In the increasingly likely event that Hillary Clinton wins the White House in November, Washington is likely to be once again consumed by a battle over whether or how much to raise the federal minimum wage. (While the national Democratic Party has endorsed a $15 per hour, the candidate says she favors raising it to $12—a position that disappointed the liberal wing of her party even though it is a dramatic upping of the ante from President Obama’s last bid, for $10.10).Recent data published by the Bureau of Economic Analysis, however, highlight the critical shortcomings of a federalized one-size-fits all to the wage floor. The New York Times reports:
Spend enough time traveling around the United States and you’re bound to notice a dramatic variation in what a dollar can buy.Everything from the price of a cup of coffee to the cost of a house can fluctuate between, and even within, states.A gallon of regular gas costs $2.74 in Hawaii, but just $1.82 in South Carolina.The average Connecticut resident pays twice as much for electricity as the average Tennessee resident.A $7 lager in San Francisco might cost you half as much in Chicago. A $5 hamburger in California may be a dollar cheaper in Nebraska.Tuition at public colleges varies by orders of magnitude.
What’s more, these data don’t even address the dramatic differences in cost of living costs within states. High-cost metropolitan areas with strong labor markets, like San Francisco and New York, might be able to absorb minimum wage increases without significant job loss. But for economically depressed areas with high unemployment and low business investment, a dramatic hike could be devastating. It’s not a coincidence that most of the support for a $15 minimum comes from high cost-of-living blue states, and especially from the economically prosperous deep-blue urban centers within those states.A national doubling of the minimum wage would amount to a gratuitous economics experiment on the most vulnerable regions of the U.S. A better approach is to allow counties and municipalities to set their own minimum wage levels. But a better approach yet would be to leave the minimum wage alone and focus like a laser on job creation, as well as other avenues for reform—like tax credits, licensing, and housing—to increase the fortunes of Americans at the bottom of the economic ladder.