Friday, October 10, 2014

Raising the floor: An introduction

On April 30, 2014, the U.S. Senate tried to bring a bill that would raise the federal minimum wage to $10.10 per hour.  Republican Senators filibustered the bill.  54 Senators voted to proceed with final consideration and 42 Senators opposed going to final consideration so the filibuster was successful and the bill was not voted on in its final form. The vote proceeded on party lines with the only Democrat not voting being Mark Pryor and the only Democratic Senator voting against moving the bill forward was Harry Reid, which was done with procedural reasons.  Republicans and other conservatives have largely been upset about efforts to raise the minimum wage instead, relying mainly on the claims of fast food workers and labor organizations to attempt to raise the minimum wage to $15 hour as opposed to efforts to raise the minimum wage that are politically viable.  The raise to the minimum wage to at least $10 per hour is inevitable but the raise to $15 per hour is not politically viable at this point.

Fast food organizers and various labor organizations have been calling for a significant increase to the minimum wage to $15 per hour.   The criticism against raising it is frequently subpar and if taken to their logical conclusion would have disastrous results.  I don't really want to spend too much time taking apart the criticism because I don't believe that the raise to $15 per hour minimum wage is something that could be implemented at the federal level for several years.  It seems pretty clear that the argument to raising the wage to $15 per hour is a negotiating tactic intended to highlight the wage disparity that is currently happening and to instigate action to raise the minimum wage.  Once the wage is raised to $10 per hour both sides can claim a partial victory which is what both sides want.  I really want to focus on why the minimum wage hike is a political inevitablity, why it is probably a good thing, and why most of the arguments against it are bananas.  I may generalize the arguments that I have read or seen from other people but I am hoping not to strawman any of the arguments.

The Congressional Budget Office (CBO) produced an analysis of the effect of implementing a $10.10 per hour minimum wage.  According to the CBO, low wage workers would see a total increased income of $31 billion.  19% of that $31 billion would go to families at or below the poverty level with 29% going to families earning up to three times the poverty threshold.  There would be decreases in income for those who lost their jobs due to the raise in the minimum wage, business owners, and consumers facing higher inflation prices.  The CBO estimates that after accounting for all of this, overall income would increase by $2 billion.  More importantly, real income would increase by $5 billion among families at or below the poverty level.  This would move 900,000 people out of poverty.  Families whose income would be between one and three times the poverty level would receive $12 billion in additional real income.  Families between three and six times the poverty level would receive an additional $2 billion in additional real income.  Business owners and those making over six times the poverty level will see their incomes decrease only as much as their profits decrease.  


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