Another week, another polarizing result from the (nonpartisan) Congressional Budget Office. The new one, which was released yesterday, is about how a minimum-wage increase would affect employment and family income around the country. Like the last report, which had some controversial projections about the Affordable Care Act's effects on the labor force, it's given ammunition to both sides in Washington: to Democrats (who have been calling for an increase in the federal minimum wage in recent months) and Republicans (who oppose it). According to the CBO's projections hiking the federal minimum wage to $10.10 an hour, from the current $7.25, would indeed increase overall compensation to low-wage workers by some $31 billion. But the number of workers who would benefit would, per CBO, decline, as companies reduce the number of workers to contain labor costs; total employment would decline by about 500,000 people.
I wanted to offer a comment on this because I've repeatedly argued in favor of raising the minimum wage, specifically in Texas (which is one of the states where the minimum wage is, by default, the same as the federal minimum). I made that argument in my book, and elaborated on it here at Texas Monthly, exactly one year ago. I still think raising the minimum wage would be a good idea--especially in Texas. I'll explain why after the jump.
Let's begin with the usual caveat about the CBO's projections, and similar such endeavors: making projections is a necessarily imprecise practice. With that said, the CBO's logic is squarely in line with usual arguments for and against the minimum wage. In general, raising the minimum wage means that people who earn that wage will earn more income. That's generally considered a good thing, at least in the context of the United States circa 2016, where the federal minimum wage is a modest $7.25 an hour. Conversely, minimum wage increases--and, in fact, the minimum wage itself--is generally thought to have adverse effects on employment in general; if companies have a limit on what they can afford to spend on labor, and labor becomes more expensive, they will purchase less labor--in other words, hire fewer people. There are plenty of debates amongst economists about the details--about whether, for example, a minimum-wage increase will cause companies to lay off full-time workers, or to decline to hire extra part-timers, and so on--and the CBO report reflects some of that uncertainty. (The headline figure--500,000 fewer jobs--is actually the office's central estimate; getting more specific, they predict that there's a two-thirds chance that the actual figure would fall between "a very slight reduction in employment and a reduction in employment of 1.0 million workers.") While Democrats have questioned the CBO's numbers, then, they haven't really questioned the office's logic.
Texas, in my assessment, is a state where we could reasonably expect the negative employment effects--the job losses--to be on the low end of the range. I explain my reason in the piece linked above at more length, but the gist of it is that there are a couple of factors about Texas that don't apply to all states. First of all, Texas has exceeded every other state in creating and preserving jobs. Our unemployment rate has been lower than the national average for more than six years. Our total employment number has steadily grown almost every month for nearly as long. Since the beginning of the century we've been creating jobs in every which way--in pretty much every industry, every city, and every wage quartile. And many of those jobs have been minimum wage jobs. But if you think about the types of jobs that pay the minimum wage, you can see why I think the minimum-wage job growth is a result of Texas's staggering growth, not a cause--as the population has grown, as state GDP has grown, as the economy has diversified, the state has built hotels and fast-food restaurants and gas stations and movie theaters to meet the needs of its growing population. And in Texas, in contrast to a place like the District of Columbia--where the recent campaign to raise the minimum wage was challenged by companies (specifically Wal-Mart) that threatened to take their business across the street to a neighboring jurisdiction--it's not easy to relocate your store if you don't like the labor protections available. A couple of Chik-Fil-As might close. None of them are going to move to Louisiana. The point is not that there would be no adverse impacts of a minimum-wage increase in Texas; there would be some people who are negatively affected, and that should be considered. But if any state can handle an increase, it's this one.
Beyond the pragmatic questions, though, there are normative issues at stake. Here, too, Texas is in a special position. Our poverty rate, at 18.5%, is higher than the national rate (15.9%). Texans who live in poverty are arguably more vulnerable than people living in poverty in other states, because of our threadbare social services, and poverty is correlated with many of Texas's other ills, from public health problems like Type II diabetes to low rates of post-secondary education to the fact that my car gets broken into roughly once every six months on Austin's east side. And--this is significant--our poverty rate is nearly three times as high as our unemployment rate (6.2%). That's because the minimum wage is too low. A person could work full-time, in this state, and if they earn the minimum wage and have one dependent, they won't even make enough money to crack the federal poverty line. That hardly seems fair.
This normative argument, more than the pragmatic one, is the crucial point in favor of raising the federal minimum wage, too. This is the United States; compared to most rich countries, we eschew the welfare state, and as a matter of social mores, we generally expect adults to contribute to their own upkeep if they are able to do so. Millions of people are doing so, and nonetheless unable to provide adequate resources for themselves or their children. This shouldn't be a partisan issue. And, in fact, it hasn't been in the past--the last president to raise the federal minimum wage was George W. Bush. Barack Obama is right to aim for the same goal.
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