Jack Roberts: Do we need another debate over the minimum wage?

Guest Columnist By Guest Columnist The Oregonian
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on February 21, 2013 at 5:00 AM, updated March 07, 2013 at 5:55 PM
By Jack Roberts

Among the laundry list of proposals contained in President Barack Obama's State of the Union address last week one of particular interest to Oregonians should be his plan to raise the federal minimum wage from $7.25 to $9 an hour by the end of 2015 and thereafter index it to the consumer price index.

That's because Oregon's state minimum wage is already $8.95 an hour and is indexed to the federal consumer price index. That means Obama's proposed minimum-wage hike won't really affect Oregon businesses, but would presumably eliminate the competitive advantage other states (other than Washington, whose $9.19 minimum wage is the highest in the country) currently enjoy by virtue of their lower minimum wages. By leveling the playing field, Oregon should benefit, right?

The answer depends on whether our higher minimum wage has placed Oregon at a competitive disadvantage in the first place.

I've spent the past 10 years working in economic development in Lane County, and I can honestly say that during that time Oregon's minimum wage has never been a problem for the companies we've tried to recruit. That's really not too surprising since 97 percent of full-time workers and 94 percent of all workers across the country already make more than the minimum wage. Also most minimum-wage workers are in retail, particularly hospitality and food service, whose competition is other local businesses that are subject to the same minimum-wage laws.

Most traded-sector businesses -- ones that sell goods and services in a regional, national or global market -- already pay more than the minimum wage. They have to to attract and keep the workers they need to be successful. Those are the kinds of businesses for which Oregon and other states are competing, the ones that help grow our economy and increase our incomes.

Until the 1990s, nearly all economists agreed that minimum-wage increases caused at least some higher unemployment. Then in 1995 two economists from Princeton University, David Card and Alan Krueger, published a book titled "Myth and Measurement" that challenged this assumption. Their findings and methodology were in turn questioned by other economists, and for the past two decades dueling research studies have failed to reach a consensus on the impact of minimum-wage laws on jobs.

Not being an economist, I've reached my own conclusion that in recent decades variations in state minimum wages and periodic increases in the federal minimum wage simply haven't affected enough people to have a significant impact on unemployment rates or other major economic indicators, for better or worse. Any tendency in that direction seems to have easily been overshadowed by other economic and social forces during the same period.

While activists on either side can always cherry-pick statistics to support their positions, I'm convinced these minimum-wage increases haven't significantly destroyed or created jobs, reduced or increased poverty, nor caused or cured income inequality.

This is similar to the conclusion reached by Krueger and Card, who wrote, "It is worth stressing that the intensity of the political debate surrounding the minimum wage -- on both sides of the issue -- is out of proportion to its real importance in the economy. Our findings suggest that the minimum wage is a modest transfer program with relatively small efficiency losses. Opponents tend to exaggerate its adverse employment effects, while proponents tend to exaggerate its effects on poverty."

That's not to say there may not be other problems created by a minimum-wage increase that deserve study. Even if it doesn't reduce total employment, it can change the mix of jobs and, more important, the mix of people who get those jobs.

Antony Davies, an economics professor at Duquesne University, recently charted the relationship between a worker's education and higher minimum wages, defined by how close the minimum wage is to the average wage. Using data from 1978 through 2010, he found that a higher minimum wage had no effect on the unemployment rate for college graduates but a measurable adverse effect on high school graduates and a much greater negative effect on high school dropouts.

After four years of high unemployment and the corresponding loss of work experience among so many young people today, I'd rather we explored ways to prepare the next generation for jobs in a changing economy than listen to both sides regurgitate their old arguments about the minimum wage.
