In a July 19 article about the scheduled increase in the federal minimum wage from $6.55 to $7.25 per hour, McClatchy provided only arguments from "some economists" against raising the minimum wage now while ignoring economists who argue that this is a particularly good time for the pay increase. As NPR reported in a July 19 article, "[L]iberal economists say this summer is the perfect time for a wage hike."
McClatchy reported that "some economists worry that the wage hike is coming at the worst possible time and will only make the recession-battered job market tougher for the very workers it's intended to help." After describing the case of an Oklahoma woman who would benefit from the increase, McClatchy added, "Some economists argue, however, that with the recession forcing small businesses to lay people off, it would be smart to postpone the increase for a year."
However, McClatchy did not report that "some economists" say that the pay increase now will help the economy. By contrast, NPR reported, "Kai Filion, a policy analyst for the Economic Policy Institute, a left-leaning research group, says this wage hike will generate $5.5 billion in consumer spending over the next 12 months." From the NPR report:
Conservative economists are worried that the government-mandated raise will force small businesses to lay off workers. They note that the job market has deteriorated since Congress approved the 10.7 percent pay raise two years ago. In the summer of 2007, the U.S. unemployment rate was running at about 4.7 percent. Today, it is 9.5 percent. Mandating higher wages could force some employers to cut jobs, the argument goes.
But liberal economists say this summer is the perfect time for a wage hike: It will put more money into the pockets of people who need it most. Fatter paychecks will stimulate spending and help the economy, they say. Kai Filion, a policy analyst for the Economic Policy Institute, a left-leaning research group, says this wage hike will generate $5.5 billion in consumer spending over the next 12 months.
Still, most analysts say that in an economy as large as this one, a minimum-wage hike won't have much impact. For a sense of scale, they point to the stimulus plan Congress approved earlier this year. That $787 billion package was more than 14 times larger than any increased consumer spending generated by the wage hike.
Even some conservative economists concede that studies show that modest wage hikes generally have statistically insignificant impacts on employment nationwide. But they add that for the least-skilled workers, such as teenagers, it will matter. Economist David Neumark of the University of California, Irvine, estimates that this year's wage increase will eliminate about 300,000 jobs for people between the ages of 16 and 24.
Moreover, McClatchy quoted an analyst from the Employment Policies Institute (EPI) without noting the group's industry and lobbyist ties. The article quoted EPI's Kristen Lopez Eastlick, who "said the increase should be postponed because the higher wage will cause employers to reduce hours for workers and cancel plans for new hires." But McClatchy did not identify EPI as an industry-funded, Republican-linked organization.
A July 8, 1995, National Journal report identified EPI as "[a]nother new think tank with even closer ties to industry," which was "started in 1992 by a group of restaurant companies that wanted an alternative source of research on labor issues." Los Angeles Times business columnist Harvey Bernstein referred to EPI in a September 15, 1992, column as the "recently created business-funded Employment Policies Institute" and as the "conservative EPI, financed mostly by low-wage companies such as hotels and restaurants."
The address listed on the group's website is the same as the address for Berman and Co. According to the Institute's IRS Form 990, EPI paid Berman and Co. $725,136 in management company fees in 2007. Richard Berman, a federally registered lobbyist who wholly owns Berman and Co., is EPI's executive director. In October 2008, The Washington Post described EPI as "a front group created" by Berman, who "became famous in Washington fighting increases in the minimum wage for his restaurant industry clients."
From the July 19 McClatchy article:
Two previous wage hikes, one in 2007, the other in 2008, pushed the federal wage to $5.85 and then to the current $6.55 an hour. The third, which goes into effect Friday, will push it to $7.25 an hour.
That's not a life-changing raise -- an extra $28 a week for a fulltime worker earning the federal minimum -- though low-wage earners like Kendell Patterson in Oklahoma City, Okla., say it'll help.
But some economists worry that the wage hike is coming at the worst possible time and will only make the recession-battered job market tougher for the very workers it's intended to help.
The increase will have minimal impact in most states. Eighteen states and the District of Colombia already have minimum wages that are higher or equal to $7.25 an hour. In nine more, the minimum wage is higher than $6.55 an hour and so workers in those states will see their wages rise by only a fraction of the 70-cents-an-hour increase, from four cents an hour in Florida to 40 cents an hour in Nevada.
That leaves 23 states where minimum wage workers covered by the federal Fair Labor Standards Act will enjoy the full 70-cents-an-hour increase.
Patterson said the minimum wage increase won't help her very much, but even a little help is appreciated because times are so hard.
"I feel like people are trying to work and make ends meet and they just can't do it," she said. "They have to pawn something or ask family members for help or try to get a loan. Pretty soon people are going to start stealing from each other and killing each other because of the economy."
Some economists argue, however, that with the recession forcing small businesses to lay people off, it would be smart to postpone the increase for a year.
"There's always a negative impact to a wage hike," said Kristen Lopez Eastlick, senior economic analyst at the Employment Policies Institute. Eastlick said the increase should be postponed because the higher wage will cause employers to reduce hours for workers and cancel plans for new hires.
In addition, employers will look for better-skilled employees, which will make it harder for low-skilled employees to find work. The hardest hit will be minorities, teens and young adults, she said.
"None of those things help that vulnerable workforce who are already finding it tough to compete," Eastlick said.
A 2008 survey by the National Restaurant Association seems to support her contention. It found that after the minimum wage increased in 2007, 58 percent of restaurant operators raised menu prices, 41 percent cut employee hours, 26 percent put off hiring new workers and 24 percent reduced the number of employees.
The impact isn't quite so clear in the retail industry, which also provides a lot of minimum wage jobs. Rob Green, vice president for government and political affairs at the National Retail Federation, said it will be tough to quantify the impact of the minimum wage increase because the recession has so altered the economic landscape.
Others say it would be unfair to low-wage workers to put off the increase over an an economy that was wrecked by the risky behavior of the finance, banking and real estate sectors -- some of which have already received hundreds of billions of dollars in government bailouts.
"It's totally obscene that workers are being asked to bail out and subsidize the bonuses of, essentially, the people that got us in the mess," said Holly Sklar, senior policy advisor for the Let Justice Roll campaign, a coalition of more than 100 organizations dedicated to raising the minimum wage.
"The idea of asking these hard-working people that are constantly juggling bills to bail out the banks and corporations that trashed the economy is disgusting."
Patterson agreed. "If you don't raise it now, things are just going to get worse," she said.
Sklar added that the federal minimum wage was enacted in the heart of the Great Depression, so increasing it in a recession isn't unprecedented.
"The minimum wage was seen as an essential part of an economic recovery because they knew they had to stimulate national consumer buying power," she said. "And that's the same problem we have now."