Opponents of minimum wage proposal flunk economics
By Jim Scarantino
Don't look for a Nobel prize winner in economics to emerge among opponents to the proposal to raise the city's minimum wage. They wouldn't even make it through Economics 101.
City Councilor Martin Heinrich has proposed raising Albuquerque's minimum wage to $7.15 from the current federal level of $5.15. Republicans in Congress have prevented any rise in the rate for the past eight years. Heinrich would have Albuquerque join 10 other municipalities and 13 states that have raised their minimum wage rate on their own. Closest to home, Santa Fe bumped its minimum wage to $8.50 about a year ago.
Heinrich's bill would exempt businesses with fewer than 10 employees. His bill would also accept a lower wage rate in exchange for medical insurance.
The most vocal opponent thus far has been City Councilor Sally Mayer, who says the proposal makes her "sick." She bemoans the effects of a higher minimum wage on business and the local economy. She claims this is a federal issue and will introduce a resolution calling upon Washington to lift the minimum wage. Diversionary tactics don't get much more cynical. If she thinks the wage rate needs an increase, she should support Heinrich's bill. There's not a chance this Congress will touch the minimum wage because of a city council resolution or any other reason, and she knows it.
Put political maneuvering aside, and instead grade opponents on their proficiency in economics. They do not fare well.
Opponents insist government should leave wages exclusively to the marketplace. This argument presumes that we live in a free market. You can find such a place next door to Neverland. In other words, except in theory, there is no such place.
A “free market” assumes all sorts of fictions, such as perfect information, perfect mobility of labor and capital, perfectly rational human beings, equal bargaining power, and other make-believe conditions. The real world is so complicated, economists needed to imagine a simplified world just to start talking about economic behavior. To keep inconvenient facts from capsizing neat theories, economists sometimes qualify their declaratory statements with a Latin phrase: ceteris paribus. It means "all things being equal." Or, as “Saturday Night Live”'s Roseanne Roseannadanna would have put it, "Nevermind."
Government involvement in the marketplace is one of those inconvenient facts that can't be ignored. Government not only intervenes in markets, it is an active participant. The people who oppose setting a floor for wages also vote regularly for government handouts to corporations. Developer subsidies are a pillar of their political philosophy. When you get down to it, it's not government intervention in the economy they oppose, it's intervention on behalf of working people that riles them.
An honest conservative would admit that government subsidizes employers paying only the bare federal minimum. Workers earning the federal minimum wage fall below the poverty line. That rate does not cover all the costs of keeping a human fed, clothed, housed, healthy and mobile. Who picks up the difference for mega-corporations like Wal-Mart and McDonald's? Taxpayers.
Nationally, about 20 percent of the working poor are homeless people who can't help but impose costs on the public sector. Forty percent of the working poor are sole breadwinners for their families, and must turn to government and charities for help. States are assuming an increasing burden of providing health care for the working poor. The lowest wage employers effectively shift some of their labor costs to the public. Government has a right to act, if only out of self-defense.
As you would expect, opponents claim raising minimum wage rates hurts businesses. At best, that's an over-generalization. It ignores increases in productivity and quality, reduced turnover and better customer relations. (The "Nevermind" factor at work again).
La Montanita Co-op provides anecdotal evidence to blunt this contention. They calculated it cost $8.13 an hour, plus benefits, to live decently in Albuquerque. So they raised their base salary. They enjoy greater productivity and far less turnover. They are opening new stores in Santa Fe and Gallup. States and municipalities that raised their minimum wage also saw increased employment. Santa Fe's experience has been the same.
Eventually opponents resort to arguing that raising Albuquerque's minimum wage will cause inflation. At this point, they are expelled from economics class. An increase in the minimum wage nationally, let alone within a city, has never been shown to cause inflation. Alan Greenspan is not worried that a burger jockey in Albuquerque might get a raise. It's Bush's staggering deficits and the worsening trade imbalance that give him insomnia.
Opponents might consider a little field research. Try living on the $725 monthly take-home pay of a minimum wage worker. Try it, say, between now and Election Day in October. There's nothing like a few real-life facts to open one's mind to what's really going on out there.
The opinions expressed are solely those of the author. Scarantino can be reached at email@example.com.
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