The Wages of Liberal Guilt

Right Angles

By Noam Neusner

Published November 18, 2009, issue of November 27, 2009.
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‘Should” may be the most dangerous word in modern politics, because on its wings do some bad ideas fly.

Take the case of the minimum wage. Slightly more than two years ago, the Democratic-led Congress voted for an increase in the minimum wage, from $5.15 an hour to $7.25 an hour over three stages. This raise was increased on the basis of “should” — as in workers earning the bare minimum should earn more.

Now, it happens that “should” sometimes comes into direct conflict with “will” — as in, if you raise wages for young, inexperienced and unskilled workers (who are the ones earning the minimum), fewer of them will get hired.

In the battle between “should” and “will,” “will” won.

In June 2007, the overall unemployment rate was 4.6%, while the unemployment rate for teenagers was 16.1%. Today, those rates stand, respectively, at 10.2% and 27.6%. So while the recession caused the general unemployment rate to jump by 5.6 percentage points, the rate for teens leapt a whopping 11.5 percentage points.

Recessions, of course, are not kind to teenagers, but this one seems to have been particularly unkind — and the hiked-up minimum wage is a key reason why. Contrast the recent leap in the teen unemployment rate with the historical record: In the 2001 recession, the teen jobless rate rose by only 2.1 percentage points to 15.9%; in the 1990 recession, the teen unemployment rate rose only 3.3 percentage points, to 18.3%; in the recession of 1981-1982, it rose 5.5 points to 24.1%; and in the 1980 recession, it rose 3.6 points, to 19.1%. Indeed, data from the National Bureau of Labor Statistics going back all the way to 1948 does not show a single moment when the teen unemployment rate has been as high as it is now.

There is no doubt that the current recession has wreaked havoc on all areas of the economy. But those who earn the least are suffering more than others. What’s more, we knew this could happen. As Barack Obama himself wrote in “The Audacity of Hope”: “It may be true that any big jumps in the minimum wage discourage employers from hiring.”

The flip side, Obama argued then (and argues today), is that the minimum wage is a standard for economic fairness. “Working full-time should mean enough to support a family,” he said. There it is again, that pesky word “should.”

In truth, this isn’t about families. For liberals, it’s about good political theater. You don’t earn many votes by opposing a raise for the lowest earners, and by the same token, it’s easy to feel good fighting for a hike in the minimum wage. (The Jewish Council for Public Affairs issued a self-congratulatory e-mail marking the two-year anniversary of the minimum-wage increase, something it lobbied for. It said, back in July, that raising the wage “is not only good for families who are struggling to get by in these tough times; it is also good for the overall economy.”)

It’s also easy to demonize employers who have lots of minimum-wage workers. After all, what’s a 50-cent bump to them? Who can begrudge workers such a raise?

But while wage scapegoating is easy, economics is harder work.

First of all, nobody seriously thinks that even a modest number of American households subsist on the minimum wage. Only 2% of working men and 3.6% of working women have their wages currently pegged to the minimum. The average hourly wage for non-farm non-managers is $18.72, or more than twice the level of the minimum wage.

The minimum wage is a minimum for a reason: It’s paid largely to the workforce’s youngest or most inexperienced and unskilled workers. Those earning the minimum wage have not yet proven that they are worth more than that to employers — otherwise, they could do better (and always do).

Half those earning it are under the age of 25, and half of those are ages 16 to 19. Some 40% are at their first-ever jobs. And for those earning the minimum, it’s a short-lived experience: Two-thirds receive a raise within a year.

The minimum wage is one of the phoniest issues in liberal theology — a rallying cry for “economic justice” that has no cost except to those silent and faceless few who find themselves inconvenienced — and jobless — by this mandate.

Trouble is, today’s silent and faceless few number at least 300,000 teenagers who don’t have jobs this year but had them last year, according to James Sherk at the Heritage Foundation. Economists will quibble over this point, but there seems to be a fairly consistent linkage — a 10% increase in minimum wage equals a 1% to 2% decline in low-skilled jobs. A price worth paying? Ask those jobless whose future long-term earnings are permanently hurt.

As it turns out, when trying to deliver economic justice, liberals have placed their thumb on the scales: Yes, some workers got a raise over the last two years, but many lost their job or couldn’t find a job in the first place. The cost of satisfying the liberal conscience on the issue of fair wages is high — and it is borne particularly by those who actually would work for less than what liberals think fair.

Noam Neusner is the principal of Neusner Communications, LLC. He served as a speech writer and Jewish liaison for President George W. Bush.

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