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Minimum Wage Advocates Disregard Evidence

April 29, 2016 Posted by Liam Sigaud - No Comments

As The Maine Wire has repeatedly shown here, here and here, proponents of a minimum wage increase in Maine seem more concerned with soundbites than responsible public policy. The Maine People’s Alliance’s website, for example, under the heading “Why increase Maine’s minimum wage?,” states that “it’s not right that a single mother of two can work full time and still not make ends meet for her family.” That’s true, but the website fails to provide any evidence that a minimum wage increase would achieve the goal of helping poor single mothers.

The little scholarly research the Maine People’s Alliance has appealed to is the work of Michael Reich, an economics professor at UC Berkeley, who has argued that a minimum wage up to 60 percent of the median full-time wage does not reduce employment, and that higher ratios do not have “substantial negative employment effects.”

In a recent New York Times article, however, Dr. Reich is quoted as saying that the precise ratio of minimum to median wage at which significant job losses occur has yet to be definitively defined. “We don’t know at what point that kicks in,” he is quoted as saying. “We know that hasn’t happened at 50 percent or 55 percent.”

Even if we accept this 60 percent rule at face value, however, problems immediately become apparent. As Nathan Strout has pointed out, applying this 60 percent rule to median wages in Maine fails to account for significant disparities between counties, since median wages in Cumberland County ($17.85) and Washington County ($14.85) are far from the same. In addition, indexing the minimum wage to the cost of living, as the Maine People’s Alliance’s referendum would, reveals how little they care about following the 60 percent rule at all; if wages stagnate (especially among entry-level workers) while the cost of living continues to rise, the ratio of minimum-to-median wage could increase sharply, leading to significant job losses.

Yet as Michael Saltsman of the Employment Policies Institute noted in a letter-to-the-editor to the Portland Pres Herald in March, even the 60 percent rule is based on dubious assumptions and analysis. “Reich’s work is an outlier in the minimum-wage literature, with most credible studies showing that negative employment effects kick in at a much lower threshold. This suggests that any minimum-wage hike in Maine will be counterproductive,” wrote Mr. Saltsman.

The people of Maine shouldn’t be used as guinea pigs in a poorly designed study of labor market dynamics; many other states have already supplied ample evidence that minimum wage hikes make it harder for low-skilled workers to find employment and benefit only a small population, largely made up of adolescents whose household incomes far exceed the poverty line.

When a policy’s advocates refuse (or don’t bother) to grapple with hard numbers and empirical evidence, they usually have something to hide.