Voters in Two Deeply Conservative States Look Set to Approve Minimum Wage Increases Next Week. That's a Bad Idea.
Minimum wage ballot initiatives are often good politics, never good policy.
Next week, voters in Missouri and Arkansas will get the chance to approve new minimum wage hikes that offer the promise of higher pay for some workers—and hours cuts and potentially even job losses for others.
Arkansas' Issue 5, if passed, would raise the state's minimum wage from the current $8.50 an hour to $9.25 come January 2019; the minimum wage would continue to tick up each year until it reaches $11 in 2021. Neighboring Missouri's Proposition B would similarly boost the minimum wage from $7.85 to $8.60 in 2019, then increase it 85 cents each year until it hits $12 in 2023.
Minimum wages of $11 or $12 fall a fair bit short of the $15 minimum demanded by many progressive activists and adopted by cities such as Seattle, New York, and Washington, D.C. They look more ambitious when you consider how low the cost of living is in both states. Missouri ranks seventh in the nation for lowest cost of living. Arkansas is second, behind only Mississippi. So $11 or $12 an hour is going to go a lot farther there than in higher-cost jurisdictions.
The National Employment Law Project—a pro–minimum wage outfit—estimates that the two measures combined would raise wages for nearly one million people, including some 300,000 workers in Arkansas and another 660,000 in Missouri.
This, it is important to stress, does not mean that earnings will necessary increase for one million workers—only that their state-mandated hourly wage rate will increase.
Indeed, some cities that have been most aggressive in boosting their minimum wages have seen returns for workers decline. A 2017 city-sponsored study on the effects of Seattle's $15 minimum wage—passed in 2013, but phased in over time depending on business size—found that workers were actually losing about $125 a month thanks to a mix of hours cutbacks and slower employment growth for lower-wage workers.
D.C. and San Diego likewise show minimum wage increases slowing the growth of jobs, even while neighboring communities continued to add jobs at a growing rate.
It's doubtful these examples will sway voters in either Arkansas or Missouri to vote no on either measure. Minimum wage ballot initiatives have a history of doing well, even in deeply conservative states.
A $12 minimum wage in deep-red Arizona, for instance, received a whopping 58 percent of the vote in 2016. Back in 2014, 65 percent of Arkansas voters approved a minimum wage increase at the ballot box. One poll shows support for Arkansas' Issue 5 at 60 percent.
In 2006, 75 percent of Missouri voters voted yes on a wage hike as well, and the state's two largest cities—Kansas City and St. Louis—have approved minimum wage increases in recent years.
Neither of those minimum wages are in effect currently, thanks to Missouri state politicians, who passed a law preempting local minimum wages after St. Louis' wage hike—passed in 2015 but held up in the courts for two years—had already gone into effect.
Passing a law that actually lowers the cash value of a minimum wage—whatever the merits of the policy—is terrible politics. Republicans didn't help matters by arguing that a patchwork of local minimum wages would be too much of a hassle for businesses. This naturally provided a ready-made argument that state-level action is necessary.
An analysis by the Show Me Institute estimates that a $12 minimum wage would cost the state some 11,000 jobs. It also found that about 80 percent of workers who would benefit from Proposition B are not living in poverty. Add to that the harder-to-see costs of minimum wages, including price increases, hours cuts, or deferred investment.
But those negative effects are easy to ignore when the possibility of immediate and widespread wage increases are in the offing. That makes Proposition B and Issue 5 typical minimum wage ballot initiatives: good politics but bad policy.