LETTER TO THE EDITOR: Millions of workers would benefit from increase in minimum wage

Monday, February 24, 2014 | 2:56 p.m. CST

A recent opinion piece by Patrick Ishmael (Columbia Missourian, Feb. 21) from the corporate-funded, conservative Show-Me Institute provided a biased analysis of the minimum-wage issue.

Ishmael claims that the “awful truth” is that increases in the minimum wage harm the low-skilled and poor.

He cited a recent report from the Congressional Budget Office  that “up to a million people could lose their jobs” if the minimum wage was increased to $10.10 an hour.

This is an extreme example of selective citation to serve an ideological agenda.

Let’s look at the Budget Office report. This nonpartisan group predicted the following effects of a hike in the minimum wage to $10.10:

  • Increased weekly wages for 16.5 million workers;
  • A $5 billion net increase in income for families below the poverty level;
  • A $12 billion net increase in income for families between one and three times the poverty level;
  • And the elevation of 900,000 persons out of poverty.

The effect on employment was likely to range from a very slight decrease to a loss of 1 million jobs.

Why did Ishmael only cite the upper limit of the predicted job loss and ignore the rest of the Congressional Budget Office analysis?

The answer is in the funding sources for the Show-Me Institute.

The view that raising the minimum wage leads to job loss is based on traditional economic theory. However, there are good reasons to question this.

In a recently released letter, 600 Ph.D. economists, including seven Nobel laureates, supported raising the minimum wage to $10.10 an hour.

They state that the “weight of evidence” is that “increases in the minimum wage have had little or no negative effect on the employment of low-wage workers.”

They further state that increasing the wage could stimulate economic growth by increasing the purchasing power of low-income consumers.

The awful truth is that at a time when corporate profits are sky high, compensation for corporate executives is escalating, and income inequality is greater than at any time in the last 80 years, it is unconscionable that there are persons in this country who work full time for wages that leave them in poverty.

Robert Blake lives in Columbia.

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Michael Williams February 24, 2014 | 3:52 p.m.

"This is an extreme example of selective citation to serve an ideological agenda."

Ok, Mr Blake. Let's look at some of the things YOU left out. The following are exact excerpts from the CBO summary linked to your letter, following by my comments (designated "me"):

(1) Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects. As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers.

Me: What does this sentence say....statistically? It says the mean loss is estimated at -500,000 workers (7.8 billion dollars at $7.50/hour) WITH A SINGLE STANDARD DEVIATION MEASURE of +/- 500,000 workers (that's what the "two thirds" means). CBO is calculating a "confidence interval" around their estimate, and that 1/2 of that interval is essentially 100% of the mean. That ain't "confidence". It's a shotgun pattern....statistically.
(2) The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO’s estimate. However, those earnings would not go only to low-income families, because many low-wage workers are not members of low-income families. Just 19 percent of the $31 billion would accrue to families with earnings below the poverty threshold, whereas 29 percent would accrue to families earning more than three times the poverty threshold, CBO estimates.

Me: Huh? 19%?

(3) Real income would increase, on net, by $5 billion for families whose income will be below the poverty threshold under current law, boosting their average family income by about 3 percent and moving about 900,000 people, on net, above the poverty threshold (out of the roughly 45 million people who are projected to be below that threshold under current law).

Families whose income would have been between one and three times the poverty threshold would receive, on net, $12 billion in additional real income. About $2 billion, on net, would go to families whose income would have been between three and six times the poverty threshold.

Me: Ok, this is billed as helping the "poor" get out of being "poor. Yet, the bulk of the money (74%, 14 divided by 5+12+2) goes to those ABOVE the poverty line.

(Report Comment)
Michael Williams February 24, 2014 | 3:55 p.m.

And, finally:

(4)"...the increased earnings for some workers would be accompanied by reductions in real (inflation-adjusted) income for the people who became jobless because of the minimum-wage increase, for business owners, and for consumers facing higher prices.

Me: Let's talk about the "for business owners" part. Here's what I posted a few days ago, but never got an answer. FYI, you are now "it":

Situation: I have 5 new employees at $7.50/hour, 2x6-month employees at $9.00/hour, 4x2-year employees at $10.50/hour, 6x3-year employees at $13.00/hour, and 4x5-year employees at $16.00/hour.

So, I raise the salary of 7 employees (5+2) to $10.50/hour.
Now....what do I do with everyone else? I need a plan, and you're it. It's your call.

PS: Right now I'm paying $498,160 per year in salaries to this group. With the plan you are about to come up with, what would be the new total annual salaries I would pay?

PPS: I erred with the $10.50 part. I should have made my calcs with $10.10. Nonetheless, you can use my figures to get to the REAL point.

(Report Comment)
Michael Williams February 24, 2014 | 4:11 p.m.

I just finished reading the "summary" for the CBO report.

My conclusion?

The effect is SO minimal, and the uncertainty SO large, that CBO cannot make any accurate or precise predictions whatsoever.

This conclusion is supported by (1) my quotations and points above, and (2) the very last sentence in the CBO report, to wit: " It is unclear whether the effect for the coming decade as a whole would be a small increase or a small decrease in budget deficits. "

Translation: "We don't have a clue."

PS: My second conclusion is: Financially, this is a non-issue made into an issue for pandering purposes.

(Report Comment)
John Schultz February 25, 2014 | 12:18 p.m.

Oh no, Show Me Institute is corporate funded! What a bad, evil bunch of folks. Guess I shouldn't have sent them $50 back in December. That Sourcewatch article really stretches to make them seem much naughtier than they are.

(Report Comment)
Michael Williams February 25, 2014 | 1:56 p.m.

JohnS: Folks like Blake gripe mightily when corporate money and/or lobbyists fight against a favored sacred cow, but remain silent when money supports that same cow.

For example, the NRA was recently criticized for lobbying in Missouri.

Probably not going to be much criticism from those same folks concerning pressure applied by outside companies and the NFL on what is happening in Arizona right now.

I'm not supporting one side or the other. I AM griping at the logical inconsistencies.

(Report Comment)
Ellis Smith February 25, 2014 | 2:16 p.m.

"It all depends upon whose ox is being gored." - (Old saying)

You don't see many oxen on the streets or highways in the United States today. But there's another old saying involving oxen: "Dumb as an ox." No shortage there?

(Report Comment)
Michael Williams February 25, 2014 | 4:10 p.m.

Ellis: Yeah, oxen really take it on the chin. They're dumb, they get gored, they get fattened and eaten, and they get compared to editorial writers.

PS: A doctrine's validity does not depend on whose ox it gores. Somebody else said that, not me. I'm just a repeater.

PSS: I'm amazed no one has answered my salary question above. I'm forced into a conclusion that (1) math skills are low, (2) the answer is not liked, or (3) both.

(Report Comment)
Skip Yates February 25, 2014 | 8:34 p.m.

@ Michael: Nicely written. No, I don't want to do the math either Its a simple fact, though, that increased expenses are passed to the consumer. Thats sensible economics, particularly for a smalll business. Just out of curiosity, I looked up 6 or 7 of those Phd economists. First, all are not. Nor was I suprised to find that two were also climate change experts. I forget the first one; but, the professor from Evergreen was the second with writings on climate change.

(Report Comment)
Michael Williams February 25, 2014 | 9:46 p.m.

Skip: Although you didn't do the math, I'm quite confident from your past posts that you understand the implications of raising the salaries of entry-level folks to that of more experienced folks. Supporters of large increases in the minimum wage do not understand the "domino effect" plus serious morale problems if those more experienced don't get a similar salary increase. Minimum wage increases do NOT just affect those getting the minimum wage.

In my example given above, the effect upon the bottom line of a company retailing 1 million/year and paying those salaries is significant. If that business cannot raise its prices, the profit is easily cut in half and maybe even more. PO'ed employees (the experienced ones) may leave (yes, I've seen it happen).

PS: I'm doubtful there are many minimum-wage jobs worth $10.10/hour. I don't think those employees, doing the job they are doing, can make the company $24.05/hour in revenue (assumes a reasonable 42% of gross sales equals salaries paid).

(Report Comment)
Michael Williams February 25, 2014 | 9:49 p.m.

Skip: My main complaint is that no one....had a plan.

It's so easy to say "Higher minimum wages!!!!", but when faced with a salary situation that is "real life", and when faced with the potential for very real effects upon the bottom line and employee morale....those same folks either (1) refuse to admit the negatives, or (2) simply have blank looks of ignorance on their faces.

(Report Comment)
Skip Yates February 26, 2014 | 12:28 a.m.

Michael: Of course there is no plan. I have yet to see one from any advocate. And, I doubt if any of the 600 ever ran a business, paid employees, had to worry about the myraid of other factors, such as insurance, employee morale, social security, health, overtime, sick leave, (though some wouldn't apply to min. wagers ) etc., etc. But, I like the round number 600..reminds me of a battle in Balaclava a few years back.

(Report Comment)
Ellis Smith February 26, 2014 | 10:05 a.m.

Michael and Skip:

Of course there was/is no detailed plan, inclusing measures to address possible negative consequences. If that situation only applied to minimum wage it might not be so bad, but it doesn't.

(Report Comment)

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