The Las Vegas Review-Journal misleadingly attacked a proposal to increase the minimum wage by incorrectly claiming that doing so would hurt job growth and do little to reduce poverty.
In a January 12 editorial, the paper attacked a recent push to raise the federal minimum wage from $7.25 per hour to $10.10, arguing that Democratic proposals were little more than distractions “from the party's Obamacare debacle.” The paper misleadingly claimed that raising the minimum wage would increase unemployment, especially for workers under the age of 25, before concluding that, given other so-called “broken promises” from President Obama, the public should be skeptical of claims that higher wages would reduce poverty.
But comprehensive studies of the employment effects of the minimum wage don't back up the assertions laid out by the Review-Journal, which has used this tired line of attack -- or allowed anti-minimum wage increase lobbyists to do so -- in its opinion pages before. One analysis by economists Paul Wolfson of Dartmouth and Dale Belman of Michigan State looked at several studies published on the effects of the minimum wage since 2000. Wolfson and Belman found that, while some studies showed slightly positive employment effects and others slightly negative employment effects, across all studies there was no statistically significant negative impact on employment. A similar report from the Center for Economic and Policy Research on the employment effect of the minimum wage also concluded that, “employment responses generally cluster near zero, and are more likely to be positive than negative.”
It's no secret income inequality is on the rise nationwide. Research from economist Emmanueal Saez of the University of California, Berkeley shows inequality at its highest level since 1928. In Nevada, according to a Center on Budget and Policy Priorities release, income for the poorest 20 percent of residents remained stagnant from the late 1990s to the mid-2000s. That stagnation led to the richest 5 percent of households having average incomes 13.0 times larger than the bottom 20 percent of households. A report by the University of Nevada, Las Vegas Center for Democratic Culture found that 16.8 percent of Nevada's population lives in “poverty areas,” with African-American, American Indians, and Latino populations all having more than 20 percent of their populations living in poverty.
According to an issue brief from the Economic Policy Institute, a major factor in that inequality is the diminished value of the minimum wage:
Contrary to some political rhetoric of late, wage stagnation for American workers and rising inequality is not due to lack of effort; the broad middle class has increased its productivity, upgraded its educational attainment, and worked more hours (Mishel 2013). Rather it is due to certain policies that have weakened the bargaining position of low- and middle-wage workers. Among these policies is the refusal to set the minimum wage at a level where it establishes a well-enforced wage floor at 50 percent of the average wage. This paper reviews the history of the minimum wage over the last 50 years and the role of a lowered value of the minimum wage in rising wage inequality.
One way to combat that inequality, and reduce poverty, is by increasing the minimum wage. A new study by University of Massachusetts, Amherst economist Arindrajit Dube concludes that many economists, even those who found a negative employment impact, found that increasing the minimum wage would reduce the number of people living in poverty. As The Washington Post highlights, “raising the minimum wage 10 percent ... would reduce the number of people living in poverty 2.4 percent” and “raising the minimum wage to $10.10 an hour ... would reduce the number of people living in poverty by 4.6 million.”
A study from EPI found that raising the minimum wage to $10.10 incrementally, as in the Harkin-Miller proposal, would “directly or indirectly raise the wages of 27.8 million workers” and bring about economic growth to the tune of about $22 billion, “resulting in the creation of roughly 85,000 net new jobs” from 2014 to 2016. Increasing the minimum wage would affect about 24,000 Nevadans under the age of 20 or about 72.7 percent of the under-20 working population. The Washington Post explains this would cause a significant increase in the quality of life for Americans at the 10th percentile without requiring the government to tax or spend any money:
Using this as an estimate, raising the minimum wage to $10.10 an hour, as many Democrats are proposing in 2014, would reduce the number of people living in poverty by 4.6 million. It would also boost the incomes of those at the 10th percentile by $1,700. That's a significant increase in the quality of life for our worst off that doesn't require the government to tax and spend a single additional dollar. And, given that this policy is self-enforcing with virtually no administrative costs while challenging the employer's market power, it is a powerful complement to the rest of the policies the government uses to boost the living standards of the worst off, including the Earned Income Tax Credit, food stamps, Medicaid, etc.