Minimal Theories

Despite the rhetoric, evidence on the minimum wage initiative isn't conclusive either way

Over lunch at the pricey Grotto restaurant in Highland Village, Bill Miller is defending the tactics of the Save Jobs for Houston Committee, the PAC formed to defeat the so-called "Living Wage" initiative on the January 18 ballot.

Miller is an Austin-based consultant and lobbyist who's become a ubiquitous figure in Houston politics over the past half-decade, and his latest assignment is orchestrating the campaign against the proposed ordinance requiring employers in the city to pay their workers at least $6.50 an hour -- $1.75 higher than the current federal minimum.

"We're not saying total ruin," Miller says, spearing a leaf of romaine from his Caesar salad. "We're saying bad deal."

Total ruin may not be the intended message, but it's hard to imagine a more dire scenario than the one described in the barrage of ads and mailings from the Save Jobs for Houston Committee: Cops and firefighters yanked off the streets. Higher taxes. Thousands of jobs lost. Soaring prices for such essentials as food and prescription drugs. The wholesale destruction of small businesses. Streets riddled with potholes. Swollen welfare rolls.

In other words, in the highly unlikely event voters approve the ordinance, Houston will become a deserted island in a sea of progress.

The interests opposing the initiative -- which include the Greater Houston Partnership, the Houston Hispanic Chamber of Commerce and the Greater Houston Hotel and Motel Association, among other civic and business groups -- uniformly cite the same consequences if the city's minimum wage were set at $6.50, making it the highest in the nation. They argue that businesses will be left at a competitive disadvantage and will flee the city to avoid paying the new minimum, and others will drop plans to relocate in Houston, resulting in the loss of 52,000 jobs and $35 million in tax revenues.

"Call it the Fort Bend County job relocation act," jokes City Councilman Joe Roach, who opposes the initiative.

The effort to increase the minimum wage is designed, its supporters say, to raise the income of the working poor and their families above the poverty line. That's the primary thrust of the Living Wage Campaign, a collection of labor and liberal groups led by Richard Shaw of the Harris County AFL-CIO and Orell Fitzsimmons of the Service Employees International Union.

Though the two sides disagree on the exact number of workers in Houston who make less than $6.50 an hour, no one argues that the number is small: It is generally agreed that the number totals at least 200,000. Of the at least 33,000 workers earning the current federal minimum of $4.75 an hour, roughly 40 percent are the primary wage earners in their households, according to calculations based on census data. Meanwhile, the number of children in Houston living under the federal poverty threshold of a $15,600 income for a family of four exceeds 150,000.

But opponents argue that a higher minimum will instead "hurt most those it is supposed to help," as the Chronicle intoned in one of several editorials urging rejection of the initiative. Higher prices will hit the poor hardest, they say, and the jobs that will be lost will be primarily low-skilled and entry-level positions, which are disproportionately held by women and minority workers.

Despite the assertion in a mailing from Save Jobs for Houston that "economists" came up with the numerical projections for the overall prophesy of doom, the figures all emanate from a single study produced by a single economist -- Barton Smith of the University of Houston.

"That was the study we looked at," says Jacob Monty, president of Comerciantes Latinos Unidos de Houston, a group of Hispanic businessmen who oppose the minimum wage initiative. "[The other side] didn't have a study."

Smith's study -- for which he was paid $16,000 by Save Jobs for Houston -- draws from research on the effects of minimum wage increases across the country, though it offers few actual sources to back its claims. The specific negative impacts, as Smith stated in a footnote, are based on economic assumptions "purposefully taken to be conservative."

Not surprisingly, the architects of the Living Wage Campaign are relying on a more ideologically sympathetic economist to debunk Smith's conclusions -- although, given the campaign's lack of funding, it's unlikely voters will hear much about his arguments before Saturday's election.

In a written critique requested by the Living Wage Campaign, Jared Bernstein, a labor economist with the Economic Policy Institute, a left-leaning D.C.-based research group, dismissed Smith's study as worthless.

Bernstein assailed Smith's lack of sources and what he considers misrepresentations of other studies, concluding that the UH economist's estimates "offer no useful information by which to estimate the impact of the proposed legislation and should be disregarded."

In short, says Bernstein, Smith's study is "really quite badly done."
Smith himself acknowledges that his expertise lies outside the field of labor economics, though he likes to keep tabs on the latest research. But when the pro-increase side asked him to debate Bernstein on the issue, Smith recruited Finis Welch of Texas A&M to better represent the opposition arguments.

"He's a labor economist," explains Smith. "He knows the empirical literature much better than I."

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