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Could Romney Hike the Minimum Wage?

Just a few days ago prominent liberal economist James K. Galbraith strongly endorsed [1] the economic proposals at the heart of my recent immigration article [2], arguing they constituted the best chance for reviving the American economy. And now National Review‘s leading domestic policy analyst, Reihan Salam, has written a lengthy column [3] discussing Galbraith’s arguments and exploring the political implications for the current presidential campaign.

Mitt Romney stands as the very strong favorite to gain the Republican nomination, but he may have been severely wounded by the sharp attacks of Gingrich and his backers, which portray him as a heartless financial manipulator who made his huge fortune because “he likes to fire people.” Perhaps partly as a result, Romney’s support among less affluent Republicans–let alone less affluent voters in general–is quite weak. And in a general election campaign, President Obama’s TV ads could simply quote the harsh statements of these leading conservative Republicans to devastating effect, much like George W.H.Bush destroyed Michael Dukakis’s candidacy largely by regurgitating the “Willie Horton” charges previously made by Al Gore. This puts any Romney campaign in a difficult box.

But as Salam points out, that box may have a crack. Apparently Romney has generally been supportive of minimum wage laws, and has even endorsed their automatic increase through indexing, a somewhat heretical stance in the eyes of some of his rival candidates. So if Romney supports a minimum wage and also supports raising the minimum wage, he would be seen as bold rather than completely unprincipled if he called for a minimum-wage increase measured in dollars rather than pennies.

Certainly his Republican rivals would leap to the attack. Perhaps Gingrich and his supporters would immediately switch from accusing Romney of being a vile “capitalist” to denouncing him instead as a vile “communist.” Perhaps Santorum would explain how sheer “grit and gumption,” rather than any government wage laws, had enabled him to rise from his humble working-class roots to earning a million-dollar-plus annual income as a “corporate consultant” the moment he left high political office.

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But I suspect that none of these attacks would be particularly effective given the demographics of the undecided Republican voters in approaching primary states like South Carolina and Florida, and NR’s Salam feels the same. He may have mixed feelings about the actual economic questions involved, but he recognizes that if Romney dared to propose a steep rise in the federal minimum wage “he would devastate his Republican rivals.”

And that would just be the beginning. It is well known that food stamp use has skyrocketed during the four years of the Obama Administration, and while it is not entirely fair to blame a president for the consequences of a financial collapse that began shortly before he entered office, politics—like life—is not always fair. So consider the potential impact of a Romney campaign tagline such as “President Obama gave you food stamps but I’ll give you a Living Wage.”

In particular, this sort of issue might be ideal at attracting the votes of the huge white working class, considered a key swing group in this particular election cycle. I suspect that someone, liberal or conservative, who currently scrapes by on $8.85 per hour working as a Wal-Mart greeter would tend to pay a great deal of attention to a presidential candidate who promised that his first act in office would be to raise that hourly wage to an even $12.00, even if rival campaign ads were endlessly denouncing that fellow as a “heartless capitalist.” Furthermore, since top Wal-Mart executives have themselves spent many years pleading for a large rise in the minimum wage, if the Wal-Mart CEO stood on the same platform and publicly endorsed the proposed plan, that candidate promise would seem just like money in the bank.

Every hour of the day, American politicians are selling their votes to special interests in exchange for large financial contributions. So perhaps just this once it might only be fair to give American workers a chance to sell their own votes in exchange for a far more modest sum of two or three dollars per hour worked.

Sometimes American politics can take unusual twists and turns.

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#1 Comment By Peter Kirsop On January 12, 2012 @ 1:58 pm

If Wal mart executives support a rise in the minimun wage, why have they not led by example and given their staff a higher wage already?

#2 Comment By Chad Rushing On January 12, 2012 @ 2:13 pm

Raising the minimum wage would just price workers of low productivity out of the labor market even further, raising the bottom rung of career ladders out of the reach of many young people and unskilled workers who are already experiencing high rates of unemployment. Even if doing so would appeal to the masses initially, it is only because the masses are so economically ignorant that they cannot see the hidden costs involved which they would be forced to pay. For example, the costs of most basic goods and services would go up due to the higher labor prices. You cannot get something for nothing.

Assuming that they received no compensation other than their base pay (which certainly isn’t the case), if Walmart greeters’ work contributes only $10/hour to Walmart on average, but the minimum wage is raised to $12/hour, Walmart would be foolish to continue to employ any greeters at all. Instead of the greeters all receiving a nice pay raise, they would all be laid off, because each one would now mean a net loss to Walmart. So, what’s better, receiving $8.85/hour or being unemployed altogether?

On the other hand, repeal all of the minimum wage laws, and anyone whose productivity is worth more than $0/hour and who is willing to work will be able to find a job somewhere doing something, even if it is just a simple task like holding a sign out on the sidewalk that advertises a product or business. When civil governments set the minimum price (wage) of labor higher than what the market will bear either by setting the base pay too high or by mandating extra benefits, it results in job shortages like the one the USA is experiencing today. Minimum wage laws, a form of government price-fixing, cause unnecessary unemployment.

#3 Comment By Chad Rushing On January 12, 2012 @ 2:19 pm

“Furthermore, since top Wal-Mart executives have themselves spent many years pleading for a large rise in the minimum wage …”

Such a plea is totally nonsensical unless Walmart (no hyphen anymore) believes that a higher minimum wage would give them an economic advantage over their competitors such as smaller retail chains who could not afford the labor price hike.

Once a company achieves market dominance, it usually lobbies for legislation which will then protect that dominance. If Walmart executives wanted all of their employees to be paid more than the minimum wage, they could easily do so without any federal legislation whatsoever as long as the pay they offered did not exceed the economic value of their employees’ work for the company.

#4 Comment By Aaron On January 12, 2012 @ 3:09 pm

Al Gore raised the furlough program during a debate in the form of a general question about “weekend passes for convicted criminals”, before GHWB’s “Willie Horton” ad, but that appears to be the whole of his involvement. What’s your source for the claim that the “‘Willie Horton’ charges” were previously raised by Al Gore?

As for Romney proposing that he’s going to raise the minimum wage, index it to inflation, and co-opt the concept of the “living wage” for the Republican Party, I expect that the response would simply be, “If Romney’s party wanted to raise the minimum wage or index it to inflation, it would already be done. Instead they’re already saying, ‘No way, Mitt.”

#5 Comment By eep On January 12, 2012 @ 5:12 pm

I think that is a fair proposal. Romney could shut down his detractors. He could say, “you want to eliminate dependency on the federal government? People need to earn enough to survive when the cost of living is going up, and their wage isn’t keeping up.” Then say, “the minimum wage would be lowered if the government practiced fiscal discipline.”

Would Romney carry out such a promise?

#6 Comment By Ben, Okla. City On January 12, 2012 @ 6:42 pm

Think of it as the new supply side economics, except this time it’s the return to labor that benefits, rather than return to capital.

#7 Comment By Tom Paine On January 14, 2012 @ 5:13 am

Repeal the min wage so everyone has a job? What an insane idea. Haven’t we gone far enough down the road on the whole “increase affluence by lowering wages” to know it does not work?

#8 Comment By Opinion Pole On January 14, 2012 @ 9:36 am

This would only work if he combined it with the positive side of “I like to fire people”. Tell us that we can fire incompetent employees without having to pay three years of unemployment. Tell us that the petty dictators at the IRS, the women behind the Social Security counter who are doing their nails and talking on the phone to their boyfriends will get their walking papers. Tell us that union teachers that can’t or won’t teach will be out looking for other work. Tell us that you will cut the layers and layers of government regulations and contradictory paperwork that make employing people such a hug pain in the ass.

#9 Comment By John Gruskos On January 15, 2012 @ 7:46 pm

“President Obama gave you food stamps but I’ll give you a Living Wage.” Great slogan, but if Romney wants to be the blue collar candidate, straightforward immigration restriction makes far more sense than a minimum wage increase.

1. America’s blue collar workers face two crises: In the short term, unemployment, in the long term, stagnant or declining real wages. A minimum wage increase would alleviate stagnant wages but exacerbate unemployment. An immigration moratorium, on the other hand, would both reduce unemployment in the short term and put upward pressure on real wages in the long term.

2. A minimum wage increase would only benefit the lowest paid workers. An immigration moratorium, on the other hand, would create a tight labor market at all salary levels, benefitting all employees.

3. A minimum wage increase would do nothing to control housing costs. An immigration moratorium, on the other hand, would put downward pressure on housing costs, thus benefitting renters and first time buyers.

4. The electorate in South Carolina is already energized on the immigration issue – partly for economic reasons, but also because of concerns about the rule of law and the National Question. A campaign based on immigration restriction would certainly attract all three types of voters. A campaign based on minimum wage would produce a mixed response, just like the Unz proposal did among TAC readers.

5. Ron Paul has energized the libertarian wing of the Republican Party, and the minimum wage is anathema to libertarians. On the other hand, Ron Paul supports an end to birthright citizenship and other immigration restriction positions. Thus, a campaign based on immigration restriction is more likely to hold the support of Ron Paul’s supporters during the general election than a campaign based on a minimum wage increase.

6. A minimum wage increase is basically a progressive solution to stagnant/declining wages, and Obama can easily “outbid” Romney in calling for progressive measures. “You support a $12 minimum wage? That’s great, but I call for a $15 minimum wage.” An immigration moratorium, on the other hand, is a populist solution, and Obama can’t compete. He has strongly committed himself to open borders for non-economic reasons. This is Obama’s greatest blunder, as disastrous as Bush’s Iraq war and the housing bubble. All of Obama’s Keynesian deficit spending has not significantly reduced unemployment, because the population has increased as fast as new jobs have been created – because of immigration. The last time our national debt to GDP ratio was this bad was near the end of WW2, and unemployment was only 4% at that time. Now it is close to 9%, and higher if discouraged workers are taken into account. This is Obama’s greatest failing, and any Republican who wants to win needs to shine a spotlight on it.

I congratulate Salam and Unz on their concern for America’s blue collar workers, and I hope they join Buchanan, Tancredo and Frum in their support for an immigration moratorium.

#10 Comment By Philosophe On January 20, 2012 @ 3:40 am

This article paints a plausible picture of how Mitt Romney could win back a large group of voters who can currently only support him while holding their noses. It shows a way people could actually vote with some enthusiasm for Mitt Romney rather than for not-Obama.

But it is true that this would simply represent American workers getting a turn to sell their votes for bad policy, instead of watching in anger while special interests do so again and again.

It’s still bad policy which does nothing to address the underlying causes of economic decline. How lovely it would be for something else entirely to finally get a turn: thoughtful debate that produces good policy instead of *strategy* and *messaging*.

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#12 Comment By NDteacher On April 11, 2012 @ 8:45 am

I don’t have a lot of time since I am an economics teacher, but I’m really not sure if this is such a good idea. I actually just finished teaching about thinking deeper than surface level.

If we raise the minimum wage, on the surface that sounds like a great plan, but people often do not look inward at the problems that those changes would cause. Let me just say this, increasing the minimum wage will create a surplus of workers. If you do not understand that, the younger or unskilled workers in this country will continue to lose jobs and make it very difficult to find them.

#13 Comment By MichaelTFL On April 11, 2012 @ 1:12 pm

Let’s remember – this would be a PROPOSAL, not a hard and fast rule for Romney.

He could support this plan during the campaign, knowing full well that there isn’t an ice cube’s chance in you-know-where of it being passed into law, unless he was saddled as President with two Democratic-controoled houses of Congress (not likely).

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#16 Comment By NG2 Will On April 13, 2012 @ 3:26 am

Wages have fallen behind labour productivity since the 70s.

Putting up the minimum wage would restore some of this lost income/consumption/demand so directly addresses the national economic weakness/hypothermia, it would enable people to save/de-lever so strengthen banks and the economy from the ground up…a rising tide lifts the lowest boats first.

#17 Comment By End Wage Slavery On August 26, 2012 @ 6:17 pm

I guess with as right wing as the G.O.P. is now we should be glad they aren’t pushing for lowering it. But as it is nobody can afford to live on the minimum wage now. Romney is basically saying that he thinks it’s quite alright for tens of millions of workers to be making too small of an income to be able to make ends meet. The minimum wage should be raised to make it equivalent to a living wage in every region, meaning different wages for different regions. Where the cost of living is higher the minimum wage needs to be higher. And regardless of location it needs to be pegged to inflation so that if the dollar loses 5% of its value next year the workers’ minimum wage will rise by 5% to compensate.

But of course no candidate that we would be allowed to vote for would favor something like that. The business-friendly Republicrat duopoly ensures that. The only reason the (nominally) two parties don’t merge and call themselves the Prostitutes for Big Business Oligarchy Party is because if they did then even the dimmest bulb out there would be able to realize that it doesn’t matter who you vote for as it’s guaranteed to be someone who is already deep in the pocket of the billionaire ruling elite. This country sucks.