When Los Angeles Mayor Eric Garcetti last month proposed raising the minimum wage across the city to $13.25 an hour in 2017, he rekindled a long-running debate between the business sector, organized labor, city leaders and economists, among other groups.
Our own Ed Leamer, director of the UCLA Anderson Forecast, stepped right into the discussion this weekend with an op-ed in the Los Angeles Times, where he and Daniel Flaming, president of the Economic Roundtable, exchanged their educated thoughts on the pros and cons of increasing the minimum wage. Leamer raised concerns over who would fund the increase, and noted that “low wages are the symptom, not the problem,” among other points.
An excerpt of their conversation is below. To read the full op-ed, visit the LA Times.
From Edward Leamer to Daniel Flaming:
Dear Dan,
As I've considered L.A.'s minimum wage proposal in recent weeks, I keep coming back to one question: Who will pay for it?
It's complicated. It's hard to think of a better way to provide significant amounts of money to needy individuals, families and neighborhoods than by increasing compensation for low-wage work. A report by the Berkeley Institute for Research on Labor and Employment prepared for the mayor suggested that a minimum wage of $13.25 in 2017 would directly increase the earnings of 27% of workers and would channel $1.8 billion a year toward this needy and deserving group.
But what is the best way to fund this attractive charitable activity?
Most economists think of a minimum wage as equivalent to an employment tax that applies to the very group we want to help out: low-wage workers. This is attractive politically only because the minimum wage tax doesn't show up on the city's books. But it could. Los Angeles could collect the $1.8 billion from employers as a tax on low-wage employment and then distribute the tax revenue to the poorly paid workers. An alternative way to raise $1.8 billion would be a 3% payroll tax on all workers earning in excess of $50 an hour.
(Read more here.)
Comments