The conservative argument for a higher minimum wage

By Leonard Hitchcock

Those conservatives who make it a policy never to watch MS-NBC missed an opportunity to witness one of their own making a compelling case to raise the minimum wage. Ron Unz, Silicon Valley multi-millionaire, former editor of The American Conservative magazine and active in California Republican politics, was interviewed by Chris Hayes on February 12. He is campaigning for a ballot measure in California that would raise the minimum wage to $12 an hour and insists that there is a persuasive conservative case for the wisdom of doing so.

Unz’s argument is a straightforward one: The American public will not allow the poor to starve. There will always be a “safety net” of some sort, no matter what political label the government happens to wear, and that net will be paid for by the taxpayers. At present, according to Unz, the country spends $250 billion a year to enable the working poor to survive. In effect, this is a government subsidy to low-wage businesses. We’ve all seen the reports about companies like WalMart instructing new employees on how they can obtain government assistance through food stamps, etc. What this amounts to is the government supplementing those workers’ wages.

Isn’t it the case, Unz asks, that conservatives deplore handouts to the poor? Don’t they believe that such handouts are a disincentive to work, and create an unhealthy (and un-American) dependency upon the government? What if there was a way to stop those charity payments, and, at the same time, encourage the poor to get jobs and support themselves? There is such a way: raise the minimum wage to a level that enables workers to rise above the poverty level, support themselves, pay taxes and funnel money back into the economy.

What about job losses as a consequence of raising the minimum wage? Unz thinks that won’t be a problem because there are few options for employers in the service sector, where most low-wage jobs are. They can’t outsource those jobs, or automate them, economically. The natural solution for them is to retain their workers at a higher wage and pass on the extra cost to their customers. Fortunately, he argues, the cost increases for the consumer will be minimal. He calculates that Walmart would be able to cover the wage increase by raising prices 1.1%; for the average Walmart customer that would mean an annual increase in cost of just $12. McDonalds could cover its increased costs by raising the price of a cheeseburger by $.10. Grocery prices of American-grown foods would, he claims, increase by less than 2%.

The stimulus to the economy of raising the minimum wage would be substantial. Around $150 billion a year, Unz estimates, will flow back into the economy from those whose wages increase. The working poor, after all, spend almost everything they make. Moreover, tax income for the government would increase. When the working poor’s incomes rise above the poverty level, they would be required to pay income taxes and become ineligible for a variety of welfare programs. Under these circumstances, Unz slyly suggests, their sympathy for the Republican position on taxes and spending might well increase.

He also sees benefits in the area of illegal immigration. If farm workers’ wages increase, American workers will find such work more attractive. There will therefore be increased competition in that labor market. Agricultural employers will then have less incentive to break the law by hiring illegal immigrants and the lure of those jobs for foreign workers will be lessened.

Perhaps Unz’s arguments represent a cogent position for those on the right. Perhaps that explains why polls show that a great many Republicans favor increasing the minimum wage. Of course, the issue of job losses still separates Democrats and Republicans decisively. Republicans back away from wage increases more readily than Democrats if job losses are likely, and they are more likely to believe that such losses will occur.

The recent Congressional Budget Office estimates can hardly be said to settle the matter. While estimating job losses at some 500,000, the CBO admits that the real figure could be anywhere between 1 and 1 million. Democrats point, of course, to CBO’s estimate that about 16.5 million workers would benefit from the President’s recommended raise to $10.10 per hour, and pit against the CBO the predictions of a group of prominent economists who think those estimates of losses are wildly exaggerated. It’s difficult to know whose predictions are most trustworthy; perhaps they are all little more than guesses. But it’s surely unlikely, as some Democrats would have it, that increasing the minimum wage is nothing but a win/win situation. It seems undeniable that there will be losers. Yet it also seems that the good that would be done, both in terms of the welfare of the working poor and the boost to the overall economy, is both assured and massive.

Leonard Hitchcock of Pocatello is a professor emeritus at Idaho State University.