San Diego Union-Tribune (Sunday)
SHOULD THE U.S. INCREASE THE MINIMUM WAGE TO REBALANCE THE ECONOMY FOLLOWING COVID-19?
YES
The national minimum wage has not been increased since July 2009. If it had kept pace with inflation as measured by the Consumer Price Index, the national minimum wage should be $8.76 an hour instead of its current $7.25. But given that the unemployment rate is still high, particularly among those who make the minimum wage, more direct aid is needed. This includes the proposed $2,000 payment passed by the House and a continued boost in the unemployment benefit.
NO
The minimum wage in high-cost San Diego is already $14 an hour. An omnibus approach to wages doesn’t right the economic imbalances across the nation. Minimum wage earners are mostly new entrants to the job market. A much better policy approach would be to incentivize moving up the economic ladder by promulgating a national focus on the cost and delivery of a great education. Ultimately, education reform would go much further to moving the needle economically.
NO
Increasing the minimum wage (helping the lowest wage earners), rebalancing the economy (implementing structural transformation leading to economic transformation), and the COVID-19 crisis (decimation of specific industries and small businesses) are three separate issues and should be addressed separately. Although one could argue they are interrelated because mostly minimum wage earners were affected by the COVID-19 shutdowns, raising the minimum wage won’t solve structural economic problems or fix the damage inflicted on small businesses.
YES
Historically as a conservative economist who believes in letting markets set wages for professional jobs, I have not supported higher minimum wages. I actually think minimum wages should be set locally, based on local costs of living, not national. But with further research and in a world of global competition and automation, it is clear that lesser-skilled workers have zero negotiating power and these jobs need a safety net of higher minimum wage rates.
YES
Given the negative impact of COVID-19 on lower-wage workers — many in the service sectors shattered by the pandemic — considering a national increase in the minimum wage is reasonable. To this effect, businesses will need support, too. There should not be a higher wage mandate on employers also trying to rebound from business decline. Increasing the minimum wage along with adequate subsidy for the business sector to support the higher salaries is the only sensible solution.
NO
Many small businesses are struggling already due to COVID-19. They have faced forced closures or dealt with reduced revenues for nearly 10 months and it’s not getting better anytime soon. Owners are looking for ways to cut costs. If the minimum wage is raised, the cost of labor for these businesses increases. And when you increase costs on small businesses, then they must find ways to reduce them. This usually leads to job losses (layoffs, not hiring new positions, automation) or the closure of some small businesses.
YES
At $7.25, the federal minimum wage has declined since the 60s (adjusted for inflation) while compensation for other brackets skyrocketed. Studies show raising the minimum wage has a net positive effect; other wages go up, most of the money is put back into the economy, and “job losses” are over estimated. The vast differences between states (California is now two times certain states) creates perverse incentives to move labor. To placate naysayers, I would consider adding a cost-of-living adjustment.
NO
An increase in the minimum wage will not rebalance the economy, rather it will kill jobs and increase investment in automation. The nonpartisan Congressional Budget Office found that raising the wage to $15 an hour by 2025 could cause 1.3 million workers to become unemployed. Research from the Center for Economic Studies, a branch of the U.S. Census Bureau, has shown that increasing wages cause employers to cut hours and invest in automation.