Abolish the Federal Minimum Wage

The idea that the federal minimum wage should exist in some form may sound beyond debate to most Americans, the vast majority of whom have not lived in a time when it wasn’t a political reality. The debate is arguably settled, but maybe not in the way most think.

“There’s a virtual consensus among economists that the minimum wage is an idea whose time has passed,” wrote a prominent newspaper’s editorial board a few years back. “Raising the minimum wage by a substantial amount would price working poor people out of the job market….If a higher minimum means fewer jobs, why does it remain on the agenda of some liberals?”

It’s a good question, which The New York Times posed to its readers in January 1987. “The right minimum wage,” the paper’s editorial board wrote, is “$0.00.”

The editorial board has since changed its position. The basic economics, however, have not changed.

Those basics are sometimes difficult to suss out in a conversation riddled with partisanship. That’s because they’re nuanced—something the Times credibly outlined almost four decades ago. “A higher minimum would undoubtedly raise the living standard of the majority of low-wage workers who could keep their jobs,” the editorial board wrote. “That gain, it is argued, would justify the sacrifice of the minority who became unemployable. The argument isn’t convincing.”

Compare that with research released by the Congressional Budget Office (CBO) in 2019: “For most low-wage workers, earnings and family income would increase, which would lift some families out of poverty,” the agency concluded. “But other low-wage workers would become jobless, and their family income would fall—in some cases, below the poverty threshold.”

That should sound familiar. Yet a few months later, the Times endorsed the proposal that the CBO was responding to: a $15 federal minimum wage.

The paper’s about-face provides a microcosm for how the debate around the minimum wage has progressed in recent decades. Though the issue is more central to the Democratic Party’s platform, some Republicans have gotten on board as well: In 2023, for example, Republican Sens. Tom Cotton of Arkansas, Mitt Romney of Utah, Bill Cassidy of Louisiana, Susan Collins of Maine, and Shelley Moore Capito of West Virginia co-sponsored a bill that would have raised the federal minimum wage to $11 an hour over four years.

So the position has become more politically expedient, particularly among two parties whose economic visions look increasingly similar. But that does not alter the reality that the right minimum wage, to invoke the Times again, is $0.00.

Why, when mandated wage increases help some people? Because the subsequent caveat—and it’s a biggie—has been all but eliminated from the conversation: It hurts others in dire ways. The people priced out of the labor market by minimum wage laws are typically those who are considered the lowest-skilled and least experienced, and who, by extension, may be less likely to recover from losing a job—or find work at all. In other words, the most vulnerable people in society, who these interventions are supposed to help, are instead likely to be adversely affected.

There is a glaring practical problem with the federal minimum wage too: The United States is huge and diverse. It makes very little sense to argue that the same base wage imposed on San Francisco should also apply to, say, all of Mississippi. If Congress had enacted the $15 per hour standard, San Francisco—notoriously expensive as it is—would have seen no change, as its local legislators already set a minimum wage over $18. Mississippi, meanwhile, would have had to increase its minimum wage by more than 100 percent. Lovely as that may sound, it would look considerably less so after businesses started hemorrhaging staff or closing altogether in the face of enormous cost increases.

That doesn’t mean statewide hikes make sense, either. California, an economically and geographically diverse place in its own right, recently increased its fast food minimum wage to $20 an hour, a change that will apply to both San Francisco and the much poorer rural areas in the center of the state. But if there must be a minimum wage, then at the very least it should be set as close to the target areas as possible. Poverty is not a one-size-fits-all kind of problem.

This back-and-forth has been going on for quite some time. “It’s time to put this hoary debate behind us,” wrote the Times in 1987, “and find a better way to improve the lives of people who work very hard for very little.”

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Source: https://reason.com/2024/11/14/abolish-the-federal-minimum-wage/