With the elections finally over, increased scrutiny will be sure to follow Texas as Arizona, Colorado, Maine, and Washington all approved ballot provisions to raise their minimum wage. In all four cases, the minimum wage will be increased to at least $12 per hour by 2020.
While these states already had minimum wages slightly above the federal requirement of $7.25 per hour, their resurgence increases pressure on the twenty states that still operate at the federally mandated minimum wage. However, this should not be an alarm to Texans that we lag behind as increases in the minimum wage in the Lone Star State are aimed to stint growth, lower employment, and upend economic freedom.
Currently, Texas has it in statute Labor Code Section 62.051 that “an employer shall pay to each employee the federal minimum wage.” Should the federal government choose to follow the path of these most recent four states, Texas looks to lose more than any other state in the country primarily due to its low cost of living. With a wage floor moving in the direction of the often referenced $15 “living wage,” research indicates that Texas could lose nearly one million full time jobs—more than any other state.
Perhaps even more damaging, any raise in the minimum wage would be detrimental to Texas’ “economic freedom” rating as an increase would be viewed as increasing government regulation. Texas currently ranks third best in economic freedom nationwide. This is worth noting due to the strong correlation between high economic freedom and higher wages due to increased free market activity, as shown in Figure 1.
Figure 1: More Economic Freedom Related to More Prosperity in U.S. States
Source: Economic Freedom of North America 2014
As these four states raise their minimum wage, they jeopardize hundreds of thousands of jobs and the incomes of all of their citizens. Most notably, Maine and Washington place themselves in even more precarious situations as they are already in the bottom 20 percent of the economic freedom ranking.
Even though this election would appear to continue a trend of minimum wage increases, Texas shouldn’t take part in these job-killing measures. For those who view the minimum wage as a manner of assisting low-skilled, hard-working Americans, the best solution is simple: create more jobs, don’t eliminate them. This entails the Texas Legislature limiting the size and scope of government by passing conservative budgets and putting the business franchise tax on a path to elimination.