LUEBKE: Judging By The Detroit Debate, Democrats Are Having A Hard Time With Economics

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Bob Luebke Civitas Institute
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Democratic presidential candidates Bernie Sanders and Pete Buttigieg continued to urge adoption of higher minimum wage laws at the Democratic debate in Detroit. Sanders told his colleagues all Americans want and need a living wage and that’s why he’s fighting for legislation to raise the federal minimum wage to $15 an hour. Buttigieg took the argument to another level when he chastised lawmakers for blocking legislation to raise the wage, invoking scripture: “Whoever oppresses the poor taunts their Maker.” 

Is a higher federal minimum wage a workable idea? Let’s remember that Sanders was forced to eat a generous portion of humble pie when the public found out he was paying his own campaign staff the equivalent of $13 hourly. He raised their wage to $15 by cutting employee hours. Reality crashed in on yet another utopian plan. 

Hypocrisy notwithstanding, Sanders, other Democrats and progressives continue their quest to raise the federal minimum wage. The Democratic-controlled Congress passed a bill to raise the federal minimum wage to $15 hourly over the next six years. Here in North Carolina, progressive enclaves like Chapel Hill and Durham spawn organizations like Orange County Living Wage and Durham Living Wage, which are working “to convince employers to pay workers a ‘local living wage.'” (RELATED: A $15 Minimum Wage Would Put More Than A Million Out Of Work — And Tlaib Wants To Hit Even More)

Last year, to the surprise of many, North Carolina Republicans enacted legislation to raise the minimum wage for state workers to $15 an hour. Meanwhile, Democrats introduced no fewer than six bills in the General Assembly to either raise or expand coverage of the minimum wage. 

For years, Democrats and progressives have viewed minimum wage increases as one of the best anti-poverty programs. A review of the evidence shows advocates couldn’t be more wrong; the impact of minimum wage laws is far worse than the symptoms they try to correct. 

After Washington state mandated $15 an hour minimum wages several years ago, researchers found that while wages for low earners rose by 3 percent since the law went into effect, total hours worked for low earners declined by 9 percent. The average worker in Seattle making less than $19 an hour has had their income reduced by $125 a month since the law was enacted. The study also found that since the passage of this law, there are about 5,000 fewer low wage jobs in Seattle. 

The higher wage costs for employers are forcing companies to automate, eliminating even more jobs. Don’t believe me? Visit McDonalds in Seattle, San Francisco, or New York or any city with a $15 minimum wage. You’ll notice the increasing presence of kiosks where customers can place an order without having to talk to an employee.

A recent Congressional Budget Office report estimated that a phased-in $15 an hour federal minimum wage proposal, would likely result in job losses of up to 3.7 million.

The report painted a bleak picture of the proposal noting that “over time as businesses increasingly pass on their higher costs to consumers, the losses in business income diminish and the losses in families’ real income grow.”

Yes, the $15 an hour minimum wage is a job — and income killer.

Even though negative effects of such proposals continue to accumulate, progressives keep pushing. North Carolina has been fighting such proposals for several years while the evidence against a $15 minimum wage continues to mount.  A 2016 study by the Heritage Foundation estimated that implementing a $15 minimum wage in North Carolina would cost the state 367,000 jobs by 2021.

That’s a very costly and inefficient anti-poverty program. Let’s not forget that some of the inefficiency is rooted in the fact that minimum wage policies are poorly targeted. The reality is not all workers in minimum wage jobs are from poor households. As such, wage increases entice higher skilled individuals who often do not come from poor households to apply for higher paying minimum wage jobs and crowd out lower-skilled workers who most need the jobs.

Someone needs to tell Sanders that raising the federal minimum wage is not an anti-poverty program. Nor was it intended to be. There are better ways to help poor and low-income workers. 

The United States needs to cultivate a culture that values job creation, job-training and education.

In 2013 North Carolina passed historic tax reform and lowered income and corporate taxes. Those policies combined with controlled state spending have helped to create over 550,000 new jobs, reduce unemployment from 7.9 percent in 2013 to about 4.1 percent today. Those reforms led to a reduction in poverty over the past several years from a high of 18 percent to the current 15.4 percent. Such changes have made the North Carolina economy one of the best economies in the country. According to Forbes, North Carolina has the best business climate in the United States and tops Forbes’ Best States for Business ranking for the second straight year. The changes are working. 

Reducing barriers to employment can also help to reduce poverty. Too many professions have rules designed to keep out competition and prevent individuals from earning a living.  Eliminating licensing requirements and restrictive business regulations can ease the burden on individuals wanting to start their own business.  

Lastly, we must continue to improve the public schools. Children trapped in failing schools must have the option to access a better education via a charter or private school. A good education is the fastest way out of poverty. 

It’s time for Sanders, Buttigieg and other Democratic candidates to take a good long look at the evidence. Lawmakers at the state and federal levels need to recognize the overwhelming costs associated with minimum wage legislation.

Bob Luebke is director of policy at the Civitas Institute, a conservative, free-market think-tank in Raleigh, North Carolina.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.