Minimum Wage Debate Key to 2014 Election

Minimum Wage

The debate surrounding raising the federal minimum wage is likely to be a key factor in the upcoming 2014 election. President Barack Obama called for an increase in the minimum wage in his recent State of the Union Speech. The current minimum wage is $7.25 per hour and has been at that level since July of 2009. Obama’s proposal calls for an increase to $10.10 per hour. He also signed an executive order requiring that all contracted federal employees be paid at least that amount, and he called on state legislatures to implement their own wage increases without waiting for Congress to take action.

This attention on the issue of the minimum wage has caused pundits on both sides of the political spectrum to declare that the issue will help their party gain an advantage in the upcoming election. Democrats and labor union officials believe wages are a “winning” issue for them and could play a significant factor in changing the dialogue away from the Affordable Care Act (ObamaCare) which some Democrats are seeking to distance themselves from. Raising the minimum wage is far less controversial than ObamaCare among middle class voters and economic equality is an issue that remains popular with Democratic voters.

This can be seen in recent polling data where 48 percent of respondents stated that Democrats would be more likely to increase wages than Republicans. In another study conducted by the AFL-CIO labor union, they state that 66 percent of respondents believe that raising the minimum wage would be a good thing for the economy. The recent Congressional Budget Office (CBO) estimate of 500,000 lost jobs due to a minimum wage increase is downplayed by such groups. They claim that the estimate is unreliable, and furthermore that even if 500,000 jobs are lost, many millions more would benefit from the wage increase. This debate regarding the impact of a minimum wage increase will still be key to the 2014 election.

Republicans and conservative commentators take a different view of the issue. They point to the CBO report and the associated job losses and argue that those 500,000 jobs could be just the tip of the iceberg in terms of job losses. They argue that the estimate is too optimistic and that the initial job losses could be much more severe, numbering in the millions. They further argue that even if the initial job losses are only restricted to 500,000 jobs, the future impact of a minimum wage increase could have a “chilling effect” on future hiring. The increase of the minimum wage could discourage companies from expanding and hiring more employees. Job losses would not be restricted to downsizing and elimination of current positions, but it would prevent future jobs from being created.

Republicans also attempt to reconnect the minimum wage issue to ObamaCare, which they believe will benefit them in the upcoming election. They make the case that the subsidies and benefits associated with ObamaCare already amount to a “wage increase.” The act of requiring companies to provide expanded benefits, or the government stepping in to subsidize those benefits, has the same net impact on employee compensation as a direct wage increase. Republicans argue therefore that Obama and the Democrats are essentially “double dipping,” and trying to further increase the burdens for companies in terms of required employee compensation.

Both sides make interesting arguments and predictions regarding the impact of a minimum wage increase. Both sides also believe that concentrating on this issue will benefit them in the upcoming election. Regardless of the point of view, the minimum wage debate will be a key in the 2014 election.

Editorial by Christopher V. Spencer

Sources:

The New York Times
Forbes
Bloomberg Business Week
U.S. Department of Labor

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