The Minimum Wage: Tipping Points and Slippery Slopes

Slippery Slopes, Hurricane Ridge

Slippery Slopes, Hurricane Ridge

If you look closely at the gut wrenching divisions of our time, most of them can be expressed as differences over “Tipping Points” and fears about “Slippery Slopes.”  The Mandated Minimum Wage (MMW) is just one example.

Being conscious of these sub texts can help bridge some of the differences, at least among the few remaining policy makers who can still be persuaded by good data (relative to tipping points);  or by good faith efforts to address fears over slippery slopes.

Pick just about any of the chasms in politics, or differences over economics, today, and you can see how they fit into the Tipping Points and Slippery Slopes framework. Debates about taxes and regulations boil down to differences about how much we can tax and regulate before entrepreneurs stop investing.  Just about everyone agrees such a Tipping Point exists, but differences are great as to where it lies on the continuum.

Disagreement about the welfare state or size of government is more in the Slippery Slope category.   The more benefits or “goodies” handed out  — as proponents of small and limited government like to call it —   the more people will want and demand.    And the more we want and receive, the closer we get to unsustainable spending and lack of personal responsibility, or so the argument goes.   Income inequality is yet another tipping point issue.  How much of it can be tolerated  before the overall economy suffers, or before a political system is destabilized?

Sovereign debt is mostly a Tipping Point issue, but with a Slippery Slope overtone.   At some point, debt gets so large, servicing it crowds out other essential spending. Lenders exact usurious interest, so that borrowing more is all but impossible. The result is Greece.  Again, everyone agrees there is a Tipping Point, but not about where it lies.

Climate change is of course the poster child for Tipping Points.  That is where the concept is explicitly at the center of debate, and where its been popularized of late. 

One way to think about the nature of gridlock and polarization today is that one side believes we’re already at  various Tipping Points, while the other thinks we’ve got a ways to go.  And, both sides seem to believe every policy change offered by the other. is on the very edge of a Slippery Slope, leading to an abyss, and a point of no return.  

The Mandated Minimum Wage (MMW) is also a classic example of differences around Tipping Points and Slippery Slopes.  The basic tipping point question for MMW is: “how high does the minimum wage have to rise before it truly or materially reduces employment and slows economic growth?”  The basic Slippery Slope concern around MMW is:   “If you raise the minimum wage today by a certain percent, or have it apply just to certain industries or types of work, what stops politicians from doing it again and again, in larger steps, and wider in scope? 

What is the value of thinking about the MMW, or other contentious policies, from the Tipping Point and Slippery Slope standpoints?

For the remaining 39 people in America who can still be persuaded by facts and data, the Tipping Point perspective provides some common ground; or perhaps an ice-breaker in conversation.  You can usually get even the fiercest opponents to agree that a Tipping Point exists (though not exactly where).  Nonetheless, it can be reassuring that even your (“crazy”) opponent  knows there are limits

Tipping Points also remind us that most policies are scalable, not dichotomous, binary,  black and white; and thus subject to some tinkering, adjustment, negotiation.  Yes, I understand those words are not in the vocabularies of very many  politicians today.  But giving up is not an alternative either. 

WA State Capitol Campus_Lefberg_10

Washington State Capitol

One might argue that Washington addressed the Slippery Slope problem by not only establishing a new minimum wage in its 1998 Act, but providing the slope at the same time (maybe a slippery one?).  But I see this as a safeguard, rather than a runaway train.  It pegs the minimum wage to a time when the state was just about at “full employment” and adjusts it for inflation annually.  In theory, at least, this is sustainable.

The Washington approach is not a full proof, guaranteed protection that policy-makers in Washington won’t raise the MMW faster than the law provides. In fact the small city of SeaTac, Washington, which lies between Seattle and Tacoma (get it?),  passed a $15,00 minimum wage recently.   It has limitations, and may not entirely survive continued litigation. 

Having the slope built into law with nnual COLA adjustments prevents the state from going years without a change.  Raising the MMW a knowable and predictable 2% a year, is a lot better than not doing anything for 15 years, then boosting it by 40% in one bite.  At least one caveat: you really shouldn’t raise the minimum wage by 15% in a year when inflation is 15%.  Not good for the dog to chase its tail.   That can be put into law as well.

I understand that most conservatives won’t buy much of what I’ve argued here; and that liberals might say the old minimum wage idea is passe. For example, I made no mention of the “living wage” as the goal instead of a minimum wage.  A mandated “living wage”  is based on a calculation of how much money it takes for a person to achieve some specific standard of living. The goal of living wage legislation is to ensure that Americans who work full time are not living in poverty; that they are able to support their families without relying on public welfare.

There is a tax policy counterpart to the minimum and living wage concepts which has been supported by some of the most respected conservative economists in history (e.g., Hayek and Friedman).  The idea has been known as a “Basic Income” (or negative income tax).   It  would likely be much more effective, while being less intrusive on market forces than a MMW or living wage.

I don’t usually use Wikipedia as a primary source, but here their description is especially clear and (almost) concise.   “A Basic Income (or negative income tax) is a system of social security that periodically provides each citizen with a sum of money that is sufficient to live on. Except for citizenship, a basic income is entirely unconditional. There is no means test, and the richest as well as the poorest citizens would receive it.  Proponents argue that a basic income based on a broad tax base would be more economically efficient, since the minimum wage effectively imposes a high marginal tax on employers.”

The current U.S. Earned Income Tax Credit (EITC) functions like a basic income or negative income tax.  It could be tweaked so that it applied to more taxpayers or provided higher refunds. It would not be paid mainly by small business owners who employee lots of low wage workers.  The costs and burdens would be broadly distributed.   In today’s political climate, and with the nation’s sovereign debt challenges, expanding the EITC would require offsetting changes to the tax code, or spending cuts, to make it revenue and debt neutral.   There are surely Tipping Points and Slippery Slopes to be addressed in an EITC approach as well.

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10 thoughts on “The Minimum Wage: Tipping Points and Slippery Slopes

  1. Kurt

    I like the simplicity of the minimum wage. Preferably approaching a living wage. Lifting society from the bottom-up truly floats all boats — and has great historic support from the Great Depression reforms of the 1930s thru’ the 1970s.

    I’m not attracted to “slipper slope” arguments because of their fundamental status as a classic logical fallacy. Ref….

    “Slippery Slope Fallacy: Explanation”
    “Slippery slope arguments falsely assume that one thing must lead to another. They begin by suggesting that if we do one thing then that will lead to another, and before we know it we’ll be doing something that we don’t want to do. They conclude that we therefore shouldn’t do the first thing. The problem with these arguments is that it is possible to do the first thing that they mention without going on to do the other things; restraint is possible.”
    http://www.logicalfallacies.info/presumption/slippery-slope/

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    1. Irv Lefberg Post author

      Kurt, thanks for your comment, and for the arguments on the dangers of slippery slope reasoning, with which I agree. I hope that came thru in my original article. I think slippery slope reasoning (SSR) is a central feature of gridlock and polarization. And that it’s very harmful. Yes, SSR may be more of an effect than a cause of gridlock and polarization, but once you get into the habit, it takes on a life of its own; it becomes an habitual feature of our discourse

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  2. alex maclachlan

    Irv, I’m convinced you need to open a neighborhood bar called The Tipping Point, serving Slippery Slope Ale to be tipped back.

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    1. Irv Lefberg Post author

      Good one, Alex. As you probably know, we already have the “Tipsy Crow” bar/restaurant in the Gas Lamp district in San Diego. But I bet they havent thought of Slippery Slope Ale. One drink, and you can;t resist guzzling four more. 🙂

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  3. Kurt

    Irv, congrats to your career state being one of those proving the point:
    “Highest Minimum-Wage State Washington Beats U.S. Job Growth”
    “When Washington residents voted in 1998 to raise the state’s minimum wage and link it to the cost of living, opponents warned the measure would be a job-killer. The prediction hasn’t been borne out.”

    “In the 15 years that followed, the state’s minimum wage climbed to $9.32 — the highest in the country. Meanwhile job growth continued at an average 0.8 percent annual pace, 0.3 percentage point above the national rate. Payrolls at Washington’s restaurants and bars, portrayed as particularly vulnerable to higher wage costs, expanded by 21 percent. Poverty has trailed the U.S. level for at least seven years.”
    http://www.bloomberg.com/news/2014-03-05/washington-shows-highest-minimum-wage-state-beats-u-s-with-jobs.html

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    1. alex maclachlan

      Kurt, you left out the part about Washington state having no State income tax. The differences between California and Washington come July when our MW goes up to $9, is we have one of the highest income taxes, one of the highest property taxes (mostly because of values), etc etc. We’ll get to watch the comparison as California then goes from $9 to $10 in 2016 but all the employer and income taxes continue to rise along with the wage. The you’ll have a little more evidence to come to a better conclusion on Tipping Points and the Minimum Wage at that time.

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  4. Irv Lefberg Post author

    Kurt, Alex,
    One interesting aspect of the fact that Washington State has no general income tax, is that (in terms of initial incidence, i.e. where taxes initially fall), businesses in Washington are taxed more heavily than most states. As recently as 2010, last time I looked at the numbers,, WA businesses were #5 in the nation in terms of tax burden. But, many businesses (especially those which operate mostly in local markets) of course pass these costs on to consumers. Businesses operating mostly in national (or international) markets, have a tougher time of doing that. But, they don’t have to deal with a high corporate income tax either. The best place to live in the world might be Vancouver, WA, which is on the Oregon border (adjacent to Portland). Oregon has NO state sales tax – 0.0%. Zip; Nada! . So, if you live in Vancouver, WA., you don’t pay any state income tax. Then you cross the border, a few miles down I-5, and buy all your big ticket items in Portland, and you pay no sales tax. Your are supposed to pay a “use tax” to WA on those purchases, but that’s not very enforceable. What a deal!

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  5. pollins1

    I have often wondered why EITC (or conceptual equivalents) do not get more attention since it seems to achieve same end as MinWage (allow working poor to make a living) and has the support of right-wing demi-gods Hayek and Friedman. As the child of a small business person, I have some sympathy for the argument that MinWage is tax on small business. It’s one thing to force WalMart to pay $10.10 minimum, but another to force the corner Wash ‘n Dry (Dad’s business).

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    1. Irv Lefberg

      Yes, Brian…agreed. I think the EITC also does a much better job of targeting the right recipents of the benefit. MinWage is earned by a lot of kids and second or third earners in households. With EITC, you’re gettting a lot closer to the (real) target population. I have seen some recent efforts by “conservatives” to remove Hayek from the conservative pantheon — not just for the basic income (negative income tax) idea, but also for some explicit support of some safety net programs, like social security and unemployment insurance. Doesn’t mean Hayek would have done it exactly the way FDR did. In any event, these deviations from the new orthodoxy have resulted in some chip marks on Hayek’s Mt. Rushmore sculpture.

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