Senator Chris Murphy has published a book on a set of imaginary crises in America. Murphy claims that wealthy billionaires and corporations have rigged the economy, but Democrat politicians can fight back. The current problem with his claim is that Democrats are divided. Some Democrats favor socialism as a solution to our alleged economic ills. Other Democrats, like Murphy, favor incremental reform of capitalism. Murphy is trying to provoke a “contest of ideas” within his party, the outcome of which would determine whether we reform capitalism or replace it with socialism.
Murphy's first move in his contest of ideas is a Bill to increase the Federal minimum wage to $25 an hour. Would this new legislation work, if enacted? Murphy claimed, on Meet the Press, that there is evidence showing that incremental increases in the minimum wage would not kill jobs.
There is a virtual consensus among economists that large increases in the minimum wage kill jobs. Why? Economic reasoning suggests that large increases in any cost will significantly reduce employment in all of the the industries affected by those costs. Job losses from minimum wage increases mostly fall upon teenage workers.
Murphy proposed incremental increases in the Federal minimum wage. Corporations would have to pay the full $25 an hour minimum by 2032. Small businesses would have to comply by 2039. Why should employers ignore incremental increases in their costs, only respond to large increases all at once?
The Federal Reserve Bank has adopted a 2% floor for the inflation rate, a target that it rarely hits. What this means is that Murphy’s incremental Federal minimum wage rate would be devalued by at least 2 to 3% per year over the next 13 years1.
Real world data confirms economic reasoning- employers respond to real-inflation adjusted minimum wage increases (see the graphs below). The current and Federal minimum wage of 7.25 an hour has been devalued to a point where it barely matters. Murphy claims that $25 an hour constitutes a true living wage in the United States, at the current price level.
Senator Murphy's proposal for a $25 minimum wage is as phony as a $3 bill. Given that his new minimum wage wouldn't be fully enacted until 2039, it may have very little impact on teen unemployment rates- depending upon future rates of inflation.
Is Murphy being disingenuous or is he delusional? The idea of adjusting the Federal minimum wage for inflation is not that hard to grasp. Murphy should understand this. Either way, Murphy should not be taken seriously. Nor should the socialism of Zoran Mamdani be taken seriously. Murphy proposes a contest to see which set of delusional ideas will prevail in a Democrat party. Serious-thinking Americans should reject and ignore both the Murphy and the Sanders factions of the Democrat Party.
BLS data since 1950-
Any finalized version of this legislation would likely include exemptions from this new minimum wage, for some types of employers or employees.