Tuesday, May 26, 2015

The Future of Minimum Wage Hikes

What a mess Los Angeles finds herself in, and fourteen of the fifteen city council members voted to make economic matters worse, so much worse.

One can only hope that the rising unemployment, cost of living, and the general economic malaise may quicken the better angels of Los Angeles to rethink or retract the forced minimum wage hike.

Then again, with the powerful public sector unions, and the private union lobbies still as strong as ever with a surging immigration workforce, it may take utter collapse, a la Detroit (with Illinois close behind) for large municipalities to learn that even they, for all their size and celebrity, cannot outwit or outdo market forces or natural law.

Is there any hope for big cities and bloated states to give up on the minimum wage?

Illinois Republican Governor Bruce Rauner once flirted with the idea of bringing down the minimum wage to the federal level. When the media backlash pounced on the idea, like a "GOP War on the Poor" War whoop, he backed off, and supported raising the minimum wage, as long as other regulations were removed to make it easier for businesses to open and thrive.

Illinois Governor Bruce Rauner
In February, 2014 the Chicago Tribune reported:

Almost a month ago, Bruce Rauner pledged at a Downstate candidates’ forum that if elected governor he would slash the state’s minimum wage by $1 to make it equal to the federal rate in an effort to make Illinois more economically competitive.

Why would any governor not want to make his state competitive? Granted, the economics makes perfect sense. Lower the cost of doing business in a state, and the investments will come.

But the optics, the politics of toying with the minimum wage are fraught with risks, and Rauner learned his lesson:

“I made a mistake. I was flippant and I was quick,” Rauner told the Tribune as he continued a bus tour through southern Illinois.

“I should have said, ‘Tie the Illinois minimum wage to the national wage and, in that context, with other changes in being pro-business, I support raising the national minimum wage.’ I’m OK with that,” said the Republican from Winnetka.

Followed by:

Rauner acknowledged the minimum wage topic “a sensitive issue” but accused Democrats of ginning up a “class warfare issue” by creating a state that was “hostile to business,” leading to continued high unemployment.

In spite of his flub, which he corrected, Rauner may have opened a away for conservatives and free-market candidates to have an open, candid discussion about business operations and costs. Businesses pay wages, and thus should raise wages. Why would we want unaccountable, unknowledgeable politicians to spend money which could help entry-level workers learn skills and get better jobs later in life?

Still, to come out and say: "We need to lower the minimum wage" is asking for nothing but trouble, and forcing the wage is just too popular, with all the interest group rage and foment behind it.

Will the round of minimum wage hikes in big cities finally lead working people to recognize that forcing the wage will not a wealthier community create?

Could it be possible that strong leaders will risk their political careers and drive down costs and allow businesses to set the wage at the federal level? If businesses keep fleeing big cities, perhaps the discussion about the wage will be moot.

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