Not too long ago we saw the effects of a $15 per hour minimum wage in San Francisco when Chipotle was forced to significantly hike their prices. Similarly, businesses in Seattle – particularly restaurants – have been struggling to figure out whether they can increase their prices or will be forced to lay people off to meet the mandate. And those are larger cities with comparatively high costs of living. Such a move in more rural areas would hit many businesses like a sledgehammer. This has left the Democrats with a bit of a conundrum. Some of the more Elizabeth Warren leaning candidates like Bernie Sanders are going all in on the Fight for Fifteen campaign, damn the economic torpedoes and full speed ahead. But as the Washington Post reports today, Hillary Clinton and Barack Obama aren’t quite there yet.
Obama and Clinton have both expressed support for raising the federal minimum to $12 an hour, up from $7.25 an hour today. Other Democrats want to go further, to $15 an hour, including House Democratic Leader Nancy Pelosi and two of Clinton’s opponents for the presidential nomination, Bernie Sanders and Martin O’Malley.
Neither Obama nor Clinton has spoken critically of a $15-an-hour federal minimum. But recent comments from the candidate, and from officials in Obama’s administration, suggest Clinton and Obama may be worried that such a large increase could prove too much for some parts of the country to bear…
“The national minimum wage is a floor, and it needs to be raised,” she said. “But let’s also remember that the cost of living is different in Manhattan than in Little Rock and many other places.”
This is clearly a week for unexpected political coverage. It’s a rare day indeed when I find myself saying, Hillary Clinton has a point there. Of course, in this case it’s not really that Clinton and Obama are right… they’re just less wrong than Sanders, O’Malley and Warren. Clinton is pointing to one of the chief capitalist pillars underlying this discussion and doing so correctly. She simply takes off from there and arrives at the wrong conclusion because of political expedience.
Hillary’s representative spoke out on the subject and repeatedly referred to the “federal floor” for a minimum wage. There are persuasive, tempting arguments made by those who wish to raise the minimum wage everywhere, generally centering around lifting lower income workers out of poverty and giving them more money to spend which, under this theory, boosts the economy. But as usual, a one size fits all solution rarely if ever works in a nation comprised of such a diverse tapestry of local economies. Giving somebody in Manhattan fifteen dollars an hour to do anything is likely going to be an improvement in their lives to some degree, but they probably still won’t be able to afford to live near where they work. If you do the same thing in Harlingen, Texas, you’ve essentially turned the guy making your sandwich at Arby’s into a tycoon.
When you begin messing with the economic balance with no concern for the prevailing conditions you’re going to create a few positive outcomes alongside any number of disasters. As John Harvey explained at Forbes when this latest round of minimum wage talk began, you’re looking at the problem through the wrong lens.
[T]he most effective means of increasing the incomes of the poor is not to legislate an increase in their wages, but to stimulate the demand for labor to the point that firms are induced to pay more by choice. Make them want to pay in excess of the federal minimum wage because they cannot otherwise find enough employees to meet customers’ demands. And we have the tool to accomplish this through federal deficit spending.* This is precisely what we should be doing right now and should have been doing aggressively since the onset of the crisis. In fact, we are moving in the opposite direction (Obama’s greatest failure: The rapidly falling deficit).
But this is still a big deal for the Clinton campaign. Even if she can somehow manage to slide her way out of the email swamp she created and dust herself off, the liberal upstarts in her party will be demanding a pound of flesh for their support. She’ll either need to cave on this and go for a full economic implosion or find a way to explain to Bernie Sanders’ supporters why she won’t do it. Good luck with that.