D.C. Minimum Wage Contributes to Decade of Heightened Unemployment

In a daring new approach to employment analysis, a report out today from the DC Fiscal Policy Institute advises implementing a higher minimum wage for our nation’s capital.

• Low wages are one of the main causes of economic insecurity for DC residents. The median wage for workers in low-income families is just $9.14 an hour, which is too low to lift a family of three above 150 percent of poverty even with full-time, year-round work.

But wait! Minimum wage? That’s not daring. Or innovative. Or effective, at all, ever.

According to the report, the District houses so many impoverished residents that D.C.’s poor could fill both RFK Stadium and Nationals Park plus some. To put it another way, about 9 percent of the city’s population — 47,000 residents — live in extreme poverty, earning less than $5,300 per year.

Here are some of the report’s findings:

SECTION 4: BETTER JOBS CAN HELP DC RESIDENTS MOVE TOWARD ECONOMIC SECURITY. Simulations using Census Bureau data reveal that if all adults in low-income families obtained full-time work at $15 an hour, this would lift 80 percent of low-income DC families above 150 percent of poverty.

• Increasing wages will have a greater effect than increasing work hours. If each low-income working adult in DC were able to work full-time year-round at his or her current wage, the DC low-income population would be reduced by only 25 percent, because wages for this group are so low.  By contrast, increasing the wages of all low-income workers to $15 an hour — without changing their work hours — would move nearly half of all residents in low-income working families above 150 percent of poverty.
• Increasing work to full time, year round and increasing wages is the most effective way to move working families toward economic security. Nearly two-thirds of low-income working families would move above 150 percent of poverty if all able-bodied adults were able to work full time and received at least $12 an hour. Nearly 80 percent of low-income working families would move above 150 percent of poverty if all able-bodied adults were able to work full time and received at least $15 an hour.

But wait! These are folks who are, in fact, earning. The alternative is not some bottomless pit of central wealth. No, the alternative is unemployment.

Money has to come from somewhere. Just because a political body thinks there should be more money does not make it appear. We’d all like more money. What makes green paper valuable as cash is precisely the fact that it is scarce.

In these tough economic times, when every man, woman, and township is hurting for cash, it makes little sense to impose an arbitrary wage minimum. America already faces a 9.2 percent unemployment rate, while D.C. stares down the barrel of 10 percent unemployment.

Forget RFK and Nationals Park; the District houses enough impoverished residents to fill the lion’s share of our four fair quadrants.

Tellingly, the report does not consider poverty numbers as a percent of total population, but rather as absolute numbers absent any baseline. The DC Fiscal Policy Institute ignores strong economic growth in D.C. during the 2000s. Instead, the DCFPI report focuses solely on creeping poverty throughout that decade.

Who is most likely to fall below the DCFPI’s poverty line? This time around looks like it’s young adults under age 18 living in single-parent families. The highest concentration of low-income D.C. residents lives in Wards 7 and 8 and are especially likely to be African-Americans without a high school education.

DC Fiscal Policy Institute’s report is perhaps the most cursory analysis any group has ever written. The purpose of analysis is to examine other, non-tautological facts. To search for causation.

You’re not fat because your gut hangs over your shorts; you’re fat because you eat too much and exercise too little. People aren’t poor because they don’t have enough money; they’re poor because they lack sufficient skills, or ambition, or ability to compete in a tough job market.

DCFPI ran a simulation rooted in Census data to illustrate that if all low-income working adults kept their jobs, but wages bumped up to $15/hour, nearly half of all D.C. low-income families would rise above the federal poverty line.

Unfortunately, that is not how economics works. When mandated minimums artificially inflate the cost of employing each worker to a price above what the worker earns for his employer, employers must fire some of their employees, or risk going out of business entirely.

Insanity is repeating the same behavior and expecting different results. It would be insane to impose a more stringent minimum wage when the existing minimum wage has already resulted in heightened D.C. unemployment over the past decade.

D.C. should do the sane thing, and stop strangling the job market here. Perhaps then residents will finally see some positive results.