Senator Pat Toomey Misleads On The Minimum Wage

In case you missed it:

The Senate voted on Wednesday against going ahead on a bill that would gradually increase the federal minimum wage from $7.25 an hour to $10.10 an hour, another rejection for legislation that has been a major focus of the Democrats' 2014 midterm campaign.

The final vote count was 54 to 42, with Senate Majority Leader Harry M. Reid (D-Nev.), who supports the legislation, taking the procedural step of voting against the bill so that he can reintroduce it at a later time.

Of course, our Republican Senator voted against:

"The last thing the American people need is a bill coming out of Washington that would wipe out hundreds of thousands of their jobs. Yet this is precisely what the Senate voted on today. According to the nonpartisan Congressional Budget Office, the Senate Democrats' minimum wage bill will eliminate 500,000 jobs nationwide. And according to other studies, as many as 118,000 Pennsylvanians could lose a paycheck under this measure.

"Even worse, this bill will hit people who have fewer skills and younger workers the hardest -- the very people who most need an opportunity to get into the workforce, get their first job, and start their way up the economic ladder.

"I do not support government policy that puts hundreds of thousands of people out of work.

Ah, but Senator. You left out some very important CBO information, didn't you?

From the CBO webpage called The Effects of a Minimum-Wage Increase on Employment and Family Income, we read:

Increasing the minimum wage would have two principal effects on low-wage workers. Most of them would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold. But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly. [Emphases added.]

You left that out, didn't you?  You had to know it's there because you cited the CBO report but you decided not to tell us about how raising the minimum wage would boost the pay of most low wage workers.

Why?

So how many people are we talking here?  How many would see their incomes boosted?

Luckily the CBO report you only partially cited has an answer (it's on the same page, btw):

Many more low-wage workers would see an increase in their earnings. Of those workers who will earn up to $10.10 under current law, most—about 16.5 million, according to CBO’s estimates—would have higher earnings during an average week in the second half of 2016 if the $10.10 option was implemented. [Emphasis added.]

16.5 million??

Yea, ya left that part out, dincha?

I'd say that by withholding this rather important information, Senator, you're misleading your constituency.

Oh, and one last thing.  You say in your statement that:

We need to stop this bad legislation in its tracks and move ahead on proposals that would actually spur hiring and economic growth...

And yet that very same CBO report says:

Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $2 billion.

Isn't that economic growth?

When Editorials Collide

Every now and then the editorial board over at the Tribune-Review takes issue with something the editorial board over at the Post-Gazette publishes.  More often than not, they don't like what they read.  Surprising, I know.

Which in itself is fine.  Conflicting between editorial boards is a good thing.  But only if both are honest with, you know, the facts.

And we all know by now that the relationship between Scaife's braintrust and the facts is iffy, at best.

Take a look at this from this morning:

Huh?: Those economic “scholars” at The Toledo, Ohio, Block Bugler once again are shilling for a higher minimum wage — this time for fast-food workers and to $10.50 an hour. And, hey, it argues (a word we use loosely), it would raise the price of a Big Mac by only a nickel. “That's a small amount to pay for meaningful change,” it says. Actually, it's a steep price to pay, given that the real result would be fewer of these entry-level jobs.

What they're talking about is this P-G editorial.  Look closely at how the braintrust characterizes the idea of raising the minimum wage to $10.50.  Now let's go see what the P-G editorial board actually says about it:

The low wages don't do great things for the restaurants, either. According to Time magazine, the National Restaurant Association estimates that a fast-food outlet sees 75 percent turnover in employees every year. The story also reported that a letter signed by more than 100 economists said that raising the minimum wage to $10.50 would add only a nickel to the price of a Big Mac.

That's a small amount to pay for meaningful change. We think most Americans would be willing to fork over a few more cents for a Happy Meal if it meant happier times for the workers who make them.

Wait, you mean that wasn't just an argument from the editorial board, but it was from something from Time Magazine?  And it's a group of 100 economists who are making the argument NOT the P-G editorial board? 

Huh, I guess that still would be some real "economic 'scholars'" but just not at the P-G.  Funny how that part got left out.  The argument looks a lot different if it comes from 100 economists, doesn't it?

Here's the Time article, by the way - the real source of that idea.

But why would those actual "economic scholars" say that about raising the minimun wage to $10.50?

Here's what they say from the petition:

We, the undersigned professional economists, support the “Catching Up to 1968 Act of 2013, ” sponsored by Congressman Alan Grayson of Florida. This measure would raise the federal minimum wage from its current level of $7.25, established in 2009, to $10.50 per hour , and with automatic increases indexed to inflation thereafter.

As is conveyed by the title of the bill itself, the real , inflation-adjusted, value of the federal minimum wage has fallen dramatically over time. In 1968, the real value of the minimum wage was $10.65, so that, in fact, an increase today to a $10.50 federal minimum would not even bring the minimum wage fully back to the 1968 standard.

And:

Businesses can readily absorb these small cost increases through minor increases in prices and productivity as well as enabling low-wage workers to receive a slightly larger share of businesses’ total revenues. On average, even fast-food restaurants, which employ a disproportionate share of minimum wage workers, are likely to see their overall business costs increase by only about 2. 7 percent from a rise today to a $10.50 federal minimum wage. That means, for example, that McDonalds could cover fully half of the cost increase by raising the price of a Big Mac, on average, from $4.00 to $4.05.

And as to whether that will decrease  minimum wage employment, they say:

Opponents of minimum wage increases frequently argue that such measures will mean fewer employment opportunities for low-wage workers because businesses will be less willing to hire workers at the increased wage level. But the weight of evidence from the extensive professional literature has , for decades, consistently found that no significant effects on employment opportunities result when the minimum wage rises in reasonable increments. This is because the increases in overall business costs resulting from a minimum wage increase are modest .

And there's more:

Moreover, the overwhelming factor determining employment opportunities for low - wage workers is macroeconomic conditions — whether the economy is growing or in a recession. Thus, in 1968, when the U.S. minimum wage reached $10.65 in real dollars, the overall unemployment rate was 3.6 percent. By contrast, during the depths of the 1982 recession, the real value of the minimum wage had fallen to $8.05 while unemployment peaked at 10.8 percent

You can even check out the economic scholarship supporting the petition here.  Where's the work supporting the braintrust's position?  Someplace NOT bought and paid for by Scaife foundation money, that is.

There's a lot behind the P-G editorial, isn't there?  Not so much for the editorial from the braintrust.

When editorials collide, said George Pal to his bride, I'm gonna give you some terrible thrills.

The Braintrust Misquotes A Democratic Senator!

Yea, I know.  Surprising, right??

Here's what we found in an op-ed at the Tribune-Review today:

By advocating tripling the federal minimum wage at a committee hearing, U.S. Sen. Elizabeth Warren, D-Mass., removed all doubt about her ignorance of basic economics — which a new study confirms.

She thinks productivity gains mean the $7.25-an-hour minimum wage should be about $22 an hour.

If we (and they) wanted to present this issue fairly (and we do), we'd (and they'd) actually quote what Senator Warren said.  So this is what we'll do -  something Braintrust didn't - we'll get you her actual words.  This is from the Huffingtonpost:

"If we started in 1960 and we said that as productivity goes up, that is as workers are producing more, then the minimum wage is going to go up the same. And if that were the case then the minimum wage today would be about $22 an hour," she said, speaking to Dr. Arindrajit Dube, a University of Massachusetts Amherst professor who has studied the economic impacts of minimum wage. "So my question is Mr. Dube, with a minimum wage of $7.25 an hour, what happened to the other $14.75? It sure didn't go to the worker."

Read that again.  She's not "advocating tripling the minimum wage" as much as she's asking a somewhat rhetorical question about the growth of productivity over the last 5 or so decades.  And she's making the point that despite the stagnating level of the minimum wage over the last few decades, workers have produced more - which is to say more money for their employers.

That is what she was saying.  By squeezing what she said into how she's "advocating" raising the minimum wage, the Braintrust is using a so-called "straw man" argument, though appy-polly loggies to my droogs for the gendered metaphor.

This is the study by the way that Warren is referencing:

By all of these benchmarks, the value of the minimum wage peaked in 1968. If the minimum wage in that year had been indexed to the official Consumer Price Index (CPI-U), the minimum wage in 2012 (using the Congressional Budget Office’s estimates for inflation in 2012) would be at $10.52. Even if we applied the current methodology (CPI-U-RS) for calculating inflation – which generally shows a lower rate of inflation than the older measure – to the whole period since 1968, the 2012 value of the minimum wage would be $9.22.

Using wages as a benchmark, in 1968 the federal minimum stood at 53 percent of the average production worker earnings. During much of the 1960s, the minimum wage was close to 50 percent of the same wage benchmark. If the minimum wage were at 50 percent of the production worker wage in 2012 (again, using CBO projections to produce a full-year 2012 estimate), the federal minimum would be $10.01 per hour.

A final benchmark for the minimum wage is productivity growth. Figure 2 below compares growth in average labor productivity with the real value of the minimum wage between the late 1940s and the end of the last decade. Between the end of World War II and 1968, the minimum wage tracked average productivity growth fairly closely. Since 1968, however, productivity growth has far outpaced the minimum wage. If the minimum wage had continued to move with average productivity after 1968, it would have reached $21.72 per hour in 2012 – a rate well above the average production worker wage. If minimum-wage workers received only half of the productivity gains over the period, the federal minimum would be $15.34. Even if the minimum wage only grew at one-fourth the rate of productivity, in 2012 it would be set at $12.25.

And yet the wage is still $7.25 an hour.

When Studies Collide (Said George Pal To His Bride)

In today's Tribune-Review, Scaife's Braintrust has effectively endorsed this Texas A&M study on the minimum-wage.  They write:

A new Texas A&M study concludes that raising the minimum wage retards job creation. Additionally, the study says raising the government-dictated wage floor would not stimulate the economy. It's so simple and fundamental that even a “progressive” should be able to understand it. [Bolding in original.]

I realize there's a lot of competing economic theories on the effects that the raising minimum wage on our nation's employment.  For example in this discussion via Minnesota Public Radio, the "pro" side says it would  pump more money into the economy since those working minimum wage jobs pay for things immediately.  On the other hand, there's the argument that minimum wage jobs are rarely the primary income for a household and raising the rate too high would make jobs "disappear" and hurt the families you're looking to help.

I'm not here to settle that discussion - oh no.

I'm here to look at some of the details from the study endorsed by the Braintrust.  In the paper's abstract we read:

The voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment. For both theoretical and econometric reasons, we argue that the effect of the minimum wage should be more apparent in employment dynamics than in levels. Using administrative data in a state-year panel, we evaluate each employment margin directly. We find that the minimum wage reduces gross hiring of new employees, but that there is no effect on gross separations. Moreover, despite having an insignificant discrete effect on the employment level, increases in the legal wage floor directly reduce job growth. Neither labor force turnover nor the entry or exit rate of establishments are affected. [Emphasis added.]

So what they're saying, as I understand it, is that raising the minimum wage, while it would reduce the rate at which new jobs are created, won't effect, on the whole, the current level of employment ("no effect on gross separations" and "Neither...entry or exit rate of establishments are affected").  So raising it won't kill any existing jobs.

Again, I am not here to discuss whether that's true, only to point out how much that idea conflicts with other things we've found at the Trib.

For instance this from last July:

Jake Haulk, a former Mellon Bank economist and president of the Allegheny Institute for Public Policy, a conservative think tank in Castle Shannon, said the minimum wage is bad policy.

"They're fighting reality," said Haulk. "If you force a minimum wage (increase), you're just going to cost people their jobs."

So I guess the study the Trib just quoted is in direct disagreement with the President of the local think-tank that the Trib's owner supports.  And for those who aren't following the numbers, according to the Bridgeproject, Scaife's various foundations account for about 89% of the support given to the Allegheny Institute for Public Policy.  They've given $5,331,000 to the institute since 1955 1995 (sorry for the typo).  Adjusted for inflation that's about $6,629,320 in today's dollars.

I wonder if they'll be correcting themselves anytime soon.  And I wonder how long it'll be before we see the Trib declare that raising the minimum wage will result in people losing their jobs.

Tracking Teh Crazie - The "Unconstitutional" Minimum Wage

Every now and then it's good to take a peek at teh crazie - and we've done it more than a few times here at 2PJ.

Today, I'd like to look at this paragraph found at World Net Daily (actually it's from Mr Crazie himself, Joseph Farah):

My thought is that nobody in Washington – not Obama, not the Congress and not the Supreme Court – has any constitutional authority to insert itself between employers or potential employers and employees. If two consenting adults, as Obama believes, can do whatever they want to each other sexually, surely two consenting adults have the right to agree or not to agree to perform services for whatever wages they deem appropriate – without any interference from the federal government.

This is your more or less classic tenther argument about the minimum wage.  If it's not specifically spelled out on the Constitution, the Congress doesn't have the authority to implement it.

Too bad the Supreme Court already decided (in 1937!) that Congress does have the authority to set a minimum wage.  From West Coast Hotel v. Parrish:

In each case the violation alleged by those attacking minimum wage regulation for women is deprivation of freedom of contract. What is this freedom? The Constitution does not speak of freedom of contract. It speaks of liberty and prohibits the deprivation of liberty without due process of law. In prohibiting that deprivation, the Constitution does not recognize an absolute and uncontrollable liberty. Liberty in each of its phases has its history and connotation. But the liberty safeguarded is liberty in a social organization which requires the protection of law against the evils which menace the health, safety, morals, and welfare of the people. Liberty under the Constitution is thus necessarily subject to the restraints of due process, and regulation which is reasonable in relation to its subject and is adopted in the interests of the community is due process. This essential limitation of liberty in general governs freedom of contract in particular. More than twenty-five years ago we set forth the applicable principle in these words, after referring to the cases where the liberty guaranteed by the Fourteenth Amendment had been broadly described.

'But it was recognized in the cases cited, as in many others, that freedom of contract is a qualified, and not an absolute, right. There is no absolute freedom to do as one wills or to contract as one chooses. The guaranty of liberty does not withdraw from legislative supervision that wide department of activity which consists of the making of contracts, or deny to government the power to provide restrictive safeguards. Liberty implies the absence of arbitrary restraint, not immunity from reasonable regulations and prohibitions imposed in the interests of the community.

This power under the Constitution to restrict freedom of contract has had many illustrations.  That it may be exercised in the public interest with respect to contracts between employer and employee is undeniable. [Emphases added.]

The United States Supreme Court, 75 years or so ago.

When given the opportunity 4 years later, the US Supreme Court said in US v. Darby:

Since our decision in West Coast Hotel Co. v. Parrish, it is no longer open to question that the fixing of a minimum wage is within the legislative power and that the bare fact of its exercise is not a denial of due process under the Fifth more than under the Fourteenth Amendment.

And yet, Joseph Farah and his merry band of truth-telling tenthers missed this decades old decision.