum wage is the potential impact it would have in lifting Americans out of poverty. However, the research doesn’t back up the rhetoric. Studying the 28 states that raised their minimum wages between 2003 and 2007, economists from Cornell and American Universities found no evidence that a wage hike reduced poverty.
Similarly, economists from the University of California-Irvine and the Federal Reserve Board found that the overwhelming majority of robust economic research, including 85 percent of the studies since the early ’90s, concludes that increasing the minimum wage reduces job opportunities.
How will your restaurant respond to minimum wage hikes? Join the conversation in the comments below.
Given the weakness of the arguments used in favor of raising the minimum wage, proponents often resort to melodramatic appeals to try to influence the debate. At a rally in Michigan in April, President Barack Obama said, “You can give America the shaft, or you can give it a raise.”
Such a false choice may make for good politics, but it’s often the siren song of bad policy.
