President Obama, gearing up for the 2014 mid-term elections and eager to deflect attention from the troubled launch of his health program, recently said he supports a U.S. Senate bill that would raise the federal minimum wage from $7.25 to $10.10.
That’s higher than the $9 he called for in his last State of the Union address.
There’s little chance of this bill getting through the Republican-controlled House, at least in its current form. But possibilities don’t matter as much as politics. The point is to stir up class envy, a successful vote getting maneuver.
Colorado, like all but five other states, has its own minimum wage law. It’s currently $7.78, but will bump up to $8 on Jan. 1 (2.8 percent). That’s because in 2006 the voters, over heavy business opposition, passed a union-sponsored initiative setting the minimum wage at $6.85 — and adjusting it annually to reflect the consumer price index in the Denver-Boulder area.
Colorado is one of 19 states in 2013 that have minimum wages higher than the federal standard. In every state, the law establishing the higher wage applies. In other words, if the federal rate goes to more than $8, that would prevail here even though our minimum is in the state constitution.
Proponents claim a high minimum wage is necessary to provide a livable income. The eternal argument against it is that it will reduce the number of entry-level jobs. A minimum wage is “compulsory unemployment,” according to the late economist Murray Rothbard.
The debate has been raging at least since the creation of the U.S. Labor Department in 1913. Jordan Weissmann, writing in the Atlantic magazine earlier this year, observed that if a large meteor ever smashes into the earth, “there will still be two economists walking down a desolate post-apocalyptic Connecticut Avenue arguing about whether minimum wage laws kill jobs.”
It depends, of course, on whether the legal minimum is higher than what the market will bear. Even economist/columnist Paul Krugman, who rarely sees a government mandate he doesn’t like, recently said that a $20 minimum “might create a lot of problems.”
That admission gives the game away. In other words, it does matter, at least a little. If economics were so simple that you could guarantee prosperity for everyone by mandating a minimum wage, why not raise it to $25, $50 or $100 an hour? But mandates do more good than harm in any economy.
Since many factors go into the unemployment rate, mandatory minimums at or just above the market rate cause relatively little trouble.
The pending Senate bill Obama cited would raise the federal minimum by 95 cents a year over a three-year period. Once it hit $10.10 it would be indexed to inflation. But there’s no reason to believe that would settle the matter forever. Progressives would soon try to impose extraordinary increases again.
By the way, indexing the minimum wage to the consumer price index in Colorado means it can go down as well as up. And it has — once. In 2010, the minimum dropped 4 cents to $7.24 an hour.
If state minimum wage laws are bad, a federal one is worse since the cost of living varies around the nation.
The minimum wage law also applies to restaurant servers and others who depend in part on tips, but it’s lower. In Colorado their wage can be no more than $3.02 cents below the standard. So it goes up by the same dollar amount — but by a higher percentage each year. The minimum for servers next year will be $4.98.
The federal law applies to employees whose firms do more than $500,000 a year or who are in interstate commerce. The Colorado law applies to anyone working in retail or service, food and beverage, commercial support service or health and medical.
But as a practical matter, said Peter Wingate, deputy director of Colorado’s division of labor,” if the federal government wants to cover your business, they find a way to match one of its two standards.”
Those who feel they’ve been cheated by employers on wages or related working conditions can complain either to the regional office of the federal Labor Department, or to the state Department of Labor and Employment.
Mike McArdle, director of the division of labor, said his office investigates about 5,000 complaints a year — not just about too-low hourly pay but about unpaid overtime, lack of meal breaks and bounced employer checks. The federal office has about 850 complaints a year, he said.
His office usually mediates directly between employer and employee, while the feds tend to go to the work place and pull records.
Disgruntled employees don’t have to seek administrative relief first. They can go directly to small claims court or district court, if they prefer. Indeed a small-claims judge can award a successful claimant 125 percent of the claim as a penalty for nonpayment, whereas the labor division simply makes him or her whole.
There are criminal penalties for offending employers, but cases are rarely prosecuted, said McArdle.
McDonald’s and Walmart seem to be the main whipping boys for low wages. Those who picket or boycott them are usually people wealthy enough to shop and eat elsewhere.
Not everybody is that lucky. Where wages are low, so are prices. Driving down their business would also drive down their wages — or eliminate their jobs altogether.
Longtime Rocky Mountain News political columnist Peter Blake now writes Thursdays for CompleteColorado.com. Contact him at firstname.lastname@example.org You may re-publish his work at no charge and without further permission; please give full credit to Peter Blake and www.CompleteColorado.com
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