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The Prescott Daily Courier | Prescott, Arizona

home : opinions : opinions July 27, 2015

3/22/2014 6:00:00 AM
Talk of the Town: For jobs' sake, don't raise minimum wage
Special to the Courier

Arizona's labor market is struggling. There are 7.1 percent fewer private sector jobs today than before the Great Recession began six years ago. This loss is almost seven times larger than average for the rest of the country. Wage growth remains meager, contributing to rising income inequality.

The cure President Obama and various Arizonan policymakers propose for this labor market malaise is raising the minimum wage. But this prescription risks slowing Arizona's already-weak labor market, disproportionately hurting its youth, and - ironically - increasing income inequality.

A significant amount of economic research, including a recent report by the nonpartisan Congressional Budget Office (CBO), finds that raising the minimum wage benefits some workers - but only at the expense of jobs for others. Further, those suffering job loss will be the least-skilled and least-experienced workers. In fact, the CBO report concludes that raising the national minimum wage to $10.10 will lead to the loss of 500,000 jobs.

Simple economics explains the impact of a rising minimum wage: Raising hiring costs for less-skilled workers will force businesses to find substitutes.

They may shift employment to higher-skilled workers or replace employees with rapidly advancing technology like automated checkout registers. A minimum wage hike therefore harms the Arizonans who need jobs the most.

Since 2007, Arizona raised its minimum wage six times and last year had one of the highest youth unemployment rates in the country at 19.7 percent. In fact, the unemployment rate for those younger than 25 more than doubled over this time period - by far the biggest rise in the country.

In 2013, most workers earning "near-minimum" wage - between $7.80 and $8.80 per hour - were held by Arizonans younger than 25. A continued rise in the minimum wage - especially a 30 percent rise to $10.10 per hour - puts more of these jobs at risk, threatening to boost already-high youth unemployment.

There is an often-invoked image of thousands of families living in poverty and surviving on a single minimum-wage income. In reality, almost half of Arizona's near-minimum wage earners reside in households with an annual income of $40,000 or more. Households making over $100,000 annually comprise 15 percent. Two-thirds are single and never married. Further, most working-age people living in poverty didn't log a single hour of work over the prior year. What they need most is a job.

Granted, there are some people trying to support families on low-income jobs. But by raising the costs of employing them, a higher minimum wage could endanger the job of any low-skilled worker. Fortunately, it is possible to raise wages and increase hiring at the same time. The focus should be on lowering - not raising - the overall cost of hiring. For example, Arizona could reform its occupational licensing regulations, which shield special interests from competition at the expense of job creation.

The Copper State's occupational licensing regulations are ranked the most onerous and widespread in the country. According to the Institute for Justice, a whopping 64 moderate-income occupations in Arizona (including painting contractors, manicurists, door repair contractors, and cabinet makers) require licenses, costing on average $455 in fees and two years of experience and education. Research finds these restrictions disproportionately harm low-income individuals. They prevent new, job-creating businesses from ever being formed and impede the ability of Arizonans to employ themselves.

Continuing to raise the minimum wage would cost Arizona the jobs it desperately needs and harm many of those who advocates intend to help. Instead, Arizona should reduce its severely stringent occupational licensing restrictions, which keep those who need a job out of work and hold back the state's recovery.

Keith Hall is a senior research fellow with the Mercatus Center at George Mason University and formerly the 13th commissioner of the U.S. Bureau of Labor Statistics between 2008 and 2012. Robert Greene is the project coordinator in the Regulatory Studies Program and Financial Markets Working Group at the Mercatus Center at George Mason University.

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Reader Comments

Posted: Friday, March 28, 2014
Article comment by: Propaganda of the Wealthy by the Wealthy For the Wealthy

It is so good to know that our Prescott Courier is now publishing material by the brilliant Keith Hall a senior research fellow with the esteemed Mercatus Center at George Mason University! They are "Special to the Courier"! They are also "special" to the ultra right wing, conservative, Tea Party-supporting multi billionaires, Charles and David Koch!* The Koch brothers! These two have donated ~thirty millions of dollars to George Mason University to fund the Mercatus Center! The Mercatus center is a think tank funded to produce economic propaganda to keep the money flow arrow pointed UP and OUT into off shore banks of these rarified billionaires who want even more than they already have! They detest the concept that people working long hours, producing massive wealth for their 1% employers, receive a decent living wage! They want a slave labor class where people must work for a pittance and make the wealthy 1% even wealthier. Have the Koch brothers somehow slipped their slimy tendrils into our little local paper? So it seems… it had to happen. Hopefully the readers are smart enough to see it for what it is… propaganda of the wealthy, by the wealthy, for the wealthy, hopefully it will soon perish from the earth."


Posted: Sunday, March 23, 2014
Article comment by: pal maleter

Instead mouthing dogma and cant, take a look at a real life situation.

Washington has the highest in the nation, but the poverty rate is 19th lowest.

Posted: Sunday, March 23, 2014
Article comment by: An American

When you decide to raise the minimum wage you will have to raise everyones wage. After you have raised the wage ladder for the entire nation, guess what? The lazy and non productive folks who do not wish to work harder to better theirself will still be clinging to the bottom rung of the wage ladder, screaming they deserve a "living wage"... It's a fools argument.

Posted: Sunday, March 23, 2014
Article comment by: Dale Wilson

While the real earning power of the minimum wage has remained stagnant at mid 60's level productivity of American workers has risen almost 150%. This means employers are getting one and a half times the production out of each employee while keeping their pay at the earning power of the 60's. This is why there are less jobs--job holders are working more, producing more and are paid less. This only works for so long folks. You can ride a good horse only so long until it collapses. Then you walk.

Posted: Sunday, March 23, 2014
Article comment by: Zig E.

@ Right to Work State Myths - You apparently miss the parallel between non union workers and workers who are not members of the " union " of licensed contractors. Just as the unions try to make it hard to work without being a member, by wanting benefits to go to union members only for example, so to does the state contractors board try to make it difficult to work in trades with out being a paying member of their " union ". That's extortion.

Regarding the main point of the piece, the minimum wage should be raised. That will in turn cause wages to go up for other workers which will help the economy overall. The inflation will start when those at the top raise prices in order to keep getting their record profits.

Posted: Sunday, March 23, 2014
Article comment by: Higher minimum May be

Good for society, but it may be devastating for small businesses. Sure, the huge retailers can handle this, others locally will simply pay under the table until busted by the IRS or go out of business. Take a look at the stats on the sole proprietors and husband & wife sub-s companies in Yavapai County. Minimum wage workers either have to turn a profit, like in construction, close the sale as in retail/food, or make the owners' lives easier as in most Yavapai small businesses. Most of the latter jobs simply drain profits without any realistic chance of increasing revenues. Those are the jobs that will be lost. On the other hand, if the raise wipes out profits, those are the businesses that will be lost.

Posted: Sunday, March 23, 2014
Article comment by: Steve Muratore

Disingenuous Koch brothers' mouthpieces want to talk simple economics?

How about the economics that without money in the pockets of the hard-working lower income working class, they don't have discretionary income to SPEND on anything other than food and shelter. DUH!

Lots of good comments from readers today.

Posted: Saturday, March 22, 2014
Article comment by: You two

fork tongue scallywags,

Arizona is the 'Grand Canyon State'.

Posted: Saturday, March 22, 2014
Article comment by: Tom Von Deck

I used to know a couple security guards at Tucson City Hall in 2000. They said they made $5.15 per hour, even though they were carrying guns. If they were good, they got a raise to $6.00 per hour. Whoever decided on that salary could have used a few noogies, at least, along with a fierce (and televised) underwear ripping wedgie.

Posted: Saturday, March 22, 2014
Article comment by: Sometimes the jokes write themselves

Charles Koch is the chairman of the Institute for Humane Studies.

Since 1985, George Mason University (GMU), and its associated institutes and centers, has received more funding from the Koch Family Charitable Foundations than any other organization–a total of $29,604,354.

Posted: Saturday, March 22, 2014
Article comment by: Wait a minute Why don't you hire some folks

and pay them at least $10/hr? You cannot afford to do that? Well, that shouldn't enter into the discussion. We need you to do that, anyway. On a related note, many, many folks have lost hours at work this past year. Many who were working 40 hrs/week in the past have been offered only 24-28 hrs/week, beginning this year. The reason is the regulation part of Obamacare. Yes, just the regulation part will impact low and minimum wage earners far more than manipulation of the minimum wage. Speak to anyone who is working at Walmart or the Mall. Ask them how their hours and their co-workers' hours have been cut. Then, open up your wallet and pay them enough to make up the difference, if you can afford to do so. If not, why are you surprised that no one else can afford it either?

Posted: Saturday, March 22, 2014
Article comment by: Right To Work State Myths

This is the online definition of a "right to work" State.
(quote). . . A "right-to-work" law is a statute in the United States that prohibits union security agreements, or agreements between labor unions and employers, that govern the extent to which an established union can require employees' membership, payment of union dues, or fees as a condition of employment, either before or after hiring. "Right-to-work" laws do not, as the short phrase might suggest, aim to provide a general guarantee of employment to people seeking work, but rather are a government regulation of the contractual agreements between employers and labor unions that prevents them from excluding non-union workers,[1] or requiring employees to pay a fee to unions that have negotiated the labor contract all the employees work under. (end quote)
Bad employers have used the "Right To Work" slogan to take advantage of uninformed employees and job applicants. Tradesman are routinely laid off without unemployment benefits, or told that there is no such thing as overtime pay no matter how many hours they may work in a day or days in a week, or threatened to be fired with zero on-the-job rights because Arizona is a "Right To Work" State.
This catch phrase is bantered about freely without knowing what it means.

Posted: Saturday, March 22, 2014
Article comment by: Brooks Bernard

“You're all businessmen here. Doesn't it make them better citizens? Doesn't it make them better customers? They have to wait and save their money before they even ought to think of a decent home. Wait? Wait for what? Until their children grow up and leave them? Until they're so old and broken down that they... Do you know how long it takes a working man to save $5,000? Just remember this, that this rabble you're talking about... they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?”
-- George Bailey to Mr. Potter.

Whose philosophy for a stronger community do you support, George Bailey's or Keith Hall's, Robert Greene's & the Koch brothers'?

Posted: Saturday, March 22, 2014
Article comment by: Ethan Edwards

Conveniently this article leaves out certain facts to put forth an ideology. They also try to muddy the waters by inserting off topic items to further their true underlying cause (in this case contractor licensing). Finally they create fear by giving the illusion that the $10.10 will be implemented immediately. This, of course, is not true. The Harkins-Miller Bill proposed a phase in as follows: $8.20 in three months, $9.15 a year later, and $10.10 after two years, then adjusted for inflation after three years. This phase in allows businesses to adjust accordingly over a period of time so as not to be faced with a "hire or fire" scenario.

Posted: Saturday, March 22, 2014
Article comment by: James Kimes

IA livable wage would do much to improve the lives of those whose incomes are now supplemented by charity or government-subsidized programs.

With a living wage an individual can take pride in her work and enjoy the decency of a life beyond poverty

What are we saying about the respect we have for work and working families when we coolly tolerate a system in which a man or woman can work full-time in this affluent country and still be condemned to a life of poverty, including all the denial of opportunity that such indecent wages bring?

It is not acceptable that we treat workers as little more than obstacles in the path to bigger profits.

Posted: Saturday, March 22, 2014
Article comment by: It's all about the votes

There is absolutely no regard for controlling runaway inflation, cutting job hours or losing jobs altogether.

It's liberal politics as usual and all about getting the votes from the low-information public.

The majority of society is smart enough to realize raising the minimum wage will NOT create any gains.

Posted: Saturday, March 22, 2014
Article comment by: Lena Sanchez

Being a 76 year old I have seen this slogan come up more than once that has proven to be an Invalid claim! When the minimum wage has been increased history shows that never happened! What did happen was the economy grew, job growth increased and employee satisfaction increased, increasing employer happiness! Larger incomes equals more business for businesses resulting in more profits!

Posted: Saturday, March 22, 2014
Article comment by: Jackson Ripon

"Special to the Courier"? Are you kidding me? Does anyone for minute believe that two "scholars" from a University in Virginia took the time to send a column to the Courier? This is some canned article that is probably sent to publications throughout the country. This piece was probably lifted, with their permission I hope, from the Phoenix Business Journal.

Posted: Saturday, March 22, 2014
Article comment by: Worst Congress In US History

Sometimes you can tell how much the opposition fears an idea by how much they protest it. There have been many studies through recent US history that have concluded exactly the opposite of what Greene and Hall have about the minimum wage. Read Thom Hartmann, for example, and you will feel much differently about the benefits of minimum wage.

Greene and Hall do their research for the Mercatus Center, a right wing economic think tank devoted to promoting the free market and finding "market-based" solutions to public policy. They are funded entirely through donations from industry (Koch Industries and Exxon-Mobile primarily) and individuals.

The Mercatus Center has been described by Al Kamen as staunchly anti-regulatory and by Rob Stein as ground zero for anti-regulatory policy in Washington. Richard Fink and Charles Koch of Koch Industries, and the notorious Edwin Meese, all sit on the Mercatus Board of Directors.

Is there any chance that the minimum wage would receive a fair review in a study sponsored by this crew?

Obviously, conservative politicians are buying into the conclusions of think tanks such as Mercatus, the Heritage Foundation and ALEC, and this column is an example of how they try to sell it to the public.

I'm waiting to see a rebuttal by the dCourier.

Posted: Saturday, March 22, 2014
Article comment by: Mike Bates

If you want to understand the sympathies of the authors, all you have to do is trace the funding of their employer. The Mercato Center was started with a generous donation of those patriots and heros of the conservative movement, the Koch brothers, and remains an "independent" entity capable bringing you untarnished research with donations from such industry notables as Koch Industries and Exxon Mobil. In other words, this Talk of the Town has been paid for by the very people who would prefer you languish in poverty if it means they can employee your services for nothing. As to why its packaged as the opinion of local citizenry, well, that is a mystery to me.

Posted: Saturday, March 22, 2014
Article comment by: Zig E.

Requiring contractors licenses for landscaping, window washing, general painting and carpentry etc.. is nothing short of state sanctioned extortion. Not to mention completely hypocritical in a " right to work " state.

Posted: Saturday, March 22, 2014
Article comment by: Propagandizing the Hinterlands

The Mercatus Center is an anti-regulatory, market-oriented "think tank" funded by Koch Industries, Exxon-Mobil and others. One does not generally associate these folks with promoting workers' interests or social justice principles.

Regulatory reform needs to examine the purpose of the regulations, not merely eliminate regulations for the speculative hope of creating more jobs - possibly at the risk to others in the community.

This Talk of the Town from these Washington propagandists does not provide insight for policy remedies to assist the working poor of Yavapai County or anywhere else. It merely trumpets the exploitive interests of its funders. We need economic policies that provide everyone a living income, not policies that enable the accumulation of disparate accumulations of wealth by Koch Industries, Exxon-Mobil, et al.

Posted: Saturday, March 22, 2014
Article comment by: Retired Businessman

Thank you Keith Hall for a wonderful fact based will written article that paints a very clear picture of Arizona's current labor climate.
However, the correlation to a weak labor market to occupational licensing is incorrect.
First, Arizona does not have a high level of regulation or fees when compared with the rest of the nation. In fact, it rates in the middle to below middle in licensing regulation and costs. Trades licensing and fees are brutal in States with strong trade-labor unions.
Many local residents have experienced poor trades-work where anyone can be a "contractor" as long as they have a pickup truck, a dog, and a hammer.
In Arizona, it would benefit the consumer to raise the level of experience, professional education, and testing, required to earn a license to do business. This has nothing to do with the minimum wage and everything to do with being a responsible independent businessman.
More jobs are not going to be available because of reduction in occupational licensing requirements. And, the actual "real" costs of labor and overhead is enormous compared to the fees for a trade license.
A better solution? Decrease the heavier costs (taxes, fees, regulation, aka government skim) of doing business in Arizona. Allow business growth = more jobs.

Posted: Saturday, March 22, 2014
Article comment by: David Kerr

The discussion should be about the pros and cons of the EITC vs. the minimum wage. Media which talk about the minimum wage and avoid the EITC hurt TV watchers and their readers because many who are eligible for the EITC don't file a tax return. Just working part time or for a few months qualifes many for the EITC.

The minimum wage kills jobs. The EITC creates jobs.

Posted: Saturday, March 22, 2014
Article comment by: Minimum wage

If you're against raising the minimum wage how about lowering the cost of living? The politicians keep saying there's no inflation or it's very low. If that's so why am I paying more for everything these days? No raise in income but lot's more going out.

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