WSJ Debunks WSJ On Wages and Economic Growth

Blog ››› ››› ELLIE SANDMEYER

The Wall Street Journal reported that stagnant wages are "crippling" economic growth, debunking previous Journal editorials which have argued that minimum wage increases "hurt the poor and least skilled" and cause job losses.

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An August 26 Journal article reported that stagnant low wages in America have contributed to the slow pace of the economic recovery, noting that "[c]onsumers remain the biggest driver of the U.S. economy, but without more money coming in, it will be difficult for them to spur robust growth." The article noted that wages have continually fallen below inflation rates while the insecurity of the job market hurts workers' ability to push for higher pay, "crimping their spending and potentially the recovery."

However, the Journal has previously argued against wage increases for low-income workers. A July 5 editorial claimed "minimum-wage laws most hurt the poor and least skilled" because they "drive down urban employment" and "have cost cities tens of thousands of jobs." Similarly, a March 20 editorial claimed "forcing employers to pay more for labor merely prices young or low-skilled workers out of the work force." These claims are contradicted by the Journal's recent reporting and economic research.

Multiple studies have found that minimum wage increases either increase employment levels or have no discernible effect on jobs. In 2011, the Center for Economic and Policy Research concluded that wage increases were more likely to have a positive effect on employment.

But according to the Department of Labor, the minimum wage is now lower than its historical average, and inflation has already negated the modest minimum wage increase that was implemented in 2009.

The failure to increase minimum wages plays a role in the stagnation of all wages. As the executive director of the National Employment Law Project noted, "the recent decline in real wages is part of a 30-year trend that we attribute to factors such as the declining real value of the minimum wage." The Economic Policy Institute also found that low minimum wages contributed to weak wage growth for the middle class in particular, and were a key factor in the growing levels of economic inequality in the U.S.:

Contrary to some political rhetoric of late, wage stagnation for American workers and rising inequality is not due to lack of effort ... Rather it is due to certain policies that have weakened the bargaining position of low- and middle-wage workers. Among these policies is the refusal to set the minimum wage at a level where it establishes a well-enforced wage floor at 50 percent of the average wage.

Furthermore, economists at the Federal Reserve Bank of Chicago have projected that raising the minimum wage to $9 would help increase real income while boosting household spending by $48 billion -- resulting in an overall 0.3 percent increase in GDP.

Posted In
Economy, Jobs, Wages, & Unemployment
Network/Outlet
Wall Street Journal
Stories/Interests
Minimum Wage
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