The Minimum Wage, with a Short Digression Into Media Bias

(WSJ photo)

Economists have been studying the effects of the minimum wage for nearly a century.

The first Federal minimum wage was set at 25 cents per hour in 1938 . Over the years it's been hiked 22 times to the present level of $7.25 an hour. 29 states, including Washington, DC require employers to pay more than $7.25, with California and New York setting the highest State minimum wage at $15.

The current proposal before Congress, supported by President Biden, would raise the Federal minimum wage to $15. The pros and cons of raising the minimum wage are well known:

1) Some workers who make below the minimum will see their paychecks increase;

2) Some employers who have little or no profits and who are not able to pass on the higher wage costs to customers will have to reduce expenses in other areas or even go out of business;

3) Some employers will be induced to cut jobs through a combination of automation and rescheduling--for example raising two $10 employees to $15 and eliminating a third $10 employee. In the latter example there is an additional incentive to eliminate jobs because there are some costs that vary more with the number of workers, not total wages. These costs include Federal and State unemployment and disability insurance and employer-provided health care.

4) Some combination of the above will occur at larger companies.

Simplifying, a minimum wage increase will raise the pay of some and will result in others losing their jobs.

Yesterday the Congressional Budget Office released its analysis of the $15 minimum wage proposal.

But first, the headline from Yahoo! News on the CBO report:

CBO: $15 minimum wage would increase unemployment but lift 900,000 out of poverty

The above headline is a small example of why the majority of Americans believe the "news" media is biased. "Lift 900,000 out of poverty" is a very up-"lifting" phrase, and who wouldn't want that to occur? Meanwhile the cost of the bill--higher unemployment--is just a percentage, a faceless statistic.

Here's the quote from the CBO report:

Employment would be reduced by 1.4 million workers, or 0.9 percent, according to CBO’s average estimate; and

The number of people in poverty would be reduced by 0.9 million.

The honest comparison was 1.4 million jobs lost vs. higher wages for 0.9 million. But the headline writer chose to conceal the negative number.

The Wall Street Journal takes its expected position and places it where it belongs, in the opinion sction.

setting the minimum wage at a high of $15 would essentially put the country through an economic experiment. This would mean imposing the urban labor costs of San Francisco and Manhattan on every out-of-the-way gas station in rural America. The U.S. economy is made up of local and regional labor markets with prevailing wage rates that depend on varying standards of living, the kinds of employers, and the availability and skill of the workforce. Some 20 states have a minimum wage no higher than the current national minimum of $7.25.