FEEL-GOOD MIMINUM WAGE POLICY COUNTERPRODUCTIVE

This commentary originally appeared in the San Antonio Express-News on March 13, 2016.

Union officials and liberal activists are, again, agitating in the Alamo City for a dramatically higher minimum wage for public employees. Their target this time: the San Antonio Independent School District.

Community activist groups, such as COPS/METRO and the Southwest Workers Union, reportedly showed up at a recent SAISD board meeting to push for a proposal “raising the wage floor to $13 per hour next fiscal year and $15 per hour within three years.” Their message was apparently well-received by some.

SAISD board President Patti Radle expressed her support: “We are in this together. This board is anxious to pay decent wages to its employees,” according to a report in the San Antonio Express-News.

The problem with this, of course, is that it’s feel-good economics that’s neither sound nor prudent. Basic economics explains how we act to satisfy our desires given scarce resources.

Given that money is scarce, employers in the private and government sectors have limited resources to pay workers. This is why it’s essential for employees to be paid based on their merits and not on the failed approach of across-the-board government-mandated raises.

Research shows that a minimum wage most hurts those it’s intended to help, particularly the young, low-skilled and less-educated, as they have fewer job opportunities. This reduces their lifetime earnings potential with less on-the-job training, promotions and experience, which are the foundations of the more productive path of merit-based pay raises.

A minimum wage also tends to redistribute income from low- to high-skilled workers. If a low-skilled worker is too costly at a higher minimum wage, an employer will likely find a technology to replace that worker. A new technology, such as a kiosk replacing a person keeping track of students and others at a school, will be invented, built and maintained by higher-skilled, higher-paid workers.

Another way a higher SAISD minimum wage would be costly: If less productive workers are kept on staff, then higher taxes and fees must fund those expenditures. Higher wages that are artificial would also put more pressure on the state’s retirement systems as those wages correlate with higher defined benefits after retirement.

For those interested in the livelihood of the poor and income inequality, the minimum wage fails to deliver a brighter future. To put it bluntly, minimum wage increases are bad public policy because they don’t incentivize productivity and they unnecessarily burden taxpayers.

Beyond the fact that minimum wage policies violate the tenets of sound economics, there’s also a big fiscal problem. That is, SAISD is deeply in debt.

The Texas Bond Review Board’s latest figures show that San Antonio ISD’s debt totals $1.1 billion, or roughly $20,250 per student. The district’s deluge of red ink has swelled by more than $204 million since last year and by almost $365 million since 2010.

The district’s big and fast-growing debt has not been without consequence. SAISD taxpayers bear an elevated property tax burden, which could be one of the reasons that families are leaving the district, causing a steady decline in student enrollment.

According to the Texas comptroller, SAISD’s student population shrank by 4.9 percent between the 2004-05 and 2013-14 school years. In contrast, enrollment statewide surged by 14.6 percent during the same period.

The district’s high debt and shrinking student enrollment strengthen the economic arguments against a higher minimum wage and make clear that SAISD should soundly reject this kind of policy.

If the district wants to reward high-performing employees with additional pay, then it should explore other ways, like finding savings within its budget — made easier by the fact that there are fewer students to service — and redirect those dollars to workers as merit raises. This would allow the district to achieve its stated goal in a responsible manner.

http://www.texaspolicy.com/blog/detail/feel-good-wage-policy-counterproductive
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