More People On Food Stamps After Past Minimum Wage Increases

Nonetheless, Center for American Progress report contradicts recent trend

By Tom Gantert | March 17, 2014

While proponents of mandating a higher minimum wage claim it would help Michigan residents get off food stamps, the evidence from past increases shows this not to be true.

In 2007, the minimum wage in Michigan increased from $5.15 an hour to $6.95 an hour. That year, the number of people on food stamps increased from 1.1 million to 1.2 million. In 2008, the minimum wage increased again from $6.95 an hour to $7.15. Again, the number of food stamp recipients went up from 1.2 million to 1.26 million.

Yet, the left-leaning Center for American Progress recently released a report that claimed raising the minimum wage to $10.10 would get at least 110,000 families in Michigan off food stamps. President Obama and political allies are pushing for the higher mandated wage. The Center for American Progress has strong ties to the Clinton and Obama administrations. The group's president, Neera Tanden, worked as director of domestic policy for the Obama-Biden presidential campaign and also has worked as policy director for Hillary Clinton's presidential campaign.

"The economy is complex and there are many factors working among each other," said James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy. "Michigan's experience shows that the direction of the economy is the most important factor in whether food stamp rolls increase or decrease."

The Employment Policies Institute cited a half dozen studies and analyses from 2003 to 2009 that highlights why a correlation between minimum wage and food stamps is on shaky ground.

EPI pointed out that in 2009, the average family income of those earning minimum wage was more than $48,000. The 2009 U.S. Census stated that 16.5 percent of those earning minimum wage were raising a family on minimum wage. The remaining 83.5 percent were teenagers living with working parents, adults living alone or married couples with dual incomes.

And EPI cited a Ball State University study that found when the federal minimum wage increased by 40 percent from July 2007 to July 2009 there were 550,000 fewer part-time jobs as a result of the increase.

According to EPI, when employers are faced with higher labor costs, they hire workers with more work experience and higher skill levels. Workers with lower skills and less work experience are pushed out of the market for jobs.

Mandating a higher minimum wage also is associated with job losses. A Congressional Budget Office report released in February said increasing the wage mandate to $10.10 per hour would lead to the loss of about 500,000 jobs. The report also said some employees would be paid more, but that would come at the expense of others being laid off. The laid off workers would be more likely to use food stamps and other government programs.

The results of the Center for American Progress study contradict what studies have shown about minimum wage, said Antony Davies, an associate professor of economics at Duquesne University.

"Increases in the minimum wage may or may not result in an increase in overall unemployment," Davies said. "However, increases in the minimum wage do result in a shifting in employment away from lesser skilled, lesser educated workers toward higher skilled, higher educated workers. Minimum wage increases provide increases in incomes for workers who keep their jobs, but cause decreases in incomes for workers who are laid off."

Davies said in times of prosperity, food stamp use declines because more people are working. Also, when the economy is thriving, there tends to be an increase in minimum wage.

"There is no causal relationship between minimum wage and food stamps, rather rising incomes are driving both of the measures," Davies said.

Small business owners in Michigan say a mandated wage increase would lead to layoffs and higher prices.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

Moderate Steps for Brewers, Industry Freedom

No reason for Legislature not to do more

By Jarrett Skorup | March 14, 2014

Several bills related to brewers, restaurants and bars were recently passed by the Legislature. While all are pushing the rules in the right direction, there is no reason the state should not allow for more freedom on these legal products.

The most significant proposed laws are as follows (all have passed the Legislature nearly unanimously and are headed to the governor):

House Bill 4709 would “increase the amount of beer microbrewers can brew from 30,000 to 60,000 barrels per year” (up from 18,000).
House Bill 4710 would “allow one brewpub to have a financial interest in up to five other locations” (up from two).
House Bill 4711 would “allow a brewer to sell its beer at two tasting rooms instead of just one.”
Senate Bill 650 would “allow very small commercial brewers (ones that produce fewer than 1,000 barrels per year) to sell directly to a retail merchant, rather than being mandated (like larger producers) to sell through one of the regional wholesale distribution monopolies that are protected by current liquor control regulations.”
Senate Bill 505 would lift some regulations the prevented bars and restaurants from allowing advertisements on trays, coasters, napkins, shirts, hats, pitchers, glasses, bar mats, buckets, bottle openers, stir rods, liquor drink menus, patio umbrellas and packaging used to hold and deliver liquor purchased by the retailer.

There’s no good reason for the state to limit the amount of beer microbrewers can make or the number of operations and tasting rooms — consuming alcohol is legal and production should be set based on demand. If Michigan businesses are limited, it is likely that the response of consumers is to drink other types of beer, which means capping the brewers serves no purpose other than to hamper successful operations and harm economic growth. And while allowing smaller brewers to avoid the regional wholesale distribution monopoly is a good idea, all enterprises should have the freedom to ship how they want.

We have covered Senate Bill 505 previously, which is a compromise between the old, Prohibition-era rules that prevented any logos on a variety of bar and restaurant items and the idea that establishments should not be limited by government from these types of agreements. Ironically, the craft brewers lobby, which has long had to fight anti-competitive government restrictions, supports the old rule because it limits their competition. The bill is better than the previous law, but the compromise is still a ridiculous regulation hampering businesses.

From a broader public policy standpoint, there is little reason the state should be standing in the way of the expansion of Michigan brewers. The truth is, none of these laws are about public safety, or any other reasonable purpose.

A 2012 study by Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center, and Antony Davies, an associate professor of economics at Duquesne University in Pennsylvania, found that a state’s alcohol regulatory regime has little to do with public health outcomes.

Another study from Donald Boudreaux, a professor of economics at George Mason University, and Julia Williams, with the Regulatory Economics Group, completed in 2010 looked broadly at how tough alcohol regulatory laws were. It found “no statistically significant differences between the 18 control states and the 32 license states (and the District of Columbia) in rates of alcohol-related deaths, drunk-driving fatalities or binge drinking.” They also found “similar results for rates of drunk-driving fatalities and binge drinking among youths.”

The state is moving in the right direction on alcohol regulation, but current laws still enrich a handful of special interests in the alcohol wholesale and distribution business. The Legislature should do more.