Small: Minimum-wage reality

Minimum-wage reality
By Jonathan Small

On paper, Oklahoma’s minimum wage has been $7.25 since 2009. In reality, the starting wage for most entry-level jobs today is much higher with wages of $11 to $14 an hour common.

That fact undermines the entire narrative of those claiming government needs to set wages. They argue that employers won’t pay a penny more than legally required. But this is false. Employee pay is not the product of government edict, but of market reality. Employers must pay wages that attract workers. That’s why today’s entry-level wages in Oklahoma are much higher than the official minimum.

Just as the true minimum wage increases over time regardless of the minimum-wage law, a minimum wage law can also set wages too high and reduce employment. If the mandatory minimum wage exceeds what an employer can financially justify, the employer will eliminate a job, automate, or even shift investment and job creation to other states.

In Oklahoma, a proposed minimum-wage law threatens to make the latter a real problem for the state’s working poor.

State Question 832 would mandate annual increases in Oklahoma’s minimum wage based on increases in the cost-of-living in the nation’s urban centers, as measured by the U.S. Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers.

Because Oklahoma is one of the nation’s lowest-cost states, the measure would mandate rapid increases in wages far exceeding the demand for labor. Effectively, the minimum wage in places like Claremore and Kingfisher would be based on the cost-of-living in places like San Francisco and New York City.

In 2024, Oklahoma City was the nation’s sixth most-affordable city with average costs 11 percent below the national average. In contrast, the cost of living in San Jose, California, was 74 percent above the national average. In San Francisco it was 58 percent above the national average and in New York City 71 percent above the national average.

Tying the minimum wage in every county in Oklahoma to the cost of living in the nation’s most expensive urban centers guarantees a skyrocketing wage that will quickly defy feasibility. An analysis by The State Chamber of Oklahoma and Oklahoma Farm Bureau found the SQ 832 could inflate Oklahoma’s minimum wage to $35.61 per hour within 15 years.

The result of such artificially high wages will not be good for many workers. The Congressional Budget Office estimated that raising the national minimum wage to a much lower $17 an hour by July 2029 would cause 700,000 additional workers to be jobless.

Those backing SQ 832 are trying to solve a problem that doesn’t exist (an unchanging minimum wage) with a solution that will cause jobs to disappear and make the plight of the working poor immeasurable worse.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.