U.S. Senator Lamar Alexander (R-Tenn.), the senior Republican on the committee overseeing labor policy, today said the committee's hearing on minimum wage was "on the wrong subject--on fewer jobs--and I'd like to see it on creating more jobs."
Alexander said: "My problem with this hearing is that it's a hearing on how to pay fewer people more money instead of how to get more new jobs, which is what we need in this country, with such a high rate of unemployment. I would rather see hearings--although I don't have the prerogative, as the chairman does, of setting the agenda--on creating an environment in which we could grow the largest number of good new jobs and make those more accessible."
Alexander cited a study by economists at the University of California-Irvine and the Federal Reserve who surveyed more than 100 major academic studies on the impact of minimum wage and determined that 85 percent found a negative employment effect on low-skilled workers.
Alexander continued: "The minimum wage is a good-sounding attempt to fix the price of labor. In a market system, what that usually does is create a shortage--it creates less. We had testimony at the first minimum wage hearing--we had an economist and a man who actually runs a business, and he said unquestionably that if the cost of labor is more, that that will permit him to hire fewer people."
Witnesses at the hearing in March included two restaurant owners who testified that an increase in the minimum wage of 39 percent from $7.25 to $10.10 and mandating automatic increases every year, as proposed by committee Chairman Senator Tom Harkin (D-Iowa), would force them to cut jobs to stay in business. One testified that it would increase his labor costs by 22 percent.
Alexander said today: "As a governor, when it came to a state that had the third-lowest family incomes in America, I looked around at how I could help improve incomes in our state, and the last thing in my mind was to say that what I ought to do is pass a law in Tennessee that says everybody ought to be paid more. Because I knew from experience that companies had to make the money to pay that. And companies wouldn't come and couldn't grow in Tennessee if that were the requirement. So we set about in another direction and that was to create an environment in which they could succeed.
"That meant, for example, getting rid of the usury limit we had in the state at the time, which kept capital from coming in. It meant maintaining and defending a right-to-work law, which gave employees freedom to choose and created an opportunity for the American automobile industry to come to Tennessee and compete in this marketplace. And so suddenly we went from a situation where we had no auto jobs to one where a third of our manufacturing jobs are auto jobs.
"Over the 1980s and into the 1990s, we had among the fastest-growing family incomes of any state, and I do know that our current governor and legislature are continuing to create an environment where companies can come and, without excessive mandates, create jobs to make a profit.
"So, my attitude to the so-called minimum wage is that it basically cuts the bottom rung off of the economic ladder onto which we hope Tennesseans and Americans will step, so they can then climb up the ladder. And our focus ought not to be on cutting that rung off, so people can't get on the ladder at all. Our focus ought to be on helping people move up that ladder, and that meant giving them a choice of whether or not to join a union, and giving them a choice to go to a good school instead of a bad school--as many of these attitudes as we can think of.
"So I think the hearing is on the wrong subject. I'd like to see a hearing on creating more jobs."
The last time Congress voted to increase the minimum wage in 2007, the national unemployment rate stood at 4.4 percent.
Today the unemployment rate stands at 7.6 percent.
Most economists believe that a more accurate measure of the nation's unemployment also includes discouraged workers who have given up hope of finding a job and those who have taken part-time work but want full-time--and that today stands at 13.8 percent.