Hurricane? Recession? Right says: Cut wages!

Hurricane? Recession? Right says: Cut wages!
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It's entirely predictable that the right would take advantage of the recession to call for ending wage protections for American workers in the name of "job creation." That's what happened this week, when Washington Post editorial writer Charles Lane actually made the case that, to create jobs, we should lower the minimum wage and eliminate Davis-Bacon wage standards for construction workers on federally-financed projects. (You might remember that President Bush used Hurricane Katrina as an excuse to suspend Davis-Bacon wage standards in the Gulf Coast in 2005).

It's unclear if Charles Lane is genuinely interested in creating jobs or if he just has some ideological axes to grind, but there's no question that his suggestions would worsen, not ease, unemployment. Depressed demand for goods and services is the key problem confronting the economy, yet Lane's ideas would further weaken demand by taking money out of workers' pockets. Demand for goods and services is what businesses are looking for before they'll start hiring; reducing demand by cutting workers' wages is precisely the wrong thing to do if you are interested in a sustained economic recovery. Economist Kai Filion estimates that raising the minimum wage to $9.50 an hour would give a $60 billion boost to the economy over two years.

Lane partly justifies his call to reduce the minimum wage - now set at $7.25 per hour - by citing a Wall Street Journal op-ed by economist David Neumark. But Neumark's opinion by no means represents a consensus view: 665 economists, including five Nobel laureates and six past presidents of the American Economics Association, signed a letter organized by the Economic Policy Institute supporting the 2007 minimum wage increase.

A better job creation plan would be for the Post to hire an additional editorial writer - one with a more balanced and accurate view of the labor market. An even better one would put millions of people to work in one year. It would include aid to state and local governments to prevent job losses in the public and private sectors, investments that put people to work repairing schools and improving their communities, and a job creation tax credit.

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