Friday, June 30, 2006

Minimum Wages-The Democrat's "Gay Marriage Amendment"

One tactic used by Republicans in 2004 to get their Christian conservative base to go out and actually vote for them was to put the issue of gay marriage on the ballot. By putting the issue on the ballot, their voters would go to the polling station and since they had made the effort to go there they would vote for George W. Bush and their Republican congressional candidates. Although putting this issue on the ballot would presumably increase the willingness of homosexuals to go out and vote for the Democrats, that effect would be small compared to the number of Christian conservatives mobilized for the Republicans. In the key state of Ohio, the higher turnout of Christian conservatives wanting to vote against gay marriage was probably decisive in helping Bush win the state and therefore also the presidency.

The Economist have an interesting article (not online for non-subscribers) in its latest issue about how the Democrats are now planning to use the minimum wage issue as its own "gay marriage amendment". Just like the gay marriage issue is important for a lot more Republicans than Democrats (The number of Christian conservatives in America greatly exceed the number of homosexuals), the minimum wage issue is important to a lot more Democrats than to Republicans. Few Republicans are likely to go out and vote just to stop a minimum wage increase, while quite a lot of Democrats are likely to be mobilized in order to increase the minimum wage.

Realizing this, the Republicans in Michigan for example decided to give in to the Democrats and raise the minimum wage by $1.80 per hours.

Most of my readers are probably aware of the economics of the minimum wage: that although raising it may perhaps mean higher pay for some low-skilled workers, it will make others unemployed.

But the interesting thing about the minimum wage is that at its current federal level of $5.15 per hour, it is at a record-low level in real terms. Already early 2005 did the real level of the minimum wage fall below the low reached just before the 1996 Clinton increase was enacted if deflated by the CPI. And in April this year it fell below that level even using the PCE deflator (a inflation gauge that for various reasons consistently show lower increases than the CPI). And deflated by the CPI, it now fell below the even lower level reached in late 1989, and it is now at its lowest level since the 1950s.

The U.S. minimum wage is also far below that of other countries, with Britain having a £5 minimum wage (nearly $9) and France a €8 ($10) minimum wage.

Because it is so low now, even the Ted Kennedy proposal to raise it to $7.25 per hour by 2009 (when the value of a dollar will of course be even lower than today) will not make much difference in either a positive or negative way.

The drive from Democrats to put minimum wages on state ballots and campaign on the issue is thus similar to the gay marriage and flag burning issues for the Republicans not just because it will disproportionally mobilize the voters of the campaigning side, but also because it really is an issue of no practical relevance for most people. The article in The Economist tellingly reveals how labor unions at first was uninterested in the issue as most of their members have incomes far above minimum wage levels, but when Democratic electoral strategists told them of how this can be a winning issue, they too have started to campaign for a higher minimum wage.


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