How Republicans Can Take Back the Minimum Wage

Republicans should propose pegging the minimum wage to the employment rate.

Congressional Democrats are once again pushing for an election-year hike in the federal minimum wage, from $7.25 to $10.10 an hour, over three years. And they just might get it.

Republicans have traditionally resisted minimum-wage hikes as job killers for low-skilled folks, and rightly so. If I drive up the cost of that fast-food restaurant worker’s hourly wage, I also drive up the cost of the food I’m buying, and thus the overall amount of food I’m willing to buy. In short, I’m cutting off my own nose to spite some kid’s employer’s face.

And yet Republicans traditionally end up losing the debate, usually after being bought off with some fig leaf tax cut or pork barrel spending for their business allies. And they will probably lose this latest round, too, unless they can come up with an attractive counterproposal that reframes the whole issue. I have a suggestion for how they can do that.

So far this year, Republicans have been winning by not losing, content to cite a February Congressional Budget Office analysis that predicts that the Democrats’ proposed 40 percent increase would destroy 500,000 jobs. That talking point has kept them together, and even enabled them to block consideration of the bill by winning an initial procedural vote in the Senate two weeks ago. But the bill’s supporters are undeterred. Senator Chuck Schumer, D-N.Y., vows that the Senate will “vote again and again and again” on the issue until the GOP goes along.

And he’s not wrong to assume the Republicans will eventually cave. Few of them are opposed to raising the minimum wage as a matter of economic principle; still fewer, on constitutional grounds. Most, like Senator Susan Collins of Maine, are willing to raise it, but only if it’s done more slowly than Democrats want. Others, like Senator John McCain of Arizona, want to “get something” in return for each hike (think: Keystone pipeline). Still others, like Senator Rob Portman of Ohio, want to reform it to make the whole issue harder to demagogue, by indexing it to rise automatically with inflation.

So Democrats can easily pass a bill, if they’re willing to compromise. But why would they? The public overwhelmingly supports a big wage hike, because the number of voters who expect to benefit greatly exceeds the number who expect to be harmed. The political math trumps the economic math. And if Democrats should fail to get the hike passed before the election, they at least have a political issue to run on this year, which, they’re betting, will enable them to get it passed next year. Win-win.

But Democrats are not being passive. They’re trying to neutralize the Republicans’ job-loss argument by reframing the issue as one of reducing income inequality. Pointing to the same CBO study Republicans cite, they argue that their bill would increase the incomes of 16.5 million low-wage workers and lift more than 900,000 families out of poverty. Sure, a few jobs might be destroyed, they concede, but overall “inequality” will be reduced and the lives of working Americans improved. Or so the argument goes.

Some Keynesian progressives go further, suggesting the Democrats’ bill would actually create jobs by stimulating consumer spending. This, if you think about it, is nonsense — tantamount to claiming that a man can increase his income by giving his kids a bigger allowance. (If only.)

But Democrats deserve points for creativity. To win, Republicans will have to be at least as creative. Which brings us back to counter-proposals.

Portman is on to something with his desire to index the minimum wage to inflation. Five states have done so with their own minimum wages (which cannot be below the federal floor), and it has helped depoliticize the debate in those states. It may also be helping to reduce the rate at which their minimum wages grow.

I base this assumption on an historical analogy. Before the 1970s, Democrats routinely used Social Security cost-of-living adjustments as a political weapon, just as they do with minimum wage hikes. But one day that changed. President Nixon offered to sign a one-time, 20 percent cost-of-living adjustment hike, to take effect right before an election, in exchange for indexing future adjustments to the Consumer Price Index. Democrats took the bait, and there hasn’t been a politically driven hike since.

Of course, indexing it to inflation doesn’t make the minimum wage any less of a job destroyer. The cost of living isn’t dependent on the employment rate. To minimize the negative impact on jobs, you have to index the wage to employment.

And that, I think, is the way forward for Republicans. They should propose to peg the minimum wage to the national employment rate. Future hikes would occur automatically whenever unemployment is at or near its natural low-point, or when it is falling faster than a certain rate — and only then.

They could say, “The government should only be allowed to force up wages, and thus destroy jobs, when the overall number of jobs is growing. If we tie the minimum wage to employment, we incentivize Washington to expand the number of jobs, instead of merely debating how many jobs it’s okay to destroy.”

Democrats would find themselves on the horns of a dilemma: They could accept a reform that diminishes their future opportunities for demagoguery, or they could argue squarely in favor of net job destruction as a matter of principle, in the middle of the worst economic recovery since Truman was president. Which team would be divided, then, I wonder?

If minimum-wage opponents don’t unite behind something at least this creative, it’s a safe bet that they — and low-skill job seekers — will lose yet again.

Dean F. Clancy, a former senior Republican official in Congress and the White House, writes on U.S. health reform, budget and constitutional issues. Follow him at deanclancy.com or on twitter @deanclancy.


[Originally published at usnews.com, May 15, 2014. @usnewsopinion. Republished at deanclancy.com.]

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