Columns » Ernest Dumas

Wages up, jobs too

Someone should write a book: Why does the real world routinely foil the great economic prescriptions of politicians and their parties?

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Someone should write a book: Why does the real world routinely foil the great economic prescriptions of politicians and their parties?

Take the little matter of Arkansas's dramatic plunge in unemployment in the first two months of 2016, to near the full-employment level of 4 percent. Actually, it's not such a "little matter" since Arkansas mirrors what has happened on a broader scale.

You may not have remembered, although every Arkansas employer did, that Arkansas's minimum wage shot up to $8 an hour on Jan. 1. Voters approved an initiative in 2014 that raised the bottom pay in Arkansas from $6.25 to $7.50 on Jan. 1, 2015, and then to $8 this January, and it will rise to $8.50 nine months from now. But the state's unemployment rate, instead of soaring after the wage hike last year, actually fell, and it plunged sharply again after the pay threshold went up this New Year.

Since the higher wage floors took effect 14 months ago, the jobless rate has fallen from 5.6 percent to 4.2 percent.

That is not supposed to happen! Setting or raising a minimum wage is supposed to kill jobs on a huge scale. The U.S. Chamber of Commerce has preached that for decades, and groups like the Club for Growth, Americans for Prosperity and the legion of conservative political action committees weigh in regularly. It is the official position of the Republican Party. All the original 16 Republican candidates for president except Rick Santorum and John Kasich (Mike Huckabee was noncommittal) condemned minimum-wage hikes in the early debates as job killers.

Dr. Ben Carson, the genial surgeon, was the most adamant about wage laws. Every time one has been raised anywhere, he declared, big job losses followed — it was just an economic law. He would have been nearer the statistical evidence if he had said big job losses never followed.

It is hard to make the case that a progressive minimum wage does much to raise living standards of median American workers or to perceptibly close the wealth gap between the 1 percent and everyone else, but the notion that progressive wage floors shrink the workforce not only makes no sense, it is statistical nonsense.

Let's keep the comparisons to the South. Six Southern states have no state minimum-wage law and their jobless rates are much higher than Arkansas's. Of the states that do have minimums, only Arkansas and Florida have floors that exceed the federal minimum. But only Virginia, with a roaring economy, has a lower jobless rate than Arkansas, 4.1 to our 4.2 percent.

Likewise, everyone has known since 2010 that Obamacare is a giant job killer because the Chamber and PAC ads and every Republican member of Congress and political candidate told us it was a certainty. We got ready for a double-dip recession when the law kicked in fully in 2014. What happened? Almost from the day the health care market opened and states began expanding Medicaid, the U.S. job market dramatically improved. It has been especially robust in the 30 states that opted to insure poor working adults. Alone among the Southern states, Arkansas took advantage of the Obamacare option and insured 275,000 people, and its jobless rate is lower than every Southern state's except Virginia's. The job market since 2014 has typically been better in the states embracing Obamacare's Medicaid option than in the states that didn't. Arkansas added 27,200 nonfarm jobs the past year, a fourth of them, as you would expect, in health care, according to the state Department of Workforce Services and the Bureau of Labor Statistics.

Still, Ted Cruz says in every debate that Obamacare is driving millions of people onto the jobless rolls every year. No one challenges him. Donald Trump doesn't lie about Obamacare job losses but simply says that, like Canada and Western Europe, we need a health care law that covers everybody. Kasich talks vaguely because he took the Obamacare option in Ohio, which helps drive the Ohio miracle he brags about.

If the party ever gives up on the minimum-wage and Obamacare orthodoxies, would it not also have to surrender its entire economic theory, which is that if you ever cut taxes on the rich enough, the tide of their prosperity will lift the ships of the middle class and poor? It's been a failure virtually every place and time for 35 years. David Brooks, the party's resident sage, wrote recently that it was time for the party to abandon the theory because presidential election results showed that the party's voters clearly had by favoring Donald Trump and by telling pollsters that the rich should pay higher, not lower, taxes. Besides, he said, the theory no longer seems to be working.

When it had worked he couldn't say.

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