It might seem obvious why support for the minimum wage persists in Congress. Politicians always want to be seen as helping the little guy. So they would naturally support an increase of the minimum wage to $7.25, as is currently being proposed.
Let’s assume that everyone who supports an increase in the minimum wage also knows – and perhaps even agrees with – the fundamental economic insight that such an increase would lead to either lower-skilled workers being laid off or prices for goods going up or both. It’s conceivable that someone could still support a minimum wage increase after being convinced of that. It’s a price worth paying, they might say. Or they could argue, as some supporters of the current proposal do, that an increase to $7.25 – phased in over three years, no less! – won’t do that much damage. After all, it’s not a $15 increase.
Now let’s try a little thought experiment. Assume support for a minimum wage increase is conditional and dependent upon the proposal offered. A call for a $20 minimum wage, for instance, would arguably be greeted with much less enthusiasm. Evidence of this is the fact that even supporters of the minimum wage aren’t willing to go so far as to propose such a thing.
What follows, then, is a workable assumption about the politics of this issue: How adversely affected by the policy a congressman’s district would be is the main determinant, all other things being equal, of that congressman’s enthusiasm for a minimum wage increase. A congressman representing a rural district with many small businesses that the proposed minimum wage would burden most heavily would be a less enthusiastic supporter than one from a big city with many large businesses, the employees of which make far more than the minimum wage.
But the cost of living differs dramatically in different parts of the country, too: $7.25 doesn’t buy the same amount of stuff in Manhattan as in Kansas City. And there’s the rub. It’s easy for a congressman from Manhattan to support a $7.25 minimum wage since it might have only imperceptible economic effects in his district. In Kansas City, however, the effects would be relatively greater.
Now consider what might happen if Congress were required to adjust the federal minimum wage by the cost of living in each congressional district. In areas where the cost-of-living is close to the national average, the minimum wage would be around $7.25. In Manhattan – where it costs twice as much to live when compared to other areas, like Kansas City – the minimum wage would be at least $14.
This would set off all sorts of protests from congressmen in districts in which the upward adjustment is greatest. Now the businesses in their districts would feel a pinch they wouldn’t feel under a non-adjusted minimum wage. Those formerly enthusiastic congressmen might even start to question why it’s the federal government’s business to meddle in the often complex process – going on all around the country within hundreds of companies and cities, each of which are faced with vastly different economic situations – by which an employer and employee come to their own agreement on compensation for employment. And isn’t that the sort of debate we should be having?