Wednesday, May 4, 2011

Scapegoating Nevada’s Minimum Wage


By Tsedeye Gebreselassie

In 2006, Nevada voters did a really smart thing. Recognizing that their state’s minimum wage stayed flat year after year, despite rising costs of living, the people of Nevada voted to index their minimum wage rate to adjust annually with the cost of living. In the last few years, these small annual increases have helped thousands of working families make ends meet in a rough economy, while providing a modest boost in precisely the type of consumer spending our nascent recovery needs.

Rather than celebrate voters’ sound economic move, critics of the minimum wage see an opportunity to once again toss out their usual—and widely discredited—claims that a strong minimum wage is a “job-killer.” Counting on understandable anxiety about Nevada’s stubbornly high unemployment rate, opponents of the minimum wage have proposed state legislation that would begin a repeal process for the initiative passed by Nevada’s voters just four years ago.

Let’s quickly dispense with these “job-killing” claims. Real-world experiences with minimum wage increases have produced little evidence of job losses. The decade following the federal minimum wage increase in 1996-97 ushered in one of the strongest periods of job growth in decades. Analyses of states with minimum wages higher than the federal floor between 1997 and 2007 showed that their job growth was actually stronger overall than in states that kept the lower federal level. And just last winter, a rigorous study finding that increasing the minimum wage does not lead to job loss was published in the Review of Economics and Statistics. Economists at the University of Massachusetts, University of North Carolina, and University of California compared employment data among every pair of neighboring U.S. counties that straddle a state border and had differing minimum wage levels at any time between 1990 and 2006. Analyzing employment and earnings data of over 500 counties, they found that minimum wage increases did not cost jobs.

Yet, critics of the minimum wage are undeterred by the facts, continuing to put the blame for the current recession and high joblessness rate squarely on the shoulders of our nation’s lowest-paid workers. This would be laughable if it weren’t so offensive—and the potential consequences of this shell game so tragic.

It doesn’t take an economist to tell you that the factors causing this recession have very little to do with how much or how little businesses must pay their frontline staff. Indeed, if we’ve learned anything these past couple of years, it’s that relying on rampant financial speculation and irresponsible lending practices to generate the spending that drives our economy, rather than investing in good jobs at good wages, is no way to run an economy. That’s why a robust minimum wage is a cornerstone of any recovery strategy, because it puts money into the pockets of low-income families who will spend it immediately, increasing consumer spending without adding to the deficit. According to the Economic Policy Institute, the small bump in the federal minimum wage in 2009 generated $5.5 billion in new consumer spending.

Over the last 40 years, the real value of the minimum wage has eroded substantially, lagging far behind rising living costs. At its peak in 1968, the federal minimum wage was worth more than $10 an hour in today’s dollars. When Nevada indexed its minimum wage in 2006, it joined many other states—as of today, 10 in all—to ensure that the purchasing power of these wages does not erode over time. On the federal level, minimum wage earners went 10 years without an increase until Congress finally raised the minimum wage in 2007. Repealing Nevada’s minimum wage indexing law might very well lead to the same result.

Gebreselassie is a staff attorney at the National Employment Law Project.

Copyright (C) 2011 by American Forum. 4/11