By Maxford Nelson│Freedom Foundation
Newly-elected Socialist Seattle City Council Member Kshama Sawant is better known for her incendiary rhetoric than her policy acumen. Her recent comments at a minimum wage forum at Seattle Central Community College exhibit either a lack of knowledge on the issue or a startling deficiency of candor.
One attendee asked Sawant about the economic consequences of increasing the minimum wage. In his comments, the gentleman noted that the U.S. territory of American Samoa had recently experienced significant economic damage after Congress mandated sharp increases in the territory’s minimum wage.
Sawant responded by claiming that the American Samoa study “has been done by some organization called the Freedom Foundation, which is a right-wing think-tank.” Her comments about the study’s validity were unequivocal.
“As an economist and as an academician,” she explained, “I feel strange calling it a ‘study’ because it’s a spurious analysis that has no basis in reality… Even by the standards of right-wing analysis it’s not that great.”
Sawant contended that, since American Samoa’s minimum wage was increased at about the same time the 2008 recession hit the mainland U.S., Samoa’s massive job losses were the result of the recession and not the minimum wage hikes.
“Just because we’re determined fighters for economic justice does not mean that we cannot see through this haze that’s being created,” she concluded. “We know the facts. We understand how the economy works.”
There’s only one-problem: the report was actually written by the Obama Administration’s Government Accountability Office (GAO), not the “right-wing” Freedom Foundation. While we have cited the study, we are not its authors.
First, some context. In 2007, Congress mandated that American Samoa and the Commonwealth of the Northern Marianas Islands (CNMI) increase their minimum wage in yearly, 50-cent increments until they reached the $7.25 federal minimum wage. The GAO was tasked with providing regular reports on the impact of the minimum wage increases.
In 2011, the GAO’s 147-page report found that, from 2008 to 2009, employment in American Samoa fell by 19 percent and employment in the CNMI fell by 13 percent. Major employers took cost-cutting actions like “laying off workers and freezing hiring,” and “attributed most of these actions largely to the minimum wage increases.”
In emotional testimony before Congress in 2011, American Samoa’s Democratic Governor, Togiola Tulafono explained that “we are watching our economy burn down.” He harshly criticized the GAO report, arguing that it “does not adequately, succinctly or clearly convey the magnitude of the worsening economic disaster in American Samoa that has resulted primarily from the imposition of the 2007 U.S. minimum wage mandate.”
Congress and President Obama responded by freezing the increases and significantly delaying implementation of the mandate.
There is no question that the minimum wage increases, not the mainland U.S. recession, are what devastated the territory’s economy. Sawant’s comments at the forum make it painfully clear that she was either entirely unaware of the facts or deliberately misrepresenting them. Before relying on her experience as “an economist and academician” to dismiss a study out-of-hand, she should at least take the time to read it and understand the context.
Some of Sawant’s other comments also reflect a refusal to consider all of the evidence.
Responding to one attendee’s worry that a $15 minimum wage might decrease employment, Sawant claimed that “not one single example exists which shows that if minimum wage was raised it increases unemployment or it shuts down businesses.”
On the contrary, in addition to American Samoa’s example, there are a number of studies which have found that higher minimum wages decrease employment, especially for low-skill workers. The Congressional Budget Office recently issued a report saying as much.
While the effect of higher minimum wages is admittedly controversial, Sawant could not even bring herself to acknowledge the debate exists.
Lastly, while Sawant often speaks sympathetically of small businesses, businesses owners of all stripes should expect no mercy from Sawant and her army of activists.
“It is extremely difficult to be a start-up business,” Sawant explained. “If you start looking at the cost of rent, the cost of capitalization, the cost of getting a, you know, location that is conducive for you to sell your goods, whatever they may be, it is an obstacle-ridden path to start any small business.”
But labor costs are not part of the problem, according to Sawant. “Workers are being paid poverty wages and small businesses still find it extremely difficult to survive in this economy.” Therefore, according to Sawant’s twisted logic, since Washington’s small businesses are already struggling to cope with the cost of the highest state minimum wage in the nation, we should increase the minimum wage to $15 an hour and expect no negative consequences.
Then again, Sawant’s goal is not so much to fix the economy as it is to overthrow it entirely. “If an economy is so ridiculously incapable and dysfunctional that it cannot pay something close to a living wage to a majority of its workforce, then we don’t want that economy,” Sawant proclaimed. “What are we trying to protect?”
Enjoy the revolution, Seattle.