Democrats block Congressional pay raise in quest for minimum wage increase

Democrats announced plans Monday to block a proposed Congressional pay raise unless the federal minimum wage sees its first increase in nearly a decade.

The Democrats, frequently accused by Republicans of lacking initiative, seek to establish a coherent policy platform in the run-up to the 2006 Congressional elections as well as show that they have what it takes to attack Republicans over popular issues. The ambitious Democrat legislation seeks to increase the federal minimum wage gradually; currently $5.15, under the proposed plans this would increase in 70-cent increments until January 2009, where it would remain at $7.25.

Hoping to retain their Congressional seats in what looks to be an increasingly uncertain mid-term election for Republicans, many GOP Congressmen are joining Democrats in support for a minimum wage increase.

“I think it’s the right thing to do. It seems like if I can defend and be sincere about tax cuts, some to the wealthiest, if I can do that,” then a minimum wage increase is also in order, Rep. Mike Simpson, an Idaho Republican, said in a recent interview with Reuters.

House Majority Leader John Boehner, an Ohio Republican who opposes an increase in the minimum wage, Tuesday acknowledged growing sentiment in this election year.

“We may have to deal with it,” Boehner told reporters. — Reuters

This gutsy move is likely to win the Democrats votes and support in the run-up to the mid-term elections, due to be held on November 7th. By playing on the public’s prominent distaste for high-earning, greedy politicians and their sympathy for the nation’s poor, as well as effectively blackmailing Republicans, the Democrats seek to strong-arm their social legislation through Congress as well as show the public that they have initiative. However, there is a more important consideration: what impact will this legislation and the resulting increase in minimum wage have on many of America’s poorest citizens?

The first and most important result of a minimum wage increase would be an increase in unemployment levels. As wages are artificially increased, companies — including retailers, who predominantly pay their unskilled workers minimum wage and are some of the biggest employers in the US — can afford to hire fewer workers and end up cutting jobs. Although many supporters of a minimum wage increase claim that the only people likely to be affected in this way are teenagers with part-time jobs, the reality is that thousands of others would also find themselves out of work — including some of society’s most vulnerable people. For example, after the first state-mandated increase in federal minimum wage, in 1933, over 500,000 blacks lost their jobs. Such high increases in unemployment over a short period of time place undue strain on the welfare system, increasing government spending and hindering the economy.

More complex would be the detrimental impact such an increase in minimum wage would have on the bigger picture, on the economy as a whole. By removing a large source of low-paid, unskilled labor from the job market, the US would be even less able to compete with countries like China than it is already; companies with manufacturing and other bases in the US would have a much larger incentive to outsource, benefiting China and other countries but possibly crippling the US economy’s growth.

There are also other ways in which a minimum wage increase would harm the economy and its workforce. Low-skilled workers, for example, would likely have their career advancement and wages limited as companies find themselves having less money to set aside for on-the-job training programs; these are particularly important in the manufacturing industry, where they provide opportunities for previously unskilled workers to “learn as they earn” and ultimately advance to new, better-paid positions. Although in the short-term low-skilled employees will appear to earn more, the minimum wage increase — by reducing employee access to training — hinders their long-term advancement and lowers their overall wage ceilings.

What, then, is the solution? If the Democrats seek to lower poverty levels and decrease unemployment then — rather than pursuing statist, interventionist goals such as a federally mandated minimum wage increase — they should allow the market to do its own work. Although the federal minimum wage has not been increased since 1997, real hourly earnings have increased by 7% in that time; although the federal minimum wage fell 29% in real terms between 1979 and 2003, unskilled and youth workers have continued to be able to survive and the percentage of people under the poverty line has fallen over the last 25 years. The free market is certainly more capable of maintaining a healthy workforce than Washington is, and policies such as the Democrats’ can only hinder economic progress.

One thought on “Democrats block Congressional pay raise in quest for minimum wage increase

  • June 28, 2006 at 12:21 pm

    While I am opposed to minimum wage laws, I was surprised to find that there is less and less empirical evidence to support the position that they are the job killer that most economists believe them to be. The real reason to opposed minimum wage laws is because they are a huge, off-the-book tax that is very ineffective at helping the working poor because fully two thirds of minimum wage earners are not living in poverty. If you want to help the working poor, the best way of doing so is by expanding the Earned Income Tax Credit.

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