The Tribune Democrat, Johnstown, PA

William Lloyd

August 11, 2013

William Lloyd | Obama’s minimum-wage plan would serve GOP goal well

— In his State of the Union address, President Obama proposed an increase in the minimum wage. The fact that Obama is advocating the raise is sufficient reason for many congressional Republicans to reject the idea. However, if they are serious about reducing dependency on government programs, these Republicans should reconsider their opposition.

The current minimum wage is $7.25 per hour. Under the president’s proposal, the rate would increase gradually, until it reaches $9 by the end of 2015. In subsequent years, the wage would rise automatically, to keep up with inflation.

An increase to $9 would offset the effect of inflation since 1981, thereby bringing the buying power of the minimum wage back to its level at the beginning of the Reagan administration. The automatic increases after 2015 would prevent inflation from eroding that buying power in the future.

The most frequent objection to the president’s proposal is that increasing the wage would actually hurt many low-income workers. Specifically, critics argue that the cost of the wage increase would force employers to lay off some current employees or reduce their hours and would also cause businesses to postpone hiring additional employees. Admittedly, those outcomes are likely in some cases.

However, the Obama administration contends that increasing the purchasing power of minimum-wage workers would stimulate the economy, thereby creating jobs to offset any that would be lost because of the increase.

To support that argument, the administration cites studies showing that past increases in the minimum wage have not had a significant effect on overall unemployment.

The argument about the effect on jobs is important, but it misses an essential point: In order to achieve the goal of reducing dependency on government programs, people who work in low-income jobs must be able to earn more than they do now.

A person who works full-time at a minimum-wage job earns $15,080 per year. An income of $15,080 is above the poverty level for a single person, but is below the poverty level for a worker who is the sole support of a spouse or a child. Furthermore, an income of $15,080 is more than $4,000 below the poverty level for a family of three.

That means that a single parent supporting two or more children earns considerably less than is needed to avoid poverty.

A second objection to the president’s proposal is that those employers who do not lay off workers or reduce their hours would have to raise prices. As a result, the cost of the higher minimum wage would be passed on to consumers.

Admittedly, price increases would hurt consumers, including those who are working in minimum-wage jobs. However, this argument also misses a crucial point. The Republicans’ goal is to reduce dependency on government programs. Those programs are financed by taxes. Paying taxes is mandatory. In contrast, if the price of a good or service provided by minimum-wage workers goes up, consumers can choose not to purchase that good or service.

A third objection is that raising the minimum wage would disproportionately benefit teenagers who are still living with their parents. In response, the Obama administration estimates that teenagers comprise fewer than 20 percent of the workers who earn less than $9 per hour.

However, there is a more important point. Many teenagers work in seasonal or part-time minimum-wage jobs in order to help pay for a college or technical school education. In most instances, the cost of that education is growing more rapidly than the overall rate of inflation. As a result, many students are heavily dependent on loans subsidized by the taxpayers, or attend an educational institution that receives significant taxpayer funding.

A higher minimum wage would enable those teenagers to save more for their education, thereby at least modestly reducing the need for government help.

A fourth objection is that many adults in minimum-wage jobs are simply supplementing what is already a “comfortable” household income. However, according to the Obama administration, the workers who would benefit from a $9 minimum contributed nearly half of their households’ total wages in 2011. That means that, rather than being “comfortable,” the families of these minimum-wage workers likely had a lower total income than half of the households in the country.

A guiding principle for congressional Republicans is that Americans need to depend more on their own effort and less on government programs. To be consistent with that principle, congressional Republicans should support an increase in the minimum wage.

William Lloyd of Somerset represented Somerset County in the state House of Representatives (1981-1998) and served as the state’s small business advocate (November 2003-October 2011). He writes a monthly column for The Tribune-Democrat.

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