The AFL-CIO’s National Summit on Raising Wages takes place in Washington D.C. today, but you don’t have to attend to know what’s going to be on the agenda.
In lieu of a much needed debate on how best to spur wage growth for millions of Americans passed over by the economic recovery, the AFL-CIO will fall back on its old hobby-horse of calling for a minimum wage increase.
{mosads}It’s a shame. Raising the minimum wage is a policy idea as shopworn as the AFL-CIO’s leadership team. Economic evidence overwhelming concludes that — at best — the policy is an inefficient means of helping the poor; at worst, it hurts those it intends to help by reducing job opportunities.
A new study published by the National Bureau of Economic Research makes the case, finding that the 40 percent federal minimum wage hike that took place between 2007 and 2009 accounted for 14 percent of the drop in employment during the Great Recession. The nonpartisan Congressional Budget Office estimates that, were the country to raise the minimum wage even further to $10.10 an hour, a half-million jobs would be lost.
Unfortunately, this economic consensus won’t keep the AFL-CIO from trotting out the same misleading minimum wage talking points to make its case, as is evidenced by the Summit’s headline speakers: Labor Secretary Thomas Perez and Massachusetts Senator Elizabeth Warren (D).
Perez has blurred the lines between labor department official and labor union activist, saying in October that as a nation, “we suck” at the minimum wage. In his more eloquent moments, he argues that the minimum wage should be increased because if it had tracked inflation from its 1968 levels, it would be well above $10 per hour today.
If 1968 seems like a convenient year, that’s because it is–a historical anomaly when the minimum wage hit its peak inflation-adjusted value. But two can play at this game. The inflation-adjusted $3.35 per hour minimum wage in 1988, for example, is only $6.50 per hour today. Or, the 25 cent minimum wage in 1938 – the first year of the federal minimum wage – is only $4.19 in today’s terms.
Warren’s primary argument for raising the minimum wage is similarly flawed. She claims that it should be raised because it has not tracked the productivity gains of the broader economy. It’s true that some sectors of the economy like technology have seen immense productivity gains in recent years. However, many low-margin sectors, which employ the majority of minimum wage employees, have seen little to none.
For example, the food service industry has experienced virtually no productivity gains in recent decades, according to data from the Bureau of Labor Statistics. It makes sense: You can only cook a meal or clean a table so fast. But Warren is happy to conflate the productivity of the general economy with the food service industry to make her populist talking point.
Summit attendees will no doubt point to a handful of “studies” that claim no trade-offs exist when raising the minimum wage. But these outlying reports have been the subject of scathing critiques: One team of economists from Harvard University, the Federal Reserve Board, and the University of California-Irvine concluded that “neither the conclusions of these studies nor the methods they use are supported by the data.”
More to the point, a review by two of these economists of the most credible studies on this topic since the early 1990s found that that 85 percent of them point to job loss following a wage hike.
The AFL-CIO would do well to address such challenges at its wage summit before throwing its lot in with a minimum wage hike, keeping in mind that people’s wages can’t rise if they don’t have a job.
Saltsman is research director at the Employment Policies Institute, which receives support from businesses, foundations, and individuals.