Two days after the 100-hour window, the House of Representatives raised the minimum wage to $7.25. The bill passed by a margin of almost 3-to-1, making it unclear why the Democrats couldn’t get the minimum wage raised when they were out of power.
Greg Mankiw is arguing against the raise by saying it helps the poor less than expanding the Earned Income Tax Credit. The standard response to his argument would be, “It’s not either/or.” Ordinarily, such a response is misguided, because political capital is a limited resource. However, in this case, it’s exactly on target.
The Democrats were elected to raise the minimum wage. Before the election, 68% of Americans said they considered raising the minimum wage a priority. If that’s not a mandate, I don’t know what is. Usually political responses are either/or because of limitations in political capital; however, with such a mandate, raising the minimum wage at worst doesn’t spend any political capital, and at best replenishes it.
Expanding the EITC is good. If the Democrats or the Republicans offer something like it in this session, it will do good. Just note that in 4 years of uninterrupted control of the White House and both houses of Congress, the Republicans did not do anything to reduce taxes on the poor; instead, they cut taxes on millionaires.
Of course, the Republican politicians’ arguments against the raise are even worse. In 2006, France’s economy grew 2.5%, despite having a pre-Thatcherite economy and a minimum wage of €8.27 per hour. Remember that next time you hear some libertarian rant about how the minimum wage reduces growth.