ABC White House correspondent Jake Tapper and Washington Post staff writer Jeffrey Birnbaum both uncritically reported conservatives' argument that a minimum-wage increase will eliminate existing jobs and discourage the creation of new ones. However, several studies show that minimum-wage increases do not hurt employment.
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An August 3 report by ABC White House correspondent Jake Tapper and an August 3 article by Washington Post staff writer Jeffrey Birnbaum both uncritically reported an argument made by conservatives that raising the minimum wage will result in job losses and discourage job creation. In fact, numerous studies have found that increasing the minimum wage does not result in job loss or negatively affect employment. Further, neither Tapper nor ABC business correspondent Betsy Stark reported in a previous segment on World News Tonight that congressional Republicans have tied a minimum-wage increase to legislation cutting the estate tax -- a measure that would disproportionately benefit the wealthiest Americans. And Tapper, Stark, and Birnbaum all omitted the fact that Democrats have been pushing for years to increase the minimum wage.
In his report on the August 3 edition of ABC's Good Morning America, Tapper noted that Congress is currently debating legislation that would increase the federal minimum wage from $5.15 per hour to $7.25 per hour. At the top of the segment, Tapper posed the following question: "But is that truly the smartest way to help the working poor? Or could that just hurt job creation?" He went on to note the argument put forth by retail giant Wal-Mart that efforts to increase the minimum wage it pays its employees "will mean fewer stores and fewer jobs in needy areas." Tapper then quoted two economists -- Kevin Hassett of the American Enterprise Institute and June O'Neill of the National Bureau of Economic Research -- both of whom agreed that an increased minimum wage would negatively affect the job market.
While Tapper did air a clip of talk-show host Oprah Winfrey arguing in favor of a minimum-wage increase, he did not interview one of the hundreds of economists who support such a measure. As a result, the misleading argument that a higher minimum wage would discourage job growth went unchallenged. As Media Matters for America has noted, several studies contradict this claim. A 1998 Economic Policy Institute (EPI) study of the impact of the two most recent increases in the federal minimum wage found that the effect on employment was "economically small and statistically insignificant ... [and] almost as likely to be positive as negative." Additionally, as the weblog Think Progress noted, a 1995 study by Princeton University economists David Card and Alan B. Krueger found that increases in state and federal minimum wages led "to increases in pay, but no loss in jobs." Though Card and Krueger's study is now more than a decade old, their conclusions regarding state-level wages were backed up by a report released recently by the nonpartisan Fiscal Policy Institute. That report, released in March 2006, found that "employment and payrolls in small businesses grew faster in the states with minimum wages above the federal level." Think Progress also highlighted a report from the Wisconsin Department of Workforce Development, which found that the state's 2005 minimum-wage increase "produced $175 million in additional payroll and a $3 million boost in state tax revenue."
In his August 3 Post article, Birnbaum joined Tapper in uncritically repeating conservatives' arguments against a minimum-wage increase. Birnbaum reported that "[b]usiness organizations have long opposed minimum-wage increases, arguing that the higher labor costs would force employers to lay off workers or eliminate some low-paying entry-level jobs." Similarly, a July 28 article by Post staff writer Jonathan Weisman reported this claim without challenge, as Media Matters noted.
By contrast, in her report on the August 2 edition of ABC's World News Tonight, Stark reported the claim that "jobs will be lost if employers are forced to pay wages they can't afford," but went on to note that "economists we talked to doubt that will happen." She then aired a clip of economist Bill Cheney saying "you can't find in the data any clear evidence of significant job losses." Stark also noted that employers in the 18 states that have raised the minimum wage "are hiring at about the same rate as states that have not."
Yet the reports by both Stark and Tapper omitted a crucial component of the ongoing congressional debate over the minimum wage -- that House Republicans have tied the wage increase to a bill that would cut the estate tax. Indeed, while Tapper reported that the House last week "voted to raise the wage" -- and aired a clip of Rep. Deborah Pryce (R-OH) speaking about the bill on the House floor -- he failed to note that the GOP-sponsored legislation included a provision to slash the estate tax. In her report, Stark noted that the minimum-wage measure is "linked to another controversial bill," but gave viewers no further details.
Moreover, in reporting on this issue, Birnbaum, Tapper, and Stark all ignored the strong Democratic support for a minimum-wage increase and the long-standing Republican opposition to such legislation. As CNN congressional producer Ted Barrett wrote in a June 28 article on CNN.com: "During the past nine years ... Democrats have tried unsuccessfully to increase the minimum wage." Most recently, the GOP-controlled Senate defeated a Democratic amendment calling for a minimum-wage increase on June 21. Not a single Democrat voted against the measure.
In his August 3 article, Birnbaum also uncritically reported business lobbyists' misleading claim that the estate tax hurts small businesses:
In contrast, business lobbyists are seeking "yes" votes. Dan Danner, executive vice president of the National Federation of Independent Business, the small-business lobby, sent lawmakers a letter of support this week.
"While we have strong concerns about the minimum wage hike, we're supportive of permanent relief of the estate tax," he wrote. "If Congress needs to address the federal minimum wage level this year, we believe it should be addressed in a package that also provides significant relief for small businesses. . . . The bill does just that."
"Every closely held business in America today is either affected by the death tax or could be affected by it," one top business lobbyist said. "At the same time, less than 3 percent of the country's workers get paid at the minimum wage." In addition, the lobbyist said, "people in the business community understand that it is valuable to Republicans standing for election in November to demonstrate that they have compassion for folks at the lowest end of the economic ladder."
In fact, several studies have shown that the estate tax affects few small-business owners. As Media Matters has noted, a March 2005 report by the Brookings Institution's Tax Policy Center found that of all the estates affected by the tax in 2004, only 440 (roughly 2 percent) were "primarily made up of farm and business assets," whether large or small. The Tax Policy Center report also noted that revenue from these 440 farms and businesses constituted only 5.6 percent of total estate-tax revenue collected in 2004. "Small" farms and businesses -- "defined as those valued at less than $5 million" -- constituted less than 1 percent of total estate-tax liability in 2004. Moreover, a July 2005 Congressional Budget Office report found that based on an analysis of 1999 and 2000 estate-tax returns, only 135 family-owned businesses would have owed any estate tax at the current exemption level of $2 million. By contrast, about 4.5 million active businesses with assets under $5 million filed income-tax returns in 2002, according to the IRS.
From the August 3 edition of ABC's Good Morning America:
DIANE SAWYER (co-host): Well, coming up on Capitol Hill this morning, big debate about jobs and justice and what Oprah Winfrey has been doing on her show. The issue is the minimum wage in America. And ABC's Jake Tapper is at the Capitol this morning to tell us more. Jake?
TAPPER: Good morning, Diane. Well, the federal minimum wage is five dollars and 15 cents an hour. That's about $41 a day -- not even enough to get yourself a tank of gas. Congress is now debating whether or not to increase the minimum wage. But is that truly the smartest way to help the working poor? Or could that just hurt job creation?
[begin video clip]
TAPPER: After 10 years without any increase, the mighty Oprah took action.
WINFREY: Today we're giving a voice to the millions of Americans who work full time, yet are still living far below the poverty level.
UNIDENTIFIED FEMALE: I feel like I can't give my kids enough. And that bothers me.
TAPPER: Hours after that program ran last week -- 100 days before the midterm elections -- the House voted to raise the wage.
PRYCE: The bill before us tonight will raise the minimum wage more than two dollars -- to seven dollars and 25 cents an hour -- a 41 percent increase.
TAPPER: But is this really the best way to help the working poor? Or does it destroy the very jobs they are in? In Chicago, the city council recently demanded that Wal-Mart and other big retailers pay workers above minimum wage -- 10 dollars an hour.
CROWD: We beat Wal-Mart! We beat Wal-Mart!
TAPPER: Wal-Mart and the business community argue that will mean fewer stores and fewer jobs in needy areas. So who really won here?
HASSETT: Maybe right now the grocery store in your hometown has a person out front helping you load the bags into your car. And maybe they decide that that's a service that they can't really afford to offer anymore if the minimum wage goes up another couple of dollars.
TAPPER: Some economists say a minimum-wage increase would eliminate up to 1.6 million jobs for youth. And they argue a better way to help the working poor is by giving them tax credits.
O'NEILL: Most economists agree that the minimum wage is not a useful way to help people.
[end video clip]
TAPPER: The reason economists support tax credits is because that money for the working poor comes from the federal government, whereas increasing the minimum wage comes from employers. But that can be a difficult argument to make politically when you consider how little $41 a day is to live on and when you consider the fact that, in the 10 years since congressmen last passed the minimum wage, they have voted to give themselves pay raises eight times at a total of about $30,000 a congressman. Diane.
SAWYER: Right, OK. Thank you, Jake Tapper.
From the August 2 edition of ABC's World News Tonight:
SAWYER: And now, we're going to take "A Closer Look" at the issue being fiercely debated in Congress about raising the federal minimum wage from $5.15 an hour to $7.25 an hour over the next three years. It is a political war about jobs and justice, not to mention the Oprah factor. ABC's Betsy Stark takes our "Closer Look."
[begin video clip]
STARK: The minimum wage and the debate over raising it both seem to be trapped in time.
UNIDENTIFIED SPEAKER: People who work a 40-hour workweek ought to earn a minimum wage that's worth living on.
JACK FARIS (National Federation of Independent Businesses): The unintended consequences of this action today will hurt the very people it's supposed to help.
STARK: For the nearly two million Americans who worked for the minimum wage, the 10-year status quo has been painful. While their wages have stood still, rents have gone up 34 percent. The cost of seeing a doctor is up 30 percent. A gallon of milk is 29 percent more. A gallon of gas has more than doubled.
BETH SHULMAN (Fairness Initiative of Low-Wage Work): It takes a minimum-wage worker working 11 hours merely to fill their own tank of gas.
STARK: Never in the history of the minimum wage has Congress gone this long without raising it. So, why consider it now? Polls show 80 percent of Americans favor it. It's an election year. And Congress has voted itself 10 pay raises while giving workers nothing. Today, Senate Minority Leader Harry Reid also speculated on the power of one.
REID (D-NV): Number two, and I say this seriously, Oprah. Millions of people watch that show.
STARK: On the day the House voted to increase the minimum wage, Oprah was talking about the tragedy of living on $5.15 an hour.
WINFREY: Why wouldn't this be a priority in government, if you've got 30 million potential voters who are living on minimum wage?
STARK: Opponents still say jobs will be lost if employers are forced to pay wages they can't afford. But economists we talked to doubt that will happen.
CHENEY: If you go back in time to the earlier occasions when we raised minimum wages, it's clear that you can't find in the data any clear evidence of significant job losses.
[end video clip]
STARK: And here's something else to consider, 18 states have not waited for the federal government to pass a higher minimum wage. They've done it themselves. And in those states, employers are hiring at about the same rate as states that have not raised the minimum wage.
SAWYER: OK. A reality check, Betsy. What are the odds and how soon it'll go to a Senate vote?
STARK: It doesn't look like it's going to -- there's no vote scheduled in the Senate, Diane, and the odds of this passing this year, still pretty dim. This measure's linked to another controversial bill. So this thing is still very hot politically.
SAWYER: Yeah. And about to hit the skids of the campaign --
SAWYER: -- this fall. OK. Thanks to you, Betsy.