Speaker of the House-in-Waiting Nancy Pelosi, D-Calif., says that if Democrats take control, she'll rush through a bill increasing the federal minimum wage from its current $5.15 — the lowest, in inflation-adjusted dollars in more than 50 years— to $7.25.
But Pelosi's push wouldn't help any of her own constituents. That's because on Jan. 1, California's minimum wage will rise to $7.50, and San Francisco's to $9.14.
OK, maybe San Francisco is a little out there. But California isn't alone. According to data compiled by the National Conference of State Legislatures, 16 states, including New York, Florida, Pennsylvania and Michigan, have increases slated to take effect on Jan. 1. After that round of hikes, a dozen will have minimums topping $7 an hour.
In all, 23 states have already adopted wage floors above the national minimum, which last went up in 1997. Another six — Ohio, Missouri, Arizona, Colorado, Nevada and Montana — have initiatives on the ballot Tuesday that would raise their state minimums to $6.15 or more and institute automatic future increases tied to the inflation rate.
In addition, 140 local governments have passed laws requiring government contractors to pay more than national or state minimums, according to Acorn, a liberal activist group that promotes such "living wage" ordinances. (San Francisco, Washington, D.C., and Santa Fe and Albuquerque, N.M., have passed across-the-board minimum wage laws.)
The National Restaurant Association has poured $900,000 into defeating the state ballot measures and dismisses them as a ploy by the unions and their Democratic friends to gin up voter turnout in hotly contested states. "These ballot initiatives have nothing to do with the minimum wage. They're a well-coordinated campaign to help turn out the vote," says Tom Foulkes, vice president of state relations at the restaurant association.
It's not clear, however, how big an impact the initiatives will actually have on congressional races, particularly when the war in Iraq and national security top voters' concerns. In 2004, 71 percent of Florida residents supported a minimum wage hike, yet 52 percent still voted to re-elect President George W. Bush.
Equally debatable is the effect the increases have on unemployment and the poor. Support for the traditional economic view — that the minimum wage increases unemployment among the lowest-skilled workers and among teenagers — has been weakening. In a 2000 survey of U.S. economists, only 46 percent agreed with that thesis, down from the 62 percent who agreed in 1990. And 27 percent disagreed outright with the notion, up from 18 percent in 1990. The rest agreed, but with various provisos.
David Neumark, an economics professor at the University of California, Irvine, and a senior fellow at the Public Policy Institute of California, has done the best-known empirical studies on job loss resulting from minimum wage hikes. "I wouldn't say I'm convinced you increase poverty [by raising the minimum wage]. But I'm convinced there's no evidence you reduce poverty," he says.
Still, last month, 650 economists, including five Nobel Prize winners, signed a statement, organized by the left-leaning Economic Policy Institute, asserting that "modest" raises in the minimum wage "can significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed." The statement said a phased increase in the national minimum to $7.25, or increases in the state minimums of $1 to $2.50 an hour, with inflation indexing (in other words, those measures up for a vote), fall within the range of acceptable changes.
So is the increasing localization of the minimum wage a good thing?
Economists from the Institute of Industrial Relations at the University of California, Berkeley, studied San Francisco restaurant employment after the city adopted its own higher minimum in 2004. They found the law substantially increased pay (and reduced turnover) at fast food restaurants, without any loss in jobs. Instead, prices went up.
Neumark is skeptical. Maybe a San Francisco restaurant can't move out of town, but the laundry service the eatery uses can move its jobs to an adjoining locale with a lower minimum, he argues. "You'd think you'd get more of a bad response [from a local minimum wage hike] because you could do more to avoid the law," he says.
Perhaps. But better $9.14 an hour in high-income, high-cost San Francisco than in Biloxi. "If Mississippi had the same minimum wage as San Francisco, it probably would cause a lot of unemployment," speculates Eric French, a senior economist specializing in labor and health issues at the Federal Reserve Bank of Chicago.