by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Jed Graham of Investor’s Business Daily looks beyond the headline numbers in a new report on our “disproportionately low-wage” jobs recovery.
Contrary to a new study showing that the jobs recovery has been disproportionately low-wage, better-paying work has come back somewhat faster when one adjusts for hours of work.
Because the study, by the National Employment Law Project, looks only at net hiring, it ignores the sharp divergence between the average workweek for low-wage earners (now at a record low) and non-low-wage workers (now a bit longer than before the recession).
Taking total work hours into account, low-wage employment rose 7.8% between the start of the jobs recovery and November 2013, according to the latest Bureau of Labor Statistics industry data available that aren’t tainted by winter storms. That reflects the hours of nonsupervisors in private industries where pay averages up to about $14.50 an hour.
Meanwhile, total hours worked in the rest of the private sector (among supervisors and in higher paying industries) are up 10.1% over the same period. …
… While NELP’s analysis may be factually correct, it arrives at the wrong conclusion about what is happening in the labor market by ignoring work hours. In reality, much of the recent low-wage job creation has been illusory — a function of shorter work weeks, not just more work.
This analytical failure, by extension, casts doubt on NELP’s policy conclusion — that its study supports a hike in the minimum wage to $10.10 an hour — because it misses evidence that employers are responsive to ObamaCare’s penalties.
The Congressional Budget Office’s recent analysis of the Democratic proposal to raise the minimum wage to $10.10 an hour was widely reported to predict a loss of 500,000 jobs. Yet the nonpartisan scorekeeper said that combining a minimum-wage hike with ObamaCare’s employer mandate would likely cause deeper job losses than a wage-hike alone.
ObamaCare’s extra cost “boosts the likelihood that employers’ savings from reducing the size of their workforces would exceed their adjustment costs” that could be made to get by with fewer workers, such as installing labor-saving equipment, the budget agency said.
CBO’s analysis could be wrong. It’s possible that the employer mandate won’t magnify any job losses due to a higher minimum wage, but rather intensify pressure on low-wage employers to keep work schedules below 30 hours.
Either way, the combination of the employer mandate and a $10.10 minimum wage seems to be a problematic approach to lifting up low-wage earners.
Imagine that: An incentive for employers to reduce workers’ hours might actually cause them to reduce workers’ hours, even if the Obama administration rewrites the rules without a proper constitutional basis.