This commentary was originally featured in The Houston Chronicle on July 23, 2017
This year appeared to be a dream come true for the group “Fight for $15,” as the 85th Texas Legislature heard nine bills that would have raised the state’s legal minimum wage of $7.25 per hour. The increases ranged from to $10.10 per hour by the year 2022 to $15 per hour this year.
Fortunately, legislators helped workers by rightly killing all nine wrongheaded bills. Regardless, the growing chorus of supporters to raise the minimum wage affirms that we haven’t heard the last of this tune.
While supporters point to multiple wages for which they call “a living wage,” the truth is that despite their good intentions the minimum wage is an arbitrary floor for labor services that ultimately harms the people it’s intended to help.
There’s a rare near consensus among economists that price controls lead to poor outcomes in the marketplace, such as the 1970’s controls on gasoline prices that led to long gas lines. But, when it comes to the labor market, somehow basic economics gets lost and a government-mandated wage floor becomes the best thing since sliced bread.
Although the academic literature in economics took time to reach the seemingly undebatable costs of a minimum wage, a growing body of research now supports wage controls leading to unintended results.
For example, a recent study finds that the experiment in Seattle of gradually raising the minimum wage to $15 per hour appears to have hurt lower skilled workers.
During the first phases of implementation from 2014 to 2016, employment for higher skilled workers increased while declining for lower skilled workers, which saw their earnings drop by an average of $1,500 in 2016 alone. These results support the upward redistribution of income from raising the minimum wage, which is the opposite effect of what advocates’ promise.
The effects of job loss from this government decree are amplified in states, such as Texas, with a lower cost of living. Texas could lose upwards of 1 million jobs—the most of any state—if the minimum wage was $15 per hour, thereby eliminating the opportunity for many Texans to start their way up the income ladder. Moreover, cities with lower average wages could be especially devastated, with Houston potentially losing around 110,000 jobs.
To put it simply, no matter what the minimum wage is in law, the actual minimum wage is always zero. An unemployed person whom lost their job or can’t find one from the elevated labor cost due to a minimum wage earns nothing, contributing to avoidable poverty.
Again, we are fortunate that legislators this session chose not to hinder prosperity by raising the minimum wage.
Instead, legislators can best assist workers by strengthening the Texas model of limited government where only 9 percent of Americans reside but where almost 30 percent of all new jobs were created nationwide in the last decade.
The Legislature took a valuable fiscal step in the regular session to achieve this by passing what could be a historic second consecutive Conservative Texas Budget that increases by less than population growth plus inflation.
Freeing markets is the best path to prosperity, while meddling around with an arbitrary, costly minimum wage is a quick road to poverty.