Hourly wage hike will backfire

By Joe Guzzardi

Cagle Cartoons

Democratic presidential candidates have unanimously embraced the $15 federal minimum wage. House Speaker Nancy Pelosi threw her support behind the wage hike that would more than double the current $7.25 rate. Pelosi claims that not only would the wage increase give Americans more money in their paycheck, but would also boost the gross domestic product. When people have more purchasing power, they’ll spend more, and, predicted Pelosi, the GDP will therefore rise.

But a far more credible economic source than Pelosi made the opposite calculation. The Congressional Budget Office calculated that overall the $15 hourly wage would “would reduce the nation’s output slightly.” The CBO found that as many as 27 million workers, assuming they remained employed, could benefit. On the other hand, up to 3.7 million workers might lose their jobs as employers respond to higher overhead. Goods and services costs to consumers would inevitably rise.

That’s the thing about the $15 minimum wage hype – only one side of the story is told. A wage increase won’t be effective if employers don’t hire or if they dramatically reduce their hourly payrolls to adjust for the steep bump.

Moreover, the $15 wage is an artificial solution to increasing Americans’ paychecks. The lasting correction is to tighten the labor pool. The federal government can tighten the employment market in two ways: first, reduce the 1 million-plus legal immigrants who, as employment-authorized lawful permanent residents, enter the labor force annually. Further, the government could reduce the roughly 750,000 temporary guest workers that come to the U.S. to perform an assortment of jobs that, for the most part, Americans would do, assuming a fair wage. The second tightening variable, and more immediate way to drive up wages, is to use E-Verify, the online program that ensures only legally authorized workers hold U.S. jobs.

To analyze how large influxes of immigrant workers, in this case, construction workers, impact the market, the Los Angeles Times studied the Southern California building trade. The Times wrote that over a few decades, construction workers went from being majority union, and majority U.S.-born, to majority immigrant.

But since major immigration reductions are not in the immediate future, the government could help by passing mandatory E-Verify. If passed, the program that would prevent unscrupulous employers from hiring illegal aliens and slow the flow of unlawful job-seeking foreign nationals, once the word was out. A tighter labor market results in an increase in wages for U.S. workers.

E-Verify has the overwhelming support of Americans and of companies like Costco that have used it for years. Early this year, a Houston Chronicle editorial made the interesting point that E-Verify would not only help legally present workers keep jobs, but also would protect exploited illegal immigrant workers from low pay and harsh conditions that, because of deportation fears, they’re afraid to report. With E-Verify, the onus is on employers to hire only legal workers.

For all the ballyhoo about the $15 minimum wage, nothing is ever said about tightening the labor market through lower immigration or mandating E-Verify, two solutions that would help the U.S. pay rate, still stuck at 1970 levels, to increase through normal market functions.

Joe Guzzardi is a Progressives for Immigration Reform analyst who has written about immigration for more than 30 years.