To:

Interested Parties
From: Doug Holtz-Eakin
Date: December 8, 2015
Re: The High Cost of Social Justice
Progressives are pushing a $15 minimum wage (Fight for $15), paid
family leave, free college, and expanded overtime rules in what
appears to be an orchestrated effort to make such a policy package a
referendum on social justice in the United States. Taken as a whole,
there are only three problems:

They are very expensive (#WhoPaystheBill),

They are ineffective, and
They dont appear to be terribly just.

Minimum Wage

$15 an hour is $30,000 a year. Even many minimum wage

advocates believe that this is too high to apply as a minimum to
workers of all ages, skill levels and circumstances.

The minimum wage makes it harder to employ the most needy in

the labor force the youngest, poorest educated, least skilled,
and least experienced workers.

Raising the minimum wage to $15 does not create any new
income. Thus the $105 billion in raises have to come from:
o Not hiring 6.6 million workers. This essentially takes the
money that would hire the unemployed and gives it to the
employed. Is this what fairness is supposed to look like?
o Raising prices. This takes the money from one poor
customer and gives it to another. Does that make sense?
o Taking it from the incomes of owners, including small
businesswomen, franchise owners, and retirees pension
funds.

The minimum wage is very poorly targeted. Only 7 percent of the

benefits go to those in poverty. Meanwhile, over 14 percent go to
those with incomes at least 6 times the poverty level.

Upshot: However well intentioned, the Fight for $15 does not really
help poor people. It is not fair. It is not pro-work. American workers

need solutions that support work, fight poverty and lead to

advancement.

Free College
Bernie Sanders has advocated for free public college for all (and other
progressives have their own proposals). This is expensive:

The tuition is expensive. The average annual cost of tuition and

fees in 2013 was $8,312, so the cost for students at public fouryear schools is $56.4 billion. Students at two-year colleges add
another $12 billion. Total: $68.5 billion.
Sanders adds $2.9 billion to triple federal work study and $5.8
billion annually for student loan refinancing.
Adding it all up gives a total of $77.2 billion annually.

Unfortunately, it is also ineffective at producing college graduates:

61 percent of community college students fail to earn a degree

or credential in 6 years.
Only $32 billion of the $80 billion combined federal and state
investment for President Obamas proposed free college program
would result in a degree or credential. The majority - $48 billionwould be a loss.

Upshot: Spending on the order of $100 billion annually does not greatly
enhance graduation, achievement or earnings, and thus does not
reduce wage inequality.
Paid Family Leave
The gold standard for paid leave programs was proposed by the
Washington D.C. Council. The legislation provided workers with up to
16 weeks of government paid family leave.

Nationwide, the costs would be immense between 306.6 billion

and $1.9 trillion per year.
For each worker who takes 16 weeks paid leave would cost the
government on average $12,900.
Perversely, the higher income the worker, the larger the benefit
received; 56.7 percent of benefits from the policy would go to

workers who individually earn over $1,000 per week or $52,000

per year.
An alternative to government financing would be a mandate for private
business to provide leave. But this is just the minimum wage on
steroids and would have the same effectiveness and fairness problems.
Upshot: Federally-financed paid family leave is an expensive way to
help successful workers more than their less-successful counterparts.
Alternative measures to provide parents with flexibility and family time
are smarter policy options
Overtime Pay
The president has proposed new rules for overtime pay. They would
affect very few workers and would minimally affect those at the lower
end of the income distribution:
The new overtime pay regulations will only impact 3 million
workers at most.
69 percent of workers impacted by the rule change are in
families with incomes at least three times the poverty threshold.
67.3 percent of those affected by the expansion in overtime pay
are in families with two or more workers.
The new rules would also be quite expensive for businesses to adapt to
and administer.
Upshot: Overtime rules are costly for businesses to adapt to, provide
very little overall benefit, and benefits are skewed to the better-paid
workers.
A Better Approach
There are better ways to make work more family-friendly, to provide
work with wages that address poverty, and to manage employerprovided benefits more generally. But any real attempt to address the
foundation of inequality will recognize the need for better education,
training, and skills.