by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Democratic presidential front-runner Hillary Clinton cited economist Alan Krueger during a debate Saturday to defend her position that the federal minimum wage, currently $7.25 an hour, should be $12 an hour, not the $15 that many liberals activists are calling for.
Krueger’s position, in turn, is based mainly on three studies, only one of which specifically looked at the potential impact of a $12 minimum wage.
Of the three, only one involved recent data in a major country — specifically, the impact of the United Kingdom’s minimum wage, which it first adopted in 1999. However, the U.K. minimum wage is the equivalent of $10.20, not $12. …
… Those comparisons don’t tell us much about what raising the current nation rate to $12 an hour would do, countered Douglas Holtz-Eakin, former director of the Congressional Budget Office under President George W. Bush and now president of the American Action Forum, a conservative leaning think tank. The most important factor is how much the rate is raised by from one year to the next.
“The move from where we are to $12 or $15 is a very big move. They did not move that big between, say, 1967-68. It is the change in the wages that drives the impacts on employment and other fallout on the minimum wage. So you want to look at the degree of change, not the level,” Holtz-Eakin said.
The federal minimum rose from $1.40 in 1967 to $1.60 the following year, an increase of about 14 percent. Raising the minimum by $4.75, as Clinton proposes, would be an increase of about 65 percent.
Holtz-Eakin said there isn’t much point in comparing the U.S. and the U.K. economies. “They have completely different labor markets and completely different sets of social programs,” he said.
Left unexplored is the fact that a government-mandated minimum wage — in any country — prices unskilled and some low-skilled workers out of the labor market, leaving them with a real minimum wage of zero.