Scott Manley And Laura Dresser Debate Minimum Wage Increase

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Scott Manley And Laura Dresser Debate Minimum Wage Increase

Premiere Date: 
March 7, 2014

WMC's Manley and Center on Wisconsin Strategy's Dresser debate the proposal.

 

Episode Transcript: 

Frederica Freyberg:

But first, differing takes on a minimum wage increase to $10.10 an hour. That's the number that President Obama as well as state Democrats like Mary Burke have been pushing for. But state business groups pushed back this week, citing a study that found Wisconsin would lose 27,000 jobs if the minimum wage increases to $10.10 from the current $7.25 an hour. A poll by Wisconsin Manufacturers and Commerce found just 39% of Wisconsin voters favored the wage hike when told that the higher hourly rate could cost state jobs. Contrast that with the Center of Wisconsin Strategy Funding that the increase would boost wages for more than a half million Wisconsinites, and that the state would gain nearly 4,000 jobs from increased economic activity. Joining us now to discuss the impacts of wage hikes, Scott Manley with the Wisconsin Manufacturers and Commerce, and Laura Dresser, associate director on the Center of Wisconsin Strategy and thanks to both of you for being here.

Laura Dresser:

Thanks for having us.

Scott Manley:

Thanks for having us.

Frederica Freyberg:

I'm just wondering how both things could be true, that we could either lose jobs or gain jobs. I'll go first to you, Laura Dresser, and ask, you say raising the minimum wage would create new jobs. How so most directly?

Laura Dresser:

Most directly, the minimum wage-- I think the point about making jobs is that more money comes into the economy, more money is in people's pockets and it's in people's pockets who spend their money, low-income workers spend more of their money. And so that means that there's more money circulating in the economy. This isn’t a reason to-- You know, that the slam dunk on why to raise the minimum wage has more to do with what the wage should be than it would make 4,000 jobs. That's a modest number, but it's just the point that more money in the economy and workers pockets makes jobs.

Frederica Freyberg:

What about that? It seems to make sense, Scott Manley. If you have more money in your pocket, you might spend it and thereby boost the economy. But you say the reverse and in a much bigger way, that in fact we would lose 27,000 jobs. How would that happen?

Scott Manley:

Because primarily you make it more expensive for employers to hire people, number one. But, number two, when the government steps in and says we're going to raise your labor costs, businesses respond by either cutting jobs, cutting hours or hiring fewer people. And in any of those three scenarios it's a bad outcome for workers. And that's why we oppose the minimum wage increase.

Frederica Freyberg:

So back to you, Laura Dresser. What about those facts or ideas from WMC, that these constrictions would take place if they had to pay more for labor.

Laura Dresser:

This has been the core issue around raising the minimum wage, what is the employer response? I think the simplistic economic model suggests, you raise the wage, the employment goes down. What has happened, though, over the last 20 years is we've had experimentation at the state level where states have raised their minimum wage. The state of Washington is now at $9 an hour. Different cities have raised minimum wage. Each time that minimum wage gets raised that's a chance for economics to go in and look at what happens to jobs, the total number of jobs, in effected sectors, fast food, etc. across borders. And that literature has come out with the surprising result, in 1995, a kind of revolutionary result, that there was little or no impact on jobs. How can that be? The economy is a dynamic thing. Employers predict that they will cut jobs, but then find that they add a surcharge, shift something around, and get lower turnover in fact. So these things actually add up to money. Anyway, it's always the core question, are there job losses or not? And--

Frederica Freyberg:

You say not.

Laura Dresser:

They say, the net evidence from these different studies, is not.

Scott Manley:

I couldn't disagree more profoundly, and in fact I would argue that that argument is on the wrong side of history. It's also on the wrong side of academic research. There was a study that was done by a couple of economists, Dave Newmark and William Washer. They took a look at the scholarly research over almost a two decade period and found that 85% of the studies that looked at the link between the minimum wage and job loss found 85-- In 85% of those studies there is a direct link. And that's borne out by the Congressional Budget Office just a few weeks ago came out and said President Obama's plan to increase the minimum wage to $10.10 an hour would cause between 500,000 and a million lost jobs.

Frederica Freyberg:

She needs to weigh in on that CBO report, I understand.

Laura Dresser:

Actually, the CBO estimate was zero to a million jobs and they picked the middle, 500,000. The range that they gave was zero to a million, because I think the economic literature does have a range. But many studies come in at zero.

Frederica Freyberg:

We're still left in the same place we were when we began, which is how can both things be true? You cite economists. You cite economists. We have this historical record. So maybe we should talk about something different than job loss or gain. And I'll ask you this, Scott Manley, because you referenced it a moment ago, that being that there are some other factors having to do with raising the minimum wage for workers, like perhaps moral or turnover. I mean, does that end up being a positive thing for employers?

Scott Manley:

Well, I think what's really important for us to maintain is the sense that if you have a strong work ethic and if you work hard and you're a good employee, you're going to be rewarded for doing so. And the minimum wage basically says, look, you know, we're just going to have a set wage and government's going to decide what that's going to be, not your work product. What do you think it does for morale for the person who’s been working hard for two years to maybe go up from $8 an hour to $10 an hour and be rewarded for a good employee, and then suddenly somebody comes along and right off the bat gets $10 an hour just because the government says so? That's a morale problem.

Frederica Freyberg:

In fact, Laura Dresser, you said in your report, I think, that actually boosting the minimum wage to $10.10, then kind of that becomes the floor, so everyone goes up, which isn't great for the people who are employing these people, but it is for the workers.

Scott Manley:

But where’s the money come from?

Laura Dresser:

Right, you know, I think here's a question of, what's the minimal standard in the labor market in this, the richest country on the planet? What are we going to have the minimal standard? And are we going to have hundreds of thousands of workers who have to rely on government support because the wage they bring in is insufficient to support their family? You know, one of the studies that came out this week is that increasing the minimum wage to $10.10 at the federal level will save $6.4 billion in food stamps.

Frederica Freyberg:

So there is that issue, I guess, but it's not specific necessarily to the cost of doing business for the employers in Wisconsin.

Laura Dresser:

Right.

Frederica Freyberg:

But one question, Scott Manley, does a lower minimum wage actually attract business to a state like Wisconsin? I mean, would employers say, oh, I want to go there because they're one of the states that has a $7.25 minimum wage?

Scott Manley:

Well, businesses want to be somewhere where they can be competitive, and they look for competitive cost structures. And labor costs are certainly a part of that calculation, but so is the tax structure, and so it's a variety of factors. But getting to the point of does the minimum wage help lift people out of poverty? If you look at the US Department of Labor statistics, the percentage of workers age 25 and older who make the minimum wage is 1.1%. The minimum wage is not a transformational economic policy. It's actually earned by a very small percentage of people. And the study that we saw said that the average Wisconsin family that would earn $10.10 an hour, or the average worker, lives in a household making over $58,000 a year.

Frederica Freyberg:

You know what? I know you want to jump in on this, but I am getting the wrap. And so we need to leave it there. Laura Dresser and Scott Manley, thank you very much.

Scott Manley:

Thank you.

Laura Dresser:

Thank you. 


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