What a difference an election makes. On Friday, the Bureau of Labor Statistics reported that 214,000 jobs were created in the month of October. If the recent pattern holds, the number will likely be revised upward as better data comes in, but it was not wildly out of line with the preliminary reports for the last several months.
What was markedly different though, was the reaction of House Speaker John Boehner, who has been relentless in his criticism of the Obama administration’s jobs record.
- On August 1, the BLS reported 209,000 new jobs had been created in July (since revised upward to 243,000.) Boehner’s reaction: “When I look at this report, I think one thing: we can do better.”
- On September 5, BLS reported 142,000 new jobs had been created in August (since revised upward to 203,000.) Boehner’s reaction: “Today’s disappointing report, coupled with last week’s bleak economic forecast from the Congressional Budget Office, shows a pattern of weakness in the Obama economy that has too many Americans still asking, ‘where are the jobs?’”
- On October 3, BLS reported that 248,000 jobs had been created in September (since revised up to 256,000.) Boehner’s reaction: “Only Republicans are offering real solutions to help get people back to work, lower costs at home, and restore opportunity for all.”
- Today, when BLS reported that 214,000 jobs were created in October, Boehner’s official reaction was different. “While it’s welcome news that more people found work last month, wages remain stubbornly flat while costs continue to rise, squeezing middle class families and putting the American Dream further out of reach.”
For the first time in months, he acknowledged that the economy actually is creating new jobs and stagnating wages are a problem (despite the fact that economists and policymakers have been talking about it for years).
Maybe something about the economic outlook changed between October and November that explains Boehner’s change in focus. More likely though, it was the election, which will soon put his party fully in charge of Congress (and thus, more accountable for the economy) that made him willing to acknowledge that we’re actually making solid progress on the employment front and need to pay attention instead to wages.
Now, the strongest driver of wage inflation is low unemployment, and with today’s news that the jobless rate has ticked down to 5.8 percent, it’s clear that the economy is headed in that direction. But so long as there is slack in the labor market – meaning far more jobseekers than available position – wages aren’t going to respond to job growth.
Economists are currently arguing about exactly how much slack is left in the job market, but there is strong evidence that it remains substantial.
However, there are other ways to boost wages, the most obvious of which Speaker Boehner has been avoiding for more than a year now: Raising the minimum wage. President Obama and Congressional Democrats have been calling for an increase in the minimum wage, but the issue has been a non-starter in Boehner’s House of Representatives.
As the Congressional Budget Office reported in February, when the minimum wage goes up, it typically has the effect of boosting wages for other workers already earning more than the minimum.
“The low-wage workers whose wages are affected by increases in the minimum wage include not only those workers who would otherwise have earned less than the minimum but also, in some cases, workers who would have earned slightly more than the minimum,” CBO wrote. “After a minimum-wage increase, some employers try to preserve differentials in pay that existed before—for example, so that supervisors continue to be paid more than the people they supervise—by raising the wages of people who previously earned a little more than the new minimum.”
The Republicans’ main argument against an increase has been that it will cost jobs. “When you raise the cost of something, you get less of it," Boehner said in January. Indeed, the same CBO report that noted the effect of raising the wage on the pay of those earning more than the minimum also found that while many millions of people would benefit from a wage increase, hiking the minimum to President Obama’s preferred level of $10.10 per hour could cost the equivalent of half a million jobs.
But all economic decisions are based on tradeoffs, and a minimum wage hike is no different.
Elise Gould, a senior economist with the Economic Policy Institute in Washington, recently did a study comparing wages in the first half of 2014 and the first half of 2013. She found that wages actually declined from one year to the next for all workers except those in the bottom 10 percent. The difference, she found, was largely the result of a number of states voting to increase their minimum wages.
“Raising the minimum wage is one of the options on a menu of things we need to do,” she said. “All the measures point to a lot of slack, and the wages are simply not going to respond in a labor market that has this much slack because employers know there are other workers waiting in the wings.”
However, she said, a minimum wage increase would operate independently of the relationship between the number of jobs and the number of jobseekers.
“A minimum wage increase does have a real impact on wages, and on more than just on those making the minimum.”
Indeed, the idea appears to be catching on. Five different states on Tuesday voted to raise their minimum wages independently of the federal wage, which has been stuck at $7.25 since 2009.
Combine that with Boehner’s apparent change in focus on Friday and perhaps the GOP will be persuaded to reconsider raising the federal minimum as an option for boosting wages overall.
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