The Daily Item, Sunbury, PA

Business

February 26, 2014

Pros and cons of raising the minimum wage

Like most Americans, I love nothing more than curling up in my favorite chair with a warm cup of coffee and a copy of the latest Congressional Budget Office report.

That’s just what I did when I got hold of the CBO’s recent take on the hot topic du jour: the federal minimum wage.

In case you haven’t noticed from the loud and largely inaccurate yelling coming from both sides of the political aisle, the minimum wage has become something of a big issue. President Barack Obama identified raising the minimum wage as a key way to address the income gap in America, while many Republicans, as well as a number of business organizations, say it should remain untouched.

When the CBO last week released its report, “The Effects of a Minimum-Wage Increase on Employment and Family Income,“ both sides found something delicious to chew on.

For opponents of a wage increase, there was the estimate that boosting the minimum wage to $10.10 per hour could reduce total employment by about 500,000 jobs. IT’S A JOB KILLER!

For proponents, the report estimates that 16.5 million low-wage workers could see an increase in their weekly earnings and 900,000 people could rise above the poverty line. IT WILL END INCOME INEQUALITY!

Easy there, people on both sides. If this report says anything, it’s that the pros and cons of raising the minimum wage are wildly difficult to predict and anything but certain. The CBO study is filled with caveats labeled “uncertainty in the estimates“ and enough wiggle room to accommodate a pack of excited puppies.

Accompanying the release of the CBO report was the decision by Gap Inc. to boost the minimum hourly rate it pays employees to $9 this year and then $10 next year. The company’s announcement sidestepped the political back-and-forth and cast a wage increase as simply a business decision, one that will affect 65,000 Gap employees by 2015.

“It wasn’t our intent to coincide with the national debate that’s going on,“ said Jason Bittner, regional director for Banana Republic, a Gap brand. “It’s the right thing to do for the employees. If you have a happy employee within your stores, ultimately you can create loyalty and happy customers who shop in your stores.“

I’ve preached before about the benefit of happy workers, and clearly Gap officials believe the money they invest in higher wages will pay off in increased sales and customer satisfaction.

There’s certainly nothing wrong with that. But what works for a clothing retailer might not work for a different company.

Also last week, Wal-Mart found itself at the center of the wages buzz when it was reported that the company was looking at supporting an increase in the federal minimum wage. That turned out to be not exactly correct.

Wal-Mart spokeswoman Brooke Buchanan said the company remains neutral on the idea of a minimum wage increase, but “obviously it’s something that we look at closely, as any other company would.“ She said that more than 99 percent of company associates are paid above the current minimum wage, with an average hourly rate of $11.81 for full-time and part-time staff.

The CBO report discusses how increased income for low-wage workers might translate into increased spending, and so it’s reasonable to posit that a company like Wal-Mart could see a jump in sales if the minimum wage rose to $10.10 an hour. But Buchanan cautioned against such an assumption.

“That is assuming that consumer behavior would be, ’If they have more money, they’ll spend more money,’ “ she said. “That isn’t always necessarily true. If we had a crystal ball, we could guess what consumer behavior would be in the future if something like (a minimum wage increase) goes through. But you just can’t.“

Wal-Mart and the Gap provide two views on this issue, but imagine the diversity of opinions you’ll find in the myriad companies, big and small, that employ minimum-wage workers. And the variables involved, as the CBO report points out, are almost mind-boggling, at least for a simple mind like mine.

If you look at the CBO’s estimates, it seems that a decision on raising the federal minimum wage could boil down to a moral quandary: Is it better to lift up 16.5 million people while leaving 500,000 unemployed, or would the country be better off making sure there are more jobs, even if it means lower wages?

I don’t know the answer to that. But I think the best thing to do is to use the CBO report as a jumping-off point to closely examine both sides of the argument. That still won’t lead to a definitive solution, but it will at least allow for the formation of an informed, and fair, opinion.

So, I’d like to spend the next few weeks discussing this issue, giving one week to those who support a minimum wage increase, one week to those who oppose it and a final week to review what we’ve learned. (I’ll probably spend the fourth week curled up in the fetal position, praying I never hear the words “minimum wage“ again.)

Your input throughout this will be appreciated, and I hope I can shine a calm and pragmatic light on an issue that is too often overrun by partisan shouting.

If I fail at that, feel free to shout at me all you want.

Rex Huppke writes for the Chicago Tribune. Send him questions by email at rhuppketribune.com or on Twitter RexWorksHere.

 

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