Free Local Communities to Set Their Own Minimum Wage

Last week, Iowa Governor Terry Branstad signed a bill preventing local governments from raising the minimum wage above the statewide level of $7.25 per hour. The bill was a response to four counties passing local laws boosting the minimum to $10.10 per hour or higher. reports that similar battles between state and local authorities to set wage and employment guidelines have taken place around the country.

Rather than blocking local governments from setting their own minimum wage standards, state governments should encourage them to do so.

At the most basic level, that’s a recognition that no two communities are identical. Of the four Iowa counties that passed higher minimum wage laws, two are home to the state’s biggest cities– Des Moines and Cedar Rapids. It’s not unreasonable to think that the cost of living in any city is a bit higher than in other rural areas of the state. A third county setting higher minimums is also among the state’s largest and is home to the University of Iowa. That might suggest a higher cost of living and also a more liberal political culture.

But the real reason that local governments should be allowed to establish a higher minimum wage is that it shifts decision making power away from politicians and puts it in the hands of Iowa residents.

As I note in my forthcoming book, Politics Has Failed: America Will Not, Americans have more power when we act as consumers rather than voters. We have the ability to hold local government accountable because we can decide where to live.

Like a small business, local communities compete to attract residents and jobs. In effect, they are selling a mix of lifestyle benefits including housing, amenities, services, and more. The price consumers pay is determined by housing costs, taxes, regulations, and other factors.

Seen in this light, the wisdom of raising the minimum wage in a particular county will be determined by the decisions of residents and local businesses. Maybe the higher minimum will attract more people or maybe it will drive away businesses and jobs. It’s even possible that the higher minimum wage will have no discernable impact. After all, it’s just one small part of the overall lifestyle mix offered by local communities.

Letting local governments set their own rules empowers people to vote with their feet. It works because local officials are competing in a very active market. The average American moves about 12 times in their lifetime and nearly 13 million move to a new county every year.

And that brings us to the fourth county that passed a higher minimum wage, Wapello County. It’s home to Ottumwa, perhaps best known as the home town of Radar O’Reilly in the hit TV show MASH. On the surface, there’s no clear reason for Ottumwa to have a higher minimum wage than other less populated areas of the state. But maybe the good people of Ottumwa know something we don’t know. Or perhaps they just made a mistake. Either way, the choice should be theirs to make.

If it works, life in Ottumwa will get better. If not, either the new law will be repealed or people will move away. Most important of all, the decision will be in the hands of the people rather than the politicians.

Posted in Scott's Columns

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