Elizabeth Warren: Why Isn’t the Minimum Wage Triple What it is Today?

Posted: Mar 20, 2013 7:15 AM

There is no doubt in my mind that liberal Democrats want nothing more than to see the working poor succeed and prosper. They believe in social justice, of course, and wholeheartedly agree that with a little help from government, poor people can magically escape a life of poverty and dependence. However, the policies they invariably propose almost always have the exact opposite effect they intend them to have. Enter Elizabeth Warren’s latest mind-numbing recommendation for raising the standard of living in the United States (via NRO):

In a hearing of the Senate Committee on Health, Education, Labor and Pensions last week on “indexing the minimum wage,” Massachusetts senator Elizabeth Warren inquired of University of Massachusetts professor economics Arindrajit Dube, “If we started in 1960, and we said that, as productivity goes up — that is, as workers are producing more — then the minimum wage is going to go up the same. And, if that were the case, the minimum wage today would be about $22 an hour. So, my question, Mr. Dube, is what happened to the other $14.75?”

In the president’s State of the Union address, he proposed raising the minimum wage from its current rate of $7.25 an hour to $9. The former head of President Obama’s Council of Economic Advisers, Christina Romer, has since taken to the pages of the New York Times to express her opposition to the proposal, which she argues “tends to be more popular with the general public than with economists.”

Ed Morrissey explained in The Fiscal Times last month why another minimum wage increase would almost certainly lead to fewer jobs, higher unemployment, and more disappointed teenagers:

Consider what happened when Congress last passed a minimum-wage increase in 2007. At that time, overall unemployment was 4.7 percent and the job market favored workers. Among those between 16 and 19 years of age, the jobless rate was 15.3 percent, on the lower end of the range seen during the previous four years, the highest rate of which had been 19.0 percent in June 2003 during the previous recession.

By July 2008, overall unemployment had jumped to 5.8 percent due to the then-moderate recession that had begun in December 2007, but youth unemployment rocketed upward by more than five full points to 20.7 percent. As the wage floor stepped upward to its present level by July 2009, the youth unemployment rate rose to 24.3 percent. And while the overall unemployment rate has declined from 9.5 percent at that time to 7.9 percent now (albeit with a plummeting workforce masking the true nature of chronic unemployment), youth unemployment remains at nearly the same level as in July 2009, at 23.4 percent.

Why has this been the case? When forced to pay more for labor, businesses will insist on getting more value for their money – experience and proven skills, even in entry-level positions. Younger workers never get a good chance to earn their stripes. That has long-term implications for their ability to earn in the future, as well as the social costs of high unemployment and restlessness of youth.

Liberals can always be counted on to support big government ideas -- especially if they’re centered on helping “the poor” -- because they feel morally obligated to Do Something. But just because an idea sounds good -- like a $22/hour federal minimum wage, for example -- doesn’t mean it actually is. There are many different ways to create prosperity and opportunity in our cities and suburbs -- but more government mandates from Washington probably isn’t one of them.

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