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Three (Cynical) Explanations for the Minimum Wage Groundswell

Opponents of raising the minimum wage aren’t happy that the crusade has suddenly revved up. Some say politics plays a role.

“Maybe it’s the cynic in me, but some of the motivations are less than pure,” says Michael Saltsman, research director of the Employment Policies Institute, which is partially funded by employers that oppose a higher minimum.

In SeaTac, Wash., voters approved an increase in the minimum wage to $15 an hour. Most affected will be the town’s major employer, Seattle-Tacoma International Airport. Less noticed is that the minimum can be waived, but only via collective bargaining. That exemption gives employers a huge incentive to let workers unionize, even to encourage unionization. Labor unions were the biggest supporters of the SeaTac measure.

In New Jersey, voters last week approved a constitutional amendment to raise the state minimum to $8.25 an hour, with cost-of-living adjustments to follow. Democrats got the amendment onto the ballot to get around Republican Governor Chris Christie, who had vetoed legislation to raise the wage. Minimum wage measures are proven vote-getters that may have helped Democrats prevent Christie from sweeping other Republicans into state office on his coattails. “If liberals and Democrats want to defeat Christie, they must target ‘infrequent’ voters who would be eager to vote to increase jobs and give themselves a raise,” John Atlas, president of the National Housing Institute, and Peter Dreier, who teaches politics at Occidental College, wrote in an August column for the Philadelphia Inquirer.

Now news is emerging that President Obama favors raising the minimum wage to $10.10 an hour over two years, more than the $9 an hour he proposed in his State of the Union address in February. That is good politics for the White House. Raising the minimum wage sends “a message to working families struggling paycheck to paycheck that we can help them,” says Senator Richard Durbin of Illinois, the chamber’s No. 2 Democrat.

Of course, this leaves the question of why the minimum wage is such a potent issue for unions and Democrats in the first place. Saltsman argues that it’s because voters fail to see the downside of raising wages, which is that employers will eliminate jobs for low-skilled workers deemed not worth the higher minimum.

David Neumark, an economist at the University of California, Irvine who has done extensive research that questions the value of higher minimums, says supporters’ motives aren’t necessarily ulterior. “It’s a response to rising inequality. I don’t think it’s a good response to it. Obama believes it will help, as do many other smart people who I think are wrong.”

Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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