‘Job killer’ rhetoric has it all wrong on wages

03/04/2014 5:54 PM

03/04/2014 5:54 PM

House Speaker John Boehner says raising the minimum wage is “bad policy” because it will cause job losses.

The U.S. Chamber of Commerce says a minimum wage increase would be a job killer. Republicans and the chamber also say unions are job killers, workplace safety regulations are job killers, environmental regulations are job killers, and the Affordable Care Act is a job killer. The California Chamber of Commerce even publishes an annual list of “job killers,” including almost any measures that lift wages or protect workers and the environment.

Most of this is bunk.

In 1996, when I recommended the minimum wage be raised, Republicans and the chamber screamed that it would “kill jobs.” In fact, in the four years after it was raised, the U.S. economy created more jobs than were ever created in any four-year period.

For one thing, a higher minimum wage doesn’t necessarily increase business costs. It draws more job applicants into the market, giving employers more choice of whom to hire. As a result, employers often get more reliable workers who remain longer — saving employers at least as much money as they spend on higher wages.

A higher wage can also help build employee morale, resulting in better performance. Gap, America’s largest clothing retailer, announced that it would boost its hourly wage to $10. Wall Street approved.

Even if raising the minimum wage increases the cost of business, this doesn’t necessarily kill jobs.

Most companies today can easily absorb such costs without reducing payrolls. Corporate profits now account for the largest percentage of the economy on record. Many companies are using their cash to buy back their own shares of stock, artificially increasing share value.

Wal-Mart spent $7.6 billion last year buying back shares of its own stock. Had it used that money on wages instead, it could have given its workers a raise from around $9 an hour to almost $15. Arguably that would have been a better use of the money over the long term, not only improving worker loyalty and morale but also giving workers enough to buy more goods from Wal-Mart (reminiscent of Henry Ford’s pay strategy a century ago).

There’s also a deeper issue here. Even assuming some of these measures might cause some job losses, does that mean we shouldn’t proceed with them?

Americans need jobs, but we also need minimally decent jobs. The nation could create millions of jobs tomorrow if we eliminated the minimum wage altogether and allowed employers to pay workers $1 an hour or less. But do we really want to do that?

Likewise, America could create lots of jobs if all health and safety regulations were repealed, but that would subject millions of workers to severe illness and injury.

If the Affordable Care Act were repealed, hundreds of thousands of Americans would have to go back to working at jobs they don’t want but feel compelled to do in order to get health insurance.

We’d create jobs but not progress. Progress requires creating more jobs that pay well, are safe, sustain the environment and provide a modicum of security. If seeking to achieve a minimum level of decency ends up “killing” some jobs, then maybe those aren’t the kinds of jobs we ought to try to preserve in the first place.

Finally, it’s important to remember the real source of job creation. Businesses hire more workers only when they have more customers. When they have fewer customers, they lay off workers. So the real job creators are consumers with enough money to buy.

Even Wal-Mart may be starting to understand this. The company is “looking at” whether to support a minimum wage increase.

In other words, forget what you’re hearing from the Republicans and the Chamber of Commerce. The real job killers in America are lousy jobs at lousy wages.

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