Wade Goodwyn at NPR recently interviewed me on the increase in the minimum wage by city governments for government workers across Texas. The episode can be found here.
To summarize, there is a concerted effort by liberal groups in Texas to force local governments to raise private wages, which is against the law in Texas, or raise the state's minimum wage, which the state doesn't have one—it matches the federal minimum of $7.25 per hour.
As I note in my much longer interview but a short snippet in the episode, raising the minimum wage is a failed policy based on good intentions to improve the lives of those intended (e.g. teenagers, low-skilled, and less educated) but instead they are hurt the most.
With many Texas cities and counties facing mounting debt loads and underfunded pension plans, this action to raise their minimum wages to around $13 per hour in San Antonio and Austin is a slap in taxpayers’ face. They will be the ones to pay higher taxes to afford these higher wages without often seeing an associated increase in the value of the services provided by these government workers, hence my comment in the episode.
Raising the minimum wage, or even having a minimum wage, is a failed policy to reduce poverty or income inequality, and instead substitutes higher skilled workers who can build machines and invent other technologies to replace lower skilled workers. Recent research (see here and here) that addresses the effects of a minimum wage on the labor market by age cohort and industry are clear: the least-skilled and younger adults are negatively affected by the minimum wage while the national employment level may see little change. This is the case recently in Seattle where the minimum wage was raised to $11 per hour on its way to $15 by 2017 and there has been an exodus of jobs in the restaurant industry this year.
I’ve published articles on the minimum wage increase for government workers and attempts on private sector workers recently at the San Antonio Express-News, Morning Consult, Austin American-Statesman, Tyler Morning Telegraph, McAllen Monitor, and the Foundation’s blog. These go into more detail about the research and the failure of the minimum wage as a public policy and as a tool to improve the well-being of the few who are paid the minimum wage.
Basic economics shows that in a free market a person’s wage is tied to their level of productivity. Finding ways to improve an individual’s productivity by improving our education system, preferably by advancing school choice, and offering options for people to improve their skills is a better path forward than artificially increasing the minimum wage. Skills could be improved through attending a technical school, two-year college, four-year university, or some other form of training that best matches the need of the individual instead of trying to force everyone to go to college, which has been a factor in driving up the cost of tuition.
As the late, great economist Milton Friedman popularized, “There's no such thing as a free lunch.” A minimum wage, or a higher minimum wage, is a perfect example. Let’s start thinking outside the box about ideas to advance wages instead of tinkering around with failed policies of the past.