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Second Minimum Wage Hike Not 'Enough' for the Media

     Many in the media gleefully proclaimed the second scheduled increase of the federal minimum wage last week, but few journalists correctly reported how many people would benefit or included economists’ criticisms of the 2007 mandate.

 

     Several media outlets claimed two million people would be getting a raise as of July 24, even though the real number of minimum-wage workers is only 20 percent of that amount.

 

     The CBS “Early Show” and NBC “Nightly News” called the 70-cent per hour increase “good news,” but expressed concern that it would not do much with “higher food and fuel prices [that] will swallow virtually all of that raise.”

 

     Last year’s mandate set three increases in motion – 70 cents a year for three years, on July 24 of 2007, 2008, and 2009. This second increase took it from $5.85 to $6.55, and the wage will go to $7.25 next year.

 

     Over a period of two years, then, the minimum wage will have gone from $5.15 to $7.25 – a 41-percent increase.

 

     Like the networks, the Associated Press (AP) insisted the increase isn’t enough to help the poor – but cited extreme examples of people struggling to get by.

 

     “Workers like Walter Jasper, who earns minimum wage [plus commissions] at a car wash in Nashville, Tenn., are happy to take the raise, but will still struggle with the higher gas and food prices hammering Americans,” AP reporter Christopher S. Rugaber wrote.

 

     But Jasper is not a typical minimum wage worker. He and his fiancée support “a family of seven,” according to the report.

 

     Rugaber cited a second atypical example of a garment worker who “has earned the federal minimum for 18 years.” “She says she would need to make at least $50 more a week to pay all of her bills and take care of her 84-year-old mother, whom she supports.”

 

    According to The Heritage Foundation, most minimum wage workers aren’t supporting families of seven or elderly relatives.

 

     “Minimum-wage earners fall into two distinct categories: young workers, usually in school, and older workers who have left school,” the foundation reported in January 2007. “Most minimum-wage earners fall into the first category: 52 percent of those earning $5.15 or less per hour are between the ages of 16 and 24.”

 

    As for the rest of workers – those over 24 – only 20 percent live in poverty, “while 37 percent have incomes over twice the poverty line,” according to Heritage, which published the paper before the increase to $5.85 in July 2007.

 

     AP, CBS, NBC, ABC and CNN all reported on the latest minimum wage increase, but without presenting a balanced view of the issue – mostly repeating exaggerated impact data and ignoring potential economic harm such as job loss.

 

     The Business & Media Institute reported last year, when the minimum wage increase was being hotly debated, that many economists argue that instead of helping poor low-skilled workers, the minimum wage increase could actually hurt them.

 

     A survey of the American Economic Association found that “over 73 percent of AEA labor economists believe that a significant increase [in the minimum wage] will lead to employment losses and 68 percent think these employment losses fall disproportionately on the least skilled.”



An Exaggeration the Size of Phoenix

   

     Journalists from the networks, CNN and AP all repeated the incorrect claim that two million Americans would be “getting a raise” on July 24. In fact, they overstated the impact – making it appear four-to-five times larger than it really would be.

 

     “Two million Americans got a pay raise today,” anchor Brian Williams said on the July 24 NBC “Nightly News.” Viewers of ABC’s “Good Morning America,” CNN’s “Newsroom,” CBS’s “The Early Show” and NBC’s “Today” all heard similar statements that day.

 

     That wasn’t a new error. Lou Dobbs of CNN used the two million figure a year earlier on “The Early Show” July 24, 2007.

 

     But it was CNN’s Allan Chernoff who actually used the correct figure on July 24, 2008.

 

     “[W]ould you believe that only about 400,000 Americans, according to the Department of Labor, actually earn the minimum wage?” Chernoff asked “Issue #1” co-host Gerri Willis.

 

     The difference between 400,000 and two million is roughly equivalent to the population of Phoenix, Ariz.

 

     Unlike the other journalists who emphasized how many people would “get a raise,” Chernoff made it clear that few people would be impacted by the wage hike.

 

     “They [Dept. of Labor] did a study a couple of years ago – 400,000 Americans, that is not a lot. The total number earning the minimum or below, and this is according to what the government could calculate, was about 1.7 million. That’s only about two percent of the workforce that’s paid on an hourly basis,” said Chernoff on July 24.

 

     According to the January 2007 Heritage Foundation policy paper, 1.2 million Americans earn the minimum wage or less once tips are included in the figure.

 

     And most – 52 percent – of those minimum-wage earners are between the ages of 16 and 24 and are working part-time before finishing their education, James Sherk and Rea S. Hederman, Jr., explained in the paper. “Their average family income is over $50,000 a year.” That is more than the median American household income of roughly $48,200, according to 2006 data.

 

     In 2005 the Bureau of Labor Statistics put the number of minimum wage earners at 479,000 hourly workers “earning exactly $5.15.” That was much lower than the “two million” recited by the media.

 

     One reason so few are making the federal minimum is that 32 states already have state-mandated minimums higher than the federal level.

 

 

Not Enough…

 

     In 2007, the media crusaded on behalf of a minimum wage increase, declaring that $5.15 an hour simply wasn’t “fair.” Once legislation passed setting up gradual increases through 2009, it was heralded by CNN’s Ali Velshi as “unmitigated good news.”

 

     As the second mandated increase took effect July 24, 2008, the media sent the message that the hike wasn’t “enough.”

 

     After 11 percent of voters answered a CNN Quickvote Question during “Issue #1” saying that the minimum wage is too high, CNN’s Poppy Harlow responded, “I don’t know about that.”

 

     ABCNews.com ran a story on July 24 entitled: “Surviving (or Not) on Minimum Wage.” Marcus Baram’s article mentioned the 12-percent raise from $5.85 to $6.55 an hour before saying: “But that’s still not enough to pay the bills, say some members of the working class, including many who already earn more than the minimum wage.”

 

     AP and CNN both cited the liberal Economic Policy Institute (EPI) to complain that the higher minimum wage wouldn’t be enough to help workers.

 

     On July 24, Harlow of CNNMoney.com told “Issue #1” viewers, “The Economic Policy Institute guy says that if you’re a family of three and you’re living on minimum wage, you are below the poverty line.”

 

     “That’s sub-minimum, I guess you could call it,” replied Miles O’Brien, CNN’s chief technology and environment correspondent. “Yes,” agreed Harlow.

 

     But a higher minimum wage isn’t the solution to poverty, according to Walter Williams, an economist and BMI adviser. He has written: “if higher minimum wages could cure poverty, we could easily end worldwide poverty simply by telling poor nations to legislate higher minimum wages.”

 

     In 2007, CNN reporters heavily promoted the minimum wage increase. Senior business correspondent Ali Velshi, Andy Serwer (now managing editor of Fortune magazine) and anchor Lou Dobbs all supported an increase. Dobbs even said at the time, in a July 24 CBS appearance, that it “simply isn’t enough.”

 

     Julie Chen of CBS asked him, “What do you think the minimum wage should be today?”

 

     “To adjust to purchasing power, you’re talking about nearly $10 an hour. And that’s a minimum wage to put us back to where we were 50 years ago. That’s an insult,” answered Dobbs.

 

     A CNNMoney.com article cited U.S. Rep. George Miller, D-Calif., and EPI supporting increases in the minimum wage before including only one critic [William Dunkelberg] who warned the wage increase could harm businesses. The article did note the fact that EPI is backed by unions.

 

     “But the government’s efforts may not be enough to help struggling workers, according to a report by economists at the labor-backed Economic Policy Institute,” the article said. “The group believes that, even at the new federal level, a full-time, minimum-wage worker earns below the poverty line for a household of two.”

 

     William Dunkelberg, chief economist for the National Federation of Independent Business, told CNNMoney.com “this is not the best time to be forcing employers to pay workers higher wages.” He also said “the increased minimum wage makes it more difficult to hire those who are most adversely affected by the economic slowdown.”

 

     Most of the recent media reports on the minimum wage downplayed or completely ignored economists who argue that minimum wage increases are bad economic policy that could hurt businesses and possibly cost jobs.

 

     Dr. Gary Wolfram, a Hillsdale College professor and adviser to the Business & Media Institute, said that minimum wage hikes “[raise] the cost of doing stuff where low-skilled labor is involved and increased the price of things that would require low-skilled labor – hotels, fast food.”

 

     Rugaber’s AP story on July 24, 2008, downplayed critic David Heath, the owner of a Tiki Tan in College Station, Texas, who confirmed Wolfram’s statement. Heath told AP that he would have to raise prices to cover the cost of the increase in wages.

 

     CNBC’s Melissa Lee told “Today” viewers essentially the same thing: “[R]aising the federal minimum wage could hurt. Yes, it means higher wages for some two million Americans, but it will increase the cost for businesses. That will hurt profits. And that cost could ultimately be passed on to the consumer in the form of higher prices.”

 

     CNN’s Allan Chernoff simply dismissed concerns from those who argue that job losses can result from minimum wage increases.

 

     Gerri Willis asked Chernoff, “I think a lot of people out there, when they argue against the minimum wage, they’re saying nobody’s going to get hired any more. Is that true?”

 

     That argument has been made for “a very long time,” said Chernoff. “The fact is, it probably doesn’t have all that much impact on hiring levels, because as we’ve pointed out here, not all that many people are actually earning the minimum wage.”

 

     Chernoff’s dismissal was a slap in the face of many experts. A survey of the American Economic Association found that “over 73 percent of AEA labor economists believe that a significant increase [in the minimum wage] will lead to employment losses and 68 percent think these employment losses fall disproportionately on the least skilled.”

 

 

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