Experts continue to debate Louisville minimum wage in letters to - WDRB 41 Louisville News

Experts continue to debate Louisville minimum wage in letters to Metro Council

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Paul Coomes Paul Coomes
Jason Bailey Jason Bailey
LOUISVILLE, Ky. (WDRB) -- Experts on each side of Louisville's minimum wage debate have continued to dissect the issue in dueling letters to the Metro Council, which is considering an ordinance that would raise the minimum hourly pay in Jefferson County to $10.10 by July 2017.

The economics of proposal are complex, with a range of predictions as to the effect on employment and Louisville's competitiveness for jobs, as WDRB reported in a recent Sunday Edition.

Retired University of Louisville economics professor Paul Coomes, who advised the council against adopting a local minimum wage in testimony on Oct. 2, followed up with an Oct. 5 memo to the council criticizing a research brief by Jason Bailey of the Kentucky Center for Economic Policy, who favors the proposal.

In the memo, Coomes said Bailey's estimate that 87,300 workers in Jefferson County would get a pay raise as result of the policy “ignores any economic response to the high local minimum wage and implicitly assumes that everyone in a current pay range will simply get a raise due to the legislation.”

Instead, Coomes argued, “Unemployment will rise in Jefferson County, and those people will have a zero wage rate instead of $10.10 per hour.”

He also reiterated his prediction that the policy will result in “other negative consequences…such as higher prices, fewer employee benefits, more automation, and fewer first-time job opportunities for teenagers.”

Coomes added that Bailey's assertion that workers who make up to $11.50 an hour would get a pay raise as a result of the “ripple effects” of the $10.10 minimum wage has not been “rigorously vetted.”

“To me this is another assumption that ignores economic responses in the labor market and elsewhere. Proponents need to explain where all this extra money is coming from,” Coomes wrote.

In a letter dated Monday, Bailey – who has a master's degree in public administration – said economists' understanding of the effects of minimum wage increases has changed over the last 20 years, and “there is growing recognition that minimum wage increases do not automatically mean less employment because businesses can and do use a number of channels of adjustment in response…besides layoffs.”

Bailey said his assumption that the policy will create “ripple effects” raising wages even for those who make up to $11.50 an hour is supported by the same Congressional Budget Office study that Coomes used to underscore other points in his testimony and letter to the council.

Bailey also pushed back on Coomes' assertion that minimum wage is a poorly targeted tool to fight poverty because only about one fifth of minimum wage workers nationally live in households below the poverty line, as opposed to being, for example, the teenage sons and daughters of affluent parents.

While not disputing that estimate, Bailey said it “misses the fact that a large percentage of working poor households would benefit from an increase as well as a majority of workers who are somewhat above the poverty line but still have challenges in making ends meet.”

Bailey estimates that 77 percent of Louisville households below the poverty line would benefit from the higher minimum wage.

One thing Bailey and Coomes agree on is the poverty-fighting potential of a different policy: a Kentucky earned income tax credit. Like its counterpart at the federal level, a state “EITC” would supplement the wages of the working poor with an annual income tax credit.

Unlike the minimum wage, the earned income tax credit would have be enacted by Kentucky General Assembly; it can't be done at the county level.

Bailey noted that organizations have pushed the policy in Frankfort since 2001 “without success so far.”

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