In an apparent effort to convince Democratic voters that he’s just as crazy as socialist Bernie Sanders, billionaire Tom Steyer said this week that he will now advocate for raising the federal minimum wage to a shocking $22 an hour. Fox News reports that Steyer made the promise during a campaign event in South Carolina this weekend.
Steyer’s announcement puts him to the left of both Sanders and Sen. Elizabeth Warren, both of whom have championed a $15/hour minimum wage.
We suppose Pete Buttigieg should quickly endorse raising the minimum wage to $55 an hour, just to make sure he doesn’t lose ground.
At this point, why don’t these candidates simply campaign on a platform of directly buying votes? Just skip the middleman.
Fox Business reviews why Steyer’s idea is not a good one:
According to a Congressional Budget Office report published in July 2019, increasing the federal minimum wage to $15 per hour could result in 1.3 million workers losing their jobs. (The report estimated there’s about a two-thirds chance that somewhere between zero and 3.7 million workers would lose their jobs).
It could also have negative consequences for small businesses, which tend to operate in more competitive markets with thin margins.
“A higher minimum wage reduces the family income of business owners to the extent that firms’ profits are reduced,” the CBO report said. “Real income is also reduced for nearly all people because increases in the prices of goods and services weaken families’ purchasing power. Over time, as businesses increasingly pass their higher costs on to consumers, the losses in business income diminish and the losses in families’ real income grow.”
The CBO has not studied the effects of raising the federal minimum wage to $22 an hour, presumably because no one other than Steyer has been reckless enough to propose such a thing.
Asked at the October debate how he would close the American income gap, Steyer explained the theory that got him to this latest announcement: “If you took the minimum wage from 1980 and adjusted it for inflation, you get 11 bucks. It’s $7.25. If you included the productivity gains of American workers, it would be more than 20 bucks.”
This is the kind of thing that sounds good on television, but it falls apart under any serious scrutiny.
First of all, the people who make minimum wage work primarily in the areas of hospitality, service, and retail. Those industries have seen very little in the way of increased productivity since 1980; there’s only so much you can do to serve more burgers or clean more hotel rooms. On the other hand, those industries responsible for the biggest gains in productivity – say, advanced manufacturing – can attribute most of those gains not to better workers but rather to labor-saving technology. Besides, most of the people working in that industry are already making well above minimum wage – even Steyer’s hyperinflated version.
The impulse to rob from the rich and give to the poor is an understandable one. But when the aspirational impulse meets the cold steel of reality, the results are not pretty.