Into the Great Minimum Wage Mess We Charge

By now, most Coloradans who intend to vote are well aware of what Amendment 70 would do: Raise the state’s minimum-wage rate. This doesn’t mean they necessarily understand what the minimum-wage rate is and what increases do.

Old definitions and arguments don’t seem to hold much sway with voters, so let us propose something new: The minimum wage is a political wage earned by politicians and labor-financed cause groups looking for votes from an overwhelming majority of people who haven’t earned a minimum wage since high school. 

Successful selling of minimum-wage increases in legislatures and by ballot initiatives across the country have relied on two myths that are the pillars holding up a great lie.

The first myth is that regular minimum-wage increases are needed to keep people from slipping into poverty or to lift them out of it.

Economist David Neumark of the University of California Irvine is one of the nationally renowned experts on the minimum wage. In a December 2015 article for the Federal Reserve Board of San Francisco, Reducing Poverty Via Minimum Wages, Alternatives, he points out, “Setting a higher minimum wage seems like a natural way to help lift families out of poverty. However, minimum wages target individual workers with low wages, rather than families with low incomes. As a result, a large share of the higher income from minimum wages flows to higher-income families. Other policies that directly address low family income, such as the earned income tax credit, are more effective at reducing poverty.

“The ineffective targeting of low-income families does not imply that higher minimum wages do not, on net, help the poor. Instead, the implication is that, for every dollar of benefit to poor families, there is also a large benefit to nonpoor families. This makes the minimum wage an inefficient redistributional policy.”

In another article for the Federal Reserve, Neumark teamed up with William Wascher, a researcher for the board of governors of the Federal Reserve Bank, to pore over all the credible literature on minimum-wage studies and concluded, “ … we see very few — if any — studies that provide convincing evidence of positive employment effects of minimum wages … the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.”

The second myth is the pixie dust thrown in the eyes of voters to make them believe that linking minimum-wage increases to yearly increases in the Consumer Price Index (CPI) forever solves the issue and keeps it out of the realm of politics. Amendment 42 put paid to that lie. 

Remember it? Colorado voters passed it in 2006. It raised the state’s minimum-wage rate and linked it to yearly increases in the CPI. So if it worked, why the need for Amendment 70?

To whatever small credit you can give for slyness to the alchemists who concocted Amendment 70, it is that they, too, realize what a sales sham CPI increases are. 

“Although Amendment 70 and current law both use the CPI to adjust the minimum wage,” says the Blue Book of the Colorado General Assembly’s Legislative Council, “Amendment 70 prevents a decrease in the minimum wage if the cost of living falls.”

So what is the point of the CPI at all, if it’s not truly an adjustment and if it supposedly didn’t work to keep up with the cost of living under Amendment 42? Amendment 70 would set new minimum-wage rates on every January 1 of 2017, 2018, 2019 and 2010—regardless of the CPI.

But wait! You can just hear one of the initiative’s authors decrying, let’s keep the CPI in Amendment 70 just in case there is some fool who thinks it matters.

Gov. John Hickenlooper knows what damage minimum-wage rates can have on job-creation and job-retention. He once owned a business, and he early on expressed his apprehension about Amendment 70’s impact on Colorado’s rural and smaller communities. But the political John Hickenlooper came out for its passage a week before ballots began being sent to Colorado voters—although his endorsement of Amendment 70 set no bar for enthusiasm. 

Should you vote for Amendment 70, remember: You are helping the labor unions raise their base negotiating level for their members who are earning far above the minimum wage already; and, you are reducing employment opportunities for teens, young adults and the low-skilled.

A rise in the minimum wage has never lifted someone out of poverty—and never will. If the objective is to raise an individual’s power to earn a living wage, then let’s work together to empower that individual with the necessary education and work skills which have been proven to alleviate poverty.