June 15, 2014 in Opinion

Smart Bombs: The wages of politics

By The Spokesman-Review
 

The minimum wage is back in the spotlight, with the Seattle City Council pegging it at $15 and phasing it in over several years. Before that, the issue flared and waned when President Barack Obama, in January, proposed a $10.10 minimum.

Both proposals drew the predictable ripostes from critics: “Why $15? Why not $20? Why $10.10? Why not $20.20?” As if they’ve never seen policy infused with political marketing. Can’t recall Herman Cain’s 9-9-9 tax plan?

It reminds me of the 2005 debate over capping non-economic damages in medical malpractice cases. Two competing initiatives were on the ballot. The cap was $350,000. The Spokesman-Review editorial board asked proponents the significance of that figure, and we discovered there was none. It was just the number several states had been pushing. President George W. Bush wanted Congress to adopt a $250,000 cap.

Those figures bore no relationship to the proper compensation for malpractice. The point was to lower the amount lawyers could collect so it wouldn’t be worth their while to take such cases in the first place. So why not $35,000 or $350 or nothing? Because most people would find that unreasonable.

Missouri legislators are debating this issue now, and the cap is … $350,000. Show me.

Meanwhile, back at the minimum wage, the $15 figure is clearly strategic. Labor leaders wanted it high enough that people would fight for it. As Erin Shannon of the Washington Policy Center wrote, “The reason supporters settled on $15 has nothing to do with math, data, the economy or supply and demand.  It’s about politics.”

But guess what? Current state and federal minimum wages aren’t products of empirical data either. Washington voters adopted a higher minimum wage after a political battle and then linked it to the inflation rate. An inflation adjustment makes sense if you want the wage to hold its value. If you don’t care, you raise it the way Congress does. Vote on it periodically and omit an automatic adjustment. Congress last raised the minimum wage five years ago, to $7.25.

Why $7.25? If a higher minimum wage costs jobs, why not lower it to $6.25 or eliminate it?

The federal minimum wage held its highest value in 1968, according to a report published in January by the nonpartisan Congressional Research Service. It measured the “real minimum wage” by adjusting it for inflation and found that it would need to rise to $10.69 to match its peak purchasing power. That’s 59 cents higher than Obama’s “political” number and $1.30 higher than Washington’s minimum wage, which is the highest in the nation.

So, sure, Seattle’s figure is high and political, but what’s the empirical rationale for a federal minimum wage that’s 47 percent lower than it was 46 years ago (in real terms), when the unemployment rate was 3.6 percent?

There isn’t one. It’s about politics.

Losing its ‘cool.’ City Hall is in the midst of a four-month review of Airbnb, the online agent that connects travelers to residential homes with rooms to spare. The service isn’t subject to the same regulations and requirements for tax collection as hotels. The same thing is going on with app-based car services vs. taxis.

One of the selling points of the “sharing economy” is that it draws new travelers who will drop money in the local economy.

But Airbnb is seeking other alternative experiences for travelers, according to Reuters, such as homeowners cooking meals for them. So cool, right? Let’s say travelers don’t want to leave the house for a meal. Well, they could pay for a meal cooked by the homeowner, with Airbnb sharing in the profits.

Hey, if they’ll ditch cabs and hotels, why not restaurants? Maybe one day travelers can avoid all spending at local businesses.

Associate Editor Gary Crooks can be reached at garyc@spokesman.com or (509) 459-5026.


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