Fox's Cavuto: Higher Wages Have No Place In A Recovering Economy

Fox News

Fox News' Neil Cavuto pushed the myth that minimum wage increases harm the economy, claiming that the president's call to raise the minimum wage was at odds with his push to extend unemployment insurance. However, both of these measures work in the direction of creating jobs and increasing economic growth, particularly in a sluggish economy.

On January 28, President Obama delivered his State of the Union address, during which he advocated extending emergency unemployment compensation benefits -- which lapsed in late 2013 -- and increasing the minimum wage to $10.10.

On the January 29 edition of Fox News' Your World, host Neil Cavuto was joined by Jamie Richardson, vice president of White Castle government relations, and Jerry Storch, former CEO of Toys“R”Us, to discuss the president's call to increase the minimum wage. After Richardson and Storch both expressed their opposition to minimum wage increases, Cavuto implied that the president was giving conflicting messages on the state of the economy, saying “if the economy is so bad that it warrants extending unemployment benefits for the umpteenth time, then surely it warrants going slow on increasing the minimum wage.”

Cavuto's implication that because the economy requires restoring unemployment benefits, the minimum wage shouldn't be increased is simply groundless. The fact is that both measures act to increase jobs and grow the economy.

Part of the push to restore emergency long-term unemployment benefits is not only to provide assistance to the more than 1.3 million people who have been kicked off the program, but also to help the economy at large. According to the Congressional Budget Office, extending the EUC program until the end of 2014 “would increase inflation-adjusted GDP by 0.2 percent and increase full-time-equivalent employment by 0.2 million in the fourth quarter of 2014.”

While Cavuto and his guests are comfortable trotting out well-worn falsehoods about the minimum wage hindering job growth, research suggests otherwise. According to the Economic Policy Institute (EPI), the current legislative proposal to increase the minimum wage would create approximately 140,000 jobs. Furthermore, contrary to Cavuto's assertion, EPI explains that the minimum wage should be raised precisely because labor markets are slack:

Even conservative economists suggest higher wages might help speed the recovery. American Enterprise Institute scholar Desmond Lachman, a former managing director at Salomon Smith Barney, told The New York Times, “Corporations are taking huge advantage of the slack in the labor market--they are in a very strong position and workers are in a very weak position. They are using that bargaining power to cut benefits and wages, and to shorten hours.” According to Lachman, that strategy “very much jeopardizes our chances of experiencing a real recovery” (Powell 2011).

Fox News has a history of claiming that unemployment insurance and minimum wage increases hurt the economy, but that doesn't change the fact that they both could help improve the labor market and the economic recovery.