Higher Minimum Wage to Cost Jobs. Who’s Crying Crocodile Tears?

From the federal government this week are two reports that might test the sincerity of those who believe the way grow jobs — good jobs — is to get government out of the way.  If opposition to government interference in the market is justified because it costs jobs, should we then conclude if government involvement creates jobs there will be no opposition?


tumblr_mpsf8rku4n1qgq1t9o1_500First let’s look at a report released today by the Congressional Budget Office (CBO).  The CBO weighed in on the economic impact that raising the federal minimum wage would have on the economy.  It was a mix of good news with some perhaps worrisome news as well.  On the one hand millions of people would be better off, but on the other hand some people — as many as 500,000 — would lose jobs.


I’m not sure the message is all that mixed, but it could be seen that way.  The loss of jobs is a bright target for critics.


These are best guesses, of course, and it is important to keep that in mind.  A better debate would focus on our priorities, especially in the long run, and then we might want to debate questions that focus on priorities.


Is it better, for example, to have fewer jobs — but better paying jobs — than it is to have many jobs regardless of quality?  It is a simple, maybe too simple, question, but it is worth asking.  It is also important to note that all units of labor and all demand for labor are not uniform and fungible.  And there is an inherent limit to the elasticity of the labor market.  As income rises, demand rises which spurs production and growth, which will have a bearing on the kinds of jobs needed and competition for talent to fill them.  But keep it simple.  Just as jobs tend to be harder to find in a struggling economy (we haven’t forgotten the recession already, right?) they are more plentiful in strong markets.  Good, well-paying jobs are good for the people who get them and good for the economy as a whole.


Quality jobs — not necessarily the number of jobs — built this country, but that goes largely forgotten.  If workers did not have money to spend after covering basic life necessities, there would have been no demand for the products and services that flourished in this country.  That demand in products and services fed a demand for domestic jobs.  We should be having a debate about quality of jobs, therefore, as much as we have one about numbers, but the anti-minimum wage lobby needs a different debate and it is important that we keep them from controlling the debate.


Critics of a higher minimum wage who oppose it on the argument that it will cost jobs put quantity over quality.  (By the way, there are better anti-minimum wage arguments.)  Such criticism requires a flat and rather banal assessment of the labor market for the very simple reason that the health of the labor market cannot be judged by the number of jobs alone.


Nevertheless, if you’re someone losing a job because of an increase in minimum wage rates, that probably is not a good thing.  However, if critics are sincere about delivering more jobs and better jobs, they can do more than complain about the loss of low-paying jobs in exchange for better opportunities for millions more.  They can look for solutions that deliver better jobs…and maybe some economic growth as well.


We have that solution.




The second report released this week comes from the Council of Economic Advisers (CEA).  It assesses the economic impact of the American Recovery and Reinvestment Act of 2009 (ARRA), which was the government’s response to the decimating effects of the Great Recession.  The Recovery Act covered economic stimulus programs ranging from “cash for clunkers” to a 2% tax cut for the middle class.  The results?  There are many, but highlights include over 6 million jobs saved or created and a boost to GDP growth of 2% to 3%.  In short, the Recovery Act worked.


These numbers could be significantly better, too, and if the “job creators” were sincere about creating jobs…or even saving them?  While the Recovery Act did its part to save and create jobs, many politicians have been busy on the other end reducing the work force.


Look at the public sector.  As an outcome of austerity politics, public budgets have been cut.  This has resulted in as many as 600,000 to a million public sector jobs being lost — depending on who is counting — since 2008.  For the most part, these are good paying jobs, too, with benefits.  Middle class jobs.  So if the loss of 500,000 low-paying jobs is a big deal, why isn’t the loss of more better-paying jobs a big deal?


Sure, we get the argument that we cannot afford it.  Government doesn’t “make” anything.  The free market is the answer.  And so on.  But ARRA delivered.  It saved jobs, created jobs, and boost growth.


But you won’t hear critics praise this program.  At best they’ll steer clear and remain silent.  Instead of praising what worked, we hear more about doing less with less.  But the evidence is right here, plain as can be, that government does have a positive role in managing our national economy, at least when done responsibly and without cynicism.  If we care enough about jobs when they are lost, why won’t we care when jobs are made?


English: Al Gore and Newt Gingrich applaud to ...

One wonders…what would Bill have done?

In an era when even Democrats support small government —  Bill Clinton declared that “the era of big government is over” in 1996 — and the promise of “trickle down” prosperity has failed, one has to wonder if the tears shed for jobs lost in a program helping millions of workers are sincere.  Do critics really care about the jobs or is it something else?


A large part of the Recovery Act was delivered in the form of a 2% tax break for the middle class.  This contributed directory to the program’s success.  Rather than “trickle-down” this “middle-out” approach to economic growth worked.  If creating a stronger economy is the our goal, there is something pro-government to learn here. Rather than give credits and cuts where they are not needed, give them to people who will spend their additional resources, rather than sit on them.  This, in turn, stimulates the economy and helps everyone, rich and poor alike.  We knows this works, we have current examples and historical ones, but today’s austerity politics and anti-government sentiments generally work against proven public sector solutions.


These might include spending on the poor, workers, middle class, public sector — that vast majority of Americans we keep forgetting about — through infrastructure investments, tax cuts and credits, and public services.  These investments have a multiplying effect which is reflected in stronger economic growth and that growth can mitigate the cost of these investments.


Once again take the American Recovery and Reinvestment Act, as an example.  Time will tell, but the increased growth in jobs and GDP produced by ARRA should translate into higher future tax revenues and over time a lower debt-to-GDP ratio.  In the end, the program looks to add a very small increment to the government’s overall deficit situation, a vast improvement over what the future would look like without the jobs and growth it helped produce.


So when critics complain of job loss, pay attention to the outrage because it says a lot about priorities when they talk about creating jobs.  If jobs are the priority, let’s pursue programs that create jobs.


Unfortunately many people complaining about job loss really worry less about jobs and more about political objectives of which jobs are an attention-grabbing issue.  This so-called jobs priorities are political, not practical.  When these critics complain about jobs loss they do so to score points and generally take attention away from the facts in the debate.  Otherwise explain what is wrong with the good news in the two reports discussed here.






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