Wage articles lack concrete examples

The Daily Journal recently hosted writers John Claassen ["Protect the value of human assets," Feb. 4] and Judge James P. Gray (ret.) ["Minimum wages, you can't fake reality (forever)," Feb. 4]. Claassen is an Oakland-based litigation attorney representing businesses and Judge Gray ran as the vice presidential candidate for the Libertarian party in the last national election. Their articles were kindred, if not twins in argument. Abstractions aside, each argued that the minimum wage distorts the efficiencies of capitalism. Their secondary argument seemed to be minimum wage increases will lead to more automation, causing lay-offs.

First, will a marginal increase that tracks the cost of living result in automation? As the proponent of the argument, the writers have the burden. Neither cite a concrete example. Judge Gray opines there could be an automated machine to flip burgers. I don't doubt that's possible. But if a waitress can be replaced by an iPad, or if tax software will eliminate tax preparers, those changes and many others will occur over the next 20 years regardless.

Will a dollar or so increase in the minimum wage every few years result in large-scale automation? We know automation has reduced employment in the auto manufacturing and stevedoring [longshoremen] industries, but did increases in the minimum wage cause those shifts? Remember, this is an argument not about wage levels generally, but subsistence wages for the poor.

The economic studies, like so many politically charged investigations, tend to produce conclusions sought by the purveyors of the study. The Congressional Budget Office may have less skin in the game. The CBO in December 2014 presented a more balanced view. The 2013 proposed increase in minimum wage could cause a .3 percent decrease in employment. On the other hand, higher paid workers are more likely to work harder and are less likely to leave their employment. Turnover is costly; everyone involved in training the replacement worker becomes less efficient.

ThinkProgress.org argues that despite slight job loss, an economic net gain results when workers will have more money to spend. A $10.10 minimum wage would mean a direct raise for 16.7 million workers, according to the Economic Policy Institute. The Federal Reserve Bank of Chicago found that even when potential job losses are taken into account, an increase in the minimum wage to $9, as the president proposed in his 2013 State of the Union address, would increase household spending by $28 billion, or 0.2 percent of GDP. That extra spending stimulates the economy, which can lead to more job growth, which implies a "win-win" for employers and employees.

To use a characterization by Judge Gray, here's a hard reality that won't go away: Almost 17 million people in this country must work several jobs at minimum wage to survive in a state of near constant physical and emotional exhaustion. I don't doubt Judge Gray and Claassen care about people, but their "top down" view is out of touch with the intangible human costs that are seldom factored into the "economic efficiency" equation.

Judge Gray's and Claassen's arguments lack the statistical evidence of either correlation or causation between the proposed federal minimum wage increases and harm to business. Automation is driven by competition between labor and technology, and technology is on the winning side of that battle inevitably. In the meantime, the poor need to meet their basic needs. The best economic policy would be to prepare low-income workers to be world competitive by training them for the technological shifts ahead.