by Rob Roper
First, thanks to Dave Gram of the AP for asking my opinions regarding the some legislators’ call for a “bill of economic rights,” including a proposed increase in the minimum wage. We had a good conversation on the topic, not all of which made it into the article.
In regard to increasing the minimum wage, Dave quoted me as saying, “They’re going to increase unemployment if they raise the minimum wage.” Accurate enough, but he then moved on to point out, “But the data on that question appear mixed.”
A fuller explanation of my comment might be helpful.
Looking strictly at the numbers, and recognizing that there are myriad forces at work on unemployment, Gram’s article points out that raising the minimum wage in the past has yielded mixed results. In 2007, Vermont raised the minimum wage from $7.25 to $7.58 – a 4.5% increase. Unemployment increased slightly. However, in 2004, Vermont raised the minimum wage from $6.25 to $6.75 – an 8% increase. Unemployment went slightly down. And this, Gram says, was the largest increase in the minimum wage in state history.
However, the minimum wage increase being discussed in this “bill of economic rights” would mean moving from $8.73 to $12.58 or even $15.00 per hour. Those are increases of 44% and 72% respectively. It is not hyperbolic to describe these as massive increases. They are talking about an increase 550% to 900% larger than the largest increase in state history. This will have an impact on employment.
To put this kind of increase in perspective, it would be like the price of gasoline going from $3.50 per gallon to $5.00 or $6.00 per gallon overnight. Imagine what that would do to family budgets. Imagine what it would do to the economy. An 8% increase in the price of gasoline would mean a jump from $3.50 to $3.78. Painful and undesirable for sure, but not ridiculous.
It is also important to recognize that those most harmed by minimum wage increases are youth. Roughly half of all minimum wage earners are teenagers. As our governor pointed out at length, we have a drug addiction problem in Vermont. Anything that creates barriers to getting teenagers off the streets and involved in productive, self-affirming activities is not a good idea. The best social program, after all, is a job. And, the real minimum wage is and always will be $0.00.
– Rob Roper, president of the Ethan Allen Institute.