Sen. Ted Kennedy’s alleged “populism” and liberal policymakers’ newfound embrace of states’ rights are comic diversions in the ongoing debate surrounding the federal minimum wage.  But the prize for most absurd should be awarded to Congress, which continues to give the American people the spectacle of political haranguing over an extra 70 cents per hour in wages in 2007.  This, at a time when congressional leaders of both major parties continue to avoid the real issue: the loss of millions of jobs in a private-industry sector (manufacturing) where the average hourly earnings for nonsupervisory personnel in November were $16.91 per hour, which amounts to triple the federal minimum wage.

U.S. manufacturing employment, since its most recent peak nearly nine years ago (March 1998), has declined by 3.4 million jobs, a loss of nearly one in five positions in the sector.  In the current U.S. economic expansion, which started in November 2001, manufacturing employment has declined by nearly 1.7 million jobs, the greatest decline in an expansion in the U.S. Bureau of Labor Statistics time series, which dates to 1939.  By contrast, manufacturing employment fell by 206,000 in the record ten-year expansion between March 1991 and March 2001.  Losses this cycle have occurred in both Durable Goods and Non-Durable Goods Manufacturing.  Some of the states hardest hit are in the industrial North, where five states (Pennsylvania, Ohio, Michigan, Indiana, and Illinois) have lost a combined 1.05 million manufacturing jobs since peaking before the 2001 recession.  The losses, in historical terms, are unprecedented and have contributed to Republican electoral losses in these states, as voters conclude that existing economic policies are not working.  In 1998, these five states, with the exception of Indiana, all had Republican governors.  A complete reversal has occurred: Today, the Hoosier State is the only one headed by a Republican.

There is little in the way of policy proposals to suggest that Democrats will do any better, having taken control of Congress last month.  Have they announced plans to address the flawed tax, regulatory, trade, fiscal, and monetary policies that have all played a role in manufacturing’s problems, which started during the presidency of Bill Clinton?  No, the Democrats’ fast-track proposal, sponsored by Senator Kennedy, is a $2.10 increase in the minimum wage over a three-year period, to $7.25 per hour.  The current standard of $5.15 per hour has been in effect since September 1997, when it was increased from $4.75.  Republicans argued then that any increase would price unskilled workers out of labor markets, an idea still debated by economists in academic journals.  Eighteen states, however, now have minimum wages greater than the federal rate, leading Richard B. Freeman, a Harvard University labor economist, to tell the New York Times that “The left is uneasy about states’ rights, but people are becoming more progressive at the local level.  They can see what is happening to their neighbors, and they are more sympathetic toward the poor, whom they can also see.”  Kennedy told the Times, in a written statement, that “States have always been the laboratories of democracy, and I am proud of the leadership they have shown on this issue.”  He vows to continue pushing for a minimum greater than the $7.25 per hour supported by congressional Democrats.

The irony is that another New Deal legacy has been undermined.  The federal minimum wage has its origins in FDR’s National Industrial Recovery Act (1933) and the Fair Labor Standards Act (1938).  One of FDR’s policy goals was to have the federal government establish a wage floor.  The federal government no longer serves that role.  Instead of looking to Washington, D.C., Kennedy and other liberals must look to the state of Washington, which has the highest minimum ($7.63 per hour) in the United States.