Ohio

Policy Matters Ohio Promotes Job-Killing Minimum Wage Hike

Organizations

Union-funded progressive think tank Policy Matters Ohio advocated increasing the minimum wage as a way to “help the economy” in a February 11 Cincinnati Enquirer editorial. Though minimum wage increases have been shown to decrease youth employment, Policy Matters Executive Director Amy Hanauer suggested all states should imitate Ohio by indexing their government-mandated minimum wage to inflation.

Praising the 2006 law that automatically increases Ohio’s statutory minimum wage, Hanauer wrote, “As a result, Ohioans who wake up each morning to clean office buildings, serve food, and provide care for our elderly will come a little closer to having their wages keep up with the rising cost of basic expenses.”

Hanauer continued, “the modestly higher wages received by low-paid workers in Ohio this year will go right back into the economy, generating economic growth as these workers buy groceries, pay the babysitter, and replace worn-out shoes.”

In the course of celebrating “fairness” by fiat, Hanauer somehow overlooked Ohio’s awful job growth from 1991-2011 and the state’s paltry per-capita disposable income growth from 2001-2011. Tennessee, South Carolina, Alabama, Mississippi, and Louisiana have no minimum wage laws, and all topped Ohio in both job creation and disposable income growth rates.

Also absent from the Policy Matters Ohio editorial was the basic economic concept that businesses pass on their costs to customers or simply hire fewer workers when required to pay higher wages.

“In fact, the real strain in today’s economy stems from the decision made by many national fast food chains and big box retailers to pay rock-bottom wages,” Hanauer explained. “This siphons money out of our communities and impoverishes the customer base needed to sustain economic growth.”

Hanauer fortified her tribute to minimum wage mandates by citing “the nonpartisan Economic Policy Institute,” a progressive DC think tank.

The Economic Policy Institute (EPI) board of directors is controlled by union bosses, who have poured more than $12 million into the think tank’s coffers since 2004. Without fail, EPI research focuses on and supports the priorities of DC labor unions.

Policy Matters Ohio itself acts as a state-level version of EPI, fueled by over $750,000 in union contributions and over $1 million from the progressive Ford Foundation and Joyce Foundation.

Historical data support the logical assumption that raising the minimum wage leads to higher unemployment among young Americans, for whom low-skill positions are often valuable stepping stones to future employment.

A 1981 National Bureau of Economic Research paper concluded, “Overall, our results suggest a modest role for the minimum wage in explaining teenage labor market problems. A ten percent increase in the minimum wage will reduce teenage employment, probably by one percent.”

“David Neumark of the University of California, Irvine, wrote on these pages that the 70-cent-an-hour increase in the minimum wage would cost some 300,000 jobs. Sure enough, the mandated increase to $7.25 took effect in July, and right on cue the August and September jobless numbers confirm the rapid disappearance of jobs for teenagers,” The Wall Street Journal reported in October 2009.

“The biggest explanation is of course the bad economy,” the Wall Street Journal editorial added. “But it’s precisely when the economy is down and businesses are slashing costs that raising the minimum wage is so destructive to job creation. Congress began raising the minimum wage from $5.15 an hour in July 2007, and there are now 691,000 fewer teens working.”

May 2011 study by Bill Even at Miami University and David Macpherson at Trinity University found that young black men suffer more than their white or Hispanic counterparts as a result of progressive attempts to control the labor market through minimum wage hikes.

Based on data from 1994-2010, “Drs. Even and Macpherson focus on 16-to-24 year-old males without a high school diploma, a group that previous studies suggest are particularly susceptible to wage mandates. Among white males in this group, the authors find that each 10 percent increase in a federal or state minimum wage decreased employment by 2.5 percent; for Hispanic males, the figure is 1.2 percent.”

“But among black males in this group, each 10 percent increase in the minimum wage decreased employment by 6.5 percent. The effect is similar for hours worked: each 10 percent increase reduced hours worked by 3 percent among white males, 1.7 percent for Hispanic males, and by 6.6 percent for black males,” a summary of their research explained.

Philip Klein at The Examiner noted after President Obama called for a $9 federal minimum wage in his 2013 State of the Union speech that sparse supporting evidence for increasing the minimum wage has been thoroughly debunked.

Klein added, “Already, fast-food and chain restaurants have been announcing plans to cut back worker hours to avoid the federal penalty for not providing government-approved health insurance. To them, an increase in the minimum wage on top of the health care mandate would be another incentive to cut back on their workforce.”

No doubt Policy Matters Ohio would have a government solution to that problem, too.