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Inequality Up, Disabled Down

DOL’s 5 most outrageous arguments for the minimum wage

AP

The Department of Labor has engaged in an impressive display of mental gymnastics as it seeks to downplay concerns about the potential upheaval caused by President Obama’s executive order mandating a 40 percent minimum wage hike for federal contractors.

It dismissed numerous complaints and warnings from industry and advocacy groups about the unintended consequences of the wage hike in its final rule, which was published on Tuesday.  Here are its top five attempts to squash reasonable concerns about the change in policy:

1. The Department dismissed concerns that raising the minimum wage would hurt the job prospects of the developmentally disabled.

AP
AP

Mentally disabled individuals have long been exempt from wage laws to encourage hiring and ensure that parents can still receive disability benefits to care for them. President Obama’s executive order, however, left no room for such exemption, according to the department. While some interest groups backed the inclusion of mentally disabled workers, the Department alluded to concerns raised by others.

The Department received numerous comments pertaining to the coverage of workers with disabilities whose wage rates are calculated pursuant to special certificates issued under section 14(c) of the FLSA. Executive Order 13658 expressly provides that its minimum wage protections extend to such workers... Comments questioning the coverage of such workers are not within the purview of this rulemaking action because the Executive Order explicitly provided that FLSA section 14(c) workers performing on or in connection with covered contracts are entitled to its protections.

2. The department spun concerns that the wage law could prevent families caring for the disabled from receiving federal benefits as a good thing.

AP
AP

Families caring for mentally disabled individuals rely on Social Security disability checks to help fund their care. Increased wages, however, could price families out of receiving those checks, creating an incentive to stop disabled individuals from seeking work. Rather than addressing these concerns, the Department cited them as proof that the $10.10 wage is a universal good.

Some commenters, such as SourceAmerica, stated that they supported the payment of the Executive Order minimum wage to FLSA section 14(c) workers performing on covered contracts but also expressed concerns that such inclusion could potentially lead to a loss of employment or public benefits for those workers [...]

The Department appreciates the concerns raised by these commenters regarding the potential loss of employment or reduction in public benefits that could result by requiring that the Executive Order minimum wage be paid to FLSA section 14(c) workers performing on or in connection with covered contracts, particularly with respect to workers with severe disabilities. The Department believes that many of these potential adverse employment effects will be mitigated by the economy and efficiency benefits that contractors will experience by paying their workforce, including workers with disabilities, the Executive Order minimum wage. The concerns raised by a few commenters that some workers with disabilities will lose their public benefits because, as a result of the Executive Order, they will now earn more than the statutory amount allowed (e.g., their earnings will exceed the Substantial Gainful Activity limit for purposes of Social Security benefits) reflects a recognition that many workers will not experience a loss of employment or reduction in their work hours.

3. The Department said that mass low skill unemployment was acceptable because wealthier high skilled workers would benefit.

AP
AP

President Obama and Labor Secretary Tom Perez may pay lip service to fighting income inequality, but the Labor Department appears indifferent to the toll low skill workers will pay for the wage increase. The Department dismissed the non-partisan Congressional Budget Office’s estimates that a potential national $10.10 wage would eliminate between 500,000 and 1 million jobs, most of which are low skilled positions, by saying that the rich would get richer.

The CBO study estimated that increasing the minimum wage to $10.10 nationwide would reduce total employment by 0.3 percent (or 500,000 workers). The study also indicated that the total reduction in employment might be smaller in the long run because a higher minimum wage tends to increase the employment of higher-wage workers.

4. The Department tried to assure employers that the wage couldn’t hurt workers by saying it didn’t have enough data to estimate the rule’s reach.

AP
AP

The Department estimated in its final rule that about 200,000 workers will be affected by the minimum wage increase. That’s down from early summer estimates that 300,000 workers. In some cases, the Department just threw up its hands and said it didn’t know the true reach of the rule.

The Association/IFA contended that there will be an increase in costs associated with the employment of tipped employees on a covered contract. The commenter said that on January 1, 2015, the minimum cash wage for tipped employees will more than double (i.e., increase by $2.77 ($4.90–$2.13)) and that within three years after that date, the minimum cash wage for tipped employees will nearly quadruple [...]

There is no credible data source that allows the Department to estimate the number of tipped employees covered by this Executive Order.

5. President Obama’s minimum wage can’t hurt jobs because President Obama said so.

AP
AP

The Small Business Administration, the CBO, and the United States military all said that the wage hike would eliminate thousands of jobs and force businesses to shut down. Business leaders and academics warned that the increased labor costs will force companies to raise prices, layoff workers, or replace them with robots. The Labor Department says that won’t happen because the president’s executive order said so.

The Order states that raising the pay of low-wage workers increases their morale and productivity and the quality of their work, lowers turnover and its accompanying costs, and reduces supervisory costs. Id. The Order further states that these savings and quality improvements will lead to improved economy and efficiency in Government procurement.

The wage hike will go into effect for federal contractors on Jan. 1. President Obama doesn’t intend to stop there: He’s pushing for a national wage hike.