Minimum wage propaganda drives higher prices and taxes
Maine’s progressives have been selling the benefits of the minimum wage increase using faulty analysis. Don’t buy the hype.
Our businesses and our state budget will face significant challenges when the minimum wage rises to 11 and 12 dollars an hour over the next two years.
We’ve all heard the old saying about lies and statistics. Here’s the latest example: two recent blogs by the progressive Maine Center for Economic Policy incorrectly use workforce data to support raising the minimum wage.
In a January 8 blog, MECEP incorrectly attributes our 2017 wage gain to the increased minimum wage (See note 1). According to economists at our Department of Labor, total wages paid were unusually low in the fourth quarter of 2016 and unusually high in the first quarter of 2017. This was not due to the minimum wage referendum. Rather, many employers delayed bonuses and other annual performance payments from December to January.
Why the delay? Because businesses expected incoming President Trump—with the Republican-controlled Congress—would pass tax cuts as promised. Looking at the 2017 data without that important context is misleading.
But progressives’ misunderstanding of workforce data leads to greater deceptions.
For instance, MECEP’s blog dated April 2 draws a number of misleading conclusions (See note 2). The worst claim is their argument that in 2017, low-wage workers received their largest annual increase in earnings in the last 15 years.
But the 2017 data is not representative of a single year of employment wage gains. Two of the years included in the 2017 data set, 2015 and 2016, preceded any increase in Maine’s minimum wage (See note 3).
The 2017 wage gains are largely from our improving economy, which is driving the fastest rise in real average wages in two decades—not the minimum wage. Once again, progressives prove they know little about economics, yet remain ready to tell you how to run your business.
Instead of listening to progressive falsehoods, let’s listen to our employers, who testified to the Legislature that they’ll cut hours and raise prices if the minimum wage increases.
Our state budget faces a similar challenge. We need to increase reimbursements to non-profit healthcare agencies to compensate for rising wages. To pay for this, the state must raise taxes.
A short-term budget fix will not resolve the ongoing pressure to raise wages. Year after year, these non-profits will need more money to keep pace.
We need to take the pressure off wages. One way to do this is to allow our 14- and 15-year-olds to enter the workforce more quickly by eliminating the work-permit requirement during summer months.
This would make almost 30,000 workers immediately available to employers. Several states, including Arizona, Florida and Oregon, do not require any work permits.
So don’t fall for the progressives’ propaganda. It’s bad for our state budget, and it’s bad for our businesses.
Notes
- In a January 8 article titled “Minimum Wage Increase Contributes to Largest Annual Wage Gain in 10 Years” ( http://blog.mecep.org/2018/01/minimum-wage-increase-contributes-to-largest-annual-wage-gain-in-10-years/ ), MECEP correctly states that increase in total wages paid in Maine for the first six months of 2017 over the same period in 2016 was the fastest since the last recession. However, they incorrectly attribute the gain to the increased minimum wage. According to economists at the Maine Department of Labor’s Center for Workforce Research and Information, which is the source of that data, total wages paid were unusually low in the fourth quarter of 2016, a period not included in the analysis, and unusually high in the first quarter of 2017, a period included. This occurred because many employers delayed bonuses and other annual performance payments from December 2016 to January 2017 expecting the incoming Trump Administration and Republican-controlled Congress would pass tax cuts as promised.
- In an April 2 article titled “New federal wage data brings more evidence for success of Maine’s new minimum wage law” ( http://blog.mecep.org/2018/04/new-federal-wage-data-brings-more-evidence-for-success-of-maines-new-minimum-wage-law/ ), MECEP incorrectly states that new occupational employment and wage estimates indicate that the law has not spurred employers to reduce hours worked for low-wage workers. In fact, the Occupational Employment Statistics (OES) data they cited does not include information on hours worked. Rather, MECEP estimates hours worked by taking two different data series, OES and the Quarterly Census of Employment and Wages, each with different coverage, to calculate an increase in average hours worked. Because the two datasets cover different time periods and industries, they are not directly comparable, which leads to flawed analysis.
- The April article also stated that low-wage workers received their largest annual increase in earnings in 2017 in the last 15 years. This analysis relies on a use of OES estimates that the U.S. Bureau of Labor Statistics recommends against for several reasons. In particular, USBLS notes that: “employment and wages are collected from establishments (in the survey) in six semiannual panels for three consecutive years. Every six months, a new panel of data is added, and the oldest panel is dropped, resulting in a moving-average staffing pattern. The three years of employment data are benchmarked to represent the total employment for the reference period (2017, in this case). The wages of the older data are adjusted by the Employment Cost Index. This methodology assumes that industry staffing patterns change slowly and that detailed occupational wage rates in an area change at the same rate as the national change in the ECI wage component for the occupational group. The use of six data panels to create a set of estimates means that sudden changes in occupational employment or wages in the population or changes in methodology show up in the OES estimates gradually. Given the above changes, it is difficult to make conclusive comparisons of OES data over time [emphasis added].” Data that is comprised of sets of data collected over three years is not representative of a single year of employment wage gains, especially since two of the years included in that data set, 2015 and 2016, preceded any increase in the minimum wage. More information about the OES survey methodology is available at:
https://www.bls.gov/oes/oes_ques.htm#overview .