Minimum Wage Initiative Cost Estimate May Mislead Voters

The Missouri Supreme Court has ruled that the state auditor can prepare an estimate of how much a ballot initiative will cost the state. The court also ruled that the language of an initiative to raise the minimum wage from $7.25 to $8.25 is fair and sufficient, so it will be on the ballot this November. Though this initiative has been given the court’s stamp of approval, some of the language in the ballot summary is suspect and may mislead voters into believing that a minimum wage hike does not present a significant cost to the state.

Although the case raised many issues, the most interesting was the government’s cost estimate that will accompany the ballot title in November. Here, the voters must be especially diligent in their research if they want to make an informed decision. The estimate suggests that “increased state and local government wage and benefit costs resulting from this proposal will exceed $1 million annually.” This summary, which was highly contested throughout the court hearings, is technically correct — the cost will exceed $1 million — but it does not give an accurate picture of the probable cost, which may be closer to $16 million annually. How can that be? To arrive at the conclusion that the cost to the state would “exceed $1 million annually,” the auditor sent requests to 25 local public employers (such as Linn State Technical College and the City of Columbia) requesting an estimate of how much the wage increase would cost them annually. The auditor landed on the $1 million total because only seven entities responded with an actual estimate. Just seven of the hundreds of public employers in Missouri were counted to come up with this fiscal note summary. Because the auditor cannot force entities to respond with such estimates, it would not be prudent to blame that office. That being said, voters should know that the estimate they will see this November does not provide even a close estimate of the cost. In fact, the expert witness for those challenging the initiative suggested the true cost would exceed at least $16 million annually.

Remember the old adage, buyers beware? Here, it is voters beware.

The language you will see in the voting booth may suggest that Missourians will get a lot of change for a little price, when the reality is quite different.

For more information about the effects of the minimum wage, check out other Show-Me Institute publications on the subject.