With Unemployment Already High, Why Are Leftists Pushing for an Increase in the Minimum Wage?

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Townhall Columnists Daniel J. Mitchell

        With Unemployment Already High, Why

Are Leftists Pushing for an Increase in the

Minimum Wage?

The unemployment rate has been stuck above 8 percent ever since Obama pushed through his ill-fated stimulus scheme to increase the burden of government spending.

This high level of joblessness presumably reduces Obama’s chances of getting reelected, so you would think that Democrats would be very leery of proposals that increase the cost of job creation.

Yet they’ve relentlessly pushed to subsidize unemployment, even though Paul Krugman and Larry Summers have acknowledged that unemployment insurance reduces the incentive to find a job.

Now there’s talk of pushing for a higher minimum wage. Here are some details from a report in The Hill.

Advocates pushing for a minimum wage increase are looking to turn it into an election-year issue as the campaign season heats up this fall. Such a hike is expected to be included in the Democrats’ 2012 platform — which will be presented to delegates at the party’s convention in Charlotte, N.C., next week — a member of the drafting committee told The Hill. …In the eyes of labor unions, consumer advocates and liberal Democrats, the strategy is a no-brainer in an election season that’s featured the birth of the Occupy Wall St. movement, questions about Mitt Romney’s financial practices and a highly partisan debate over which class of workers deserve an extended tax break next year. …A minimum wage hike is not without political risks, however, as Republicans and business groups are warning that such a move would burden small businesses amid an employment crisis when Congress is urging them to hire.

Regarding the last sentence in the excerpt, I agree that a minimum wage hike entails risk, but I fear those risks are to the economy rather than to politicians. Much to my dismay, a majority of voters generally support this misguided policy.

In my attempts to educate these misguided souls, I try to figure out why they favor certain policies. In the case of the minimum wage, this is my rough-draft list of why some people support this perverse form of government intervention.

1. They understand low-income people will suffer if the minimum wage is increased, but that is acceptable collateral damage in the quest for political power.

2. They understand low-income people will suffer in the short run, but they rationalize this harm because there will be more redistribution in the long run if they obtain political power.

3. They understand low-income people will suffer, but that is an acceptable price to pay since it means unions will have more negotiating leverage once low-income workers are priced out of the market.

4. They think low-income people will benefit because the economy is a fixed pie and a mandate to pay more to low-income workers will merely result in less income for the rich.

5. They think low-income people will benefit because of the magic of Keynesian economics – i.e., beneficiaries will have more income, which will then get spent, thus stimulating the economy.

6. They are impervious to evidence and instead are motivated solely by a sense that there should be a minimum income in a “fair” and “compassionate” society.

It’s quite possible, of course, for someone to support higher minimum wages for more than just one reason. Indeed, I suspect  supporters of the minimum wage can be divided into two groups. The politicians and union bosses tend to believe in higher minimum wages for reasons 1, 2, and 3, while ordinary people are likely to support intervention for reasons 4, 5, and 6.

But regardless of what they believe, they’re wrong. This Cato study has all the evidence you could possibly want. But if you don’t have time to read the paper, this video is well worth a few minutes of your time.

Walter Williams also has weighed in on this issue, noting specifically the negative impact of higher minimum wages on minorities.

Sadly, this is one of those issues where it might not make a difference which party wins in November. Romney already has said he favors not only an increase in the minimum wage, but also indexing, which means automatic increases in the future.

P.S. Here’s a very good cartoon showing the impact of raising the minimum wage.

Daniel J. Mitchell

Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.Be the first to read Daniel J. Mitchell’s column.  Sign up today and receive Townhall.com delivered each morning to your inbox.

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