Governor Tom Wolf of Pennsylvania, is on a mission to lift that state’s minimum wage from $7.25 to $12 per hour. In his quest, he has rolled out the arguments that politicians use every time a minimum wage hike is at hand: a family of four cannot afford the basic necessities of life on a single minimum wage salary; the state will collect more tax revenue if the wage is raised; and of course, “won’t someone please think of the children.”
But everyone knows that raising the minimum wage will make life better for the people who see their wages go up. That is indisputable. What politicians like Governor Wolf gloss over is that raising the minimum wage will also make life much, much worse for the people who lose their jobs as a result of increased costs to business owners. When you require that people pay more for something, they buy less of it. This is as true for employers hiring labor as it is for consumers buying anything from homes to fast food.
Raising the minimum wage helps those workers who likely could have earned more by shopping around for a better job. But the most vulnerable workers - those with the least skills, least experience, and least education - can't earn more by shopping around because they are already being paid what they are worth. Raising the minimum wage doesn't force employers to pay vulnerable workers more. It forces employers to let them go. In the end, the real minimum wage for the most vulnerable workers is zero - that’s what they earn when their jobs disappear.
But some politicians would prefer that you didn’t think about those people. They would prefer that you only thought about how “business” will have to pay for the wage hike - ignoring the fact that every cost a business incurs is ultimately paid by people. Politicians would prefer you think this way so you don’t notice what they’re really doing. What they’re really doing is buying votes. First they buy the votes of people who believe they will benefit from the minimum wage hike, then they buy the votes of people whose emotions outwork their reasoning.
But that’s just the beginning. Politicians also buy the votes of a group of people who do not come close to working for the minimum wage, but whose wages are nonetheless tied to it. And understanding this goes a long way toward understanding why the Democratic party and labor unions have been in bed together so completely and for so long.
How completely? According to the nonpartisan Center for Responsive Politics, labor unions donated almost $200 million to politicians in the 2016 election cycle. On average since 2000, 91 percent of those political donations have gone to Democrats. No other special interest group gives so lopsidedly to one party. Even the oil and gas industries - long vilified as being in bed with the Republican party - only give 83 percent of their donations to Republicans, on average.
In exchange for 91 percent of their political donations, part of what labor unions get from Democrats is on-going pressure to raise the minimum wage. According to the United Food and Commercial Workers International Union, union contracts often peg members’ wages to multiples of the minimum wage, so that as the minimum wage goes up, so too do union wages. Such increases, the UFCW says, are "one of the many advantages of being a union member."
And the strategy pays off for unions. According to a 2004 study in the Journal of Human Resources, lower-wage union workers see their earnings rise following minimum wage hikes at the same time that non-union workers lose their jobs. In the end, raising the minimum wage is less about wresting money from employers and giving it to workers than it is about wresting money from non-union workers and giving it to union labor.
If we’re going to have honest discussions about the wisdom of minimum wage hikes, let’s start by admitting that the minimum wage has become a mechanism by which politicians buy union votes in exchange for destroying non-union jobs and raising union wages. Unfortunately, “compassion,” often ends up being more of a justification than a goal.
An earlier version of this article appeared in the Philadelphia Inquirer.
Unemployment and the minimum wage by worker education and experience.