Minimum wage

About

The phrase "minimum wage" refers to laws which prevent employers from paying their employees less than a certain amount per hour of work. It also refers to the particular minimum amount required by legislation currently in effect.

History

In the United States, minimum wage laws were originally created by President Franklin D. Roosevelt in 1938 with the express intent of providing a living wage to all workers:

No business which depends for existence on paying less than living wages to its workers has any right to continue in this country... By living wages, I mean more than the bare subsistence level – I mean the wages of a decent living.

— Franklin D. Roosevelt (source needed)

Problems

Liberals often argue that raising minimum wage is helpful for combating poverty; conservatives argue (apparently without much evidence) that raising the minimum wage raises unemployment as companies must reduce their ranks in order to stay within budget. While there is no evidence that this is true -- and considerable evidence that raising the minimum wage actually causes more jobs (aka job creation) -- it is possible that minimum wage does disproportionately penalize smaller businesses.

Revenue-based minimum wage would avoid that potential problem while also more fairly distributing revenue from the most profitable businesses.

Books

• Myth and Measurement: The New Economics of the Minimum Wage by David Card & Alan B. Krueger
  • book information from publisher "In each case they present a battery of evidence showing that increases in the minimum wage lead to increases in pay, but no loss in jobs."

Discussion

excerpts from Contrary Brin

• Paul P said...

  I am disappointed to see someone with your breadth of knowledge say that raising the minimum wage is "obvious". It's far from obvious. This is one of those unusual areas that has broad agreement among economists: minimum wages hurt the people they're supposed to help. The minimum wage is a fine example of "warm and fuzzy" policy, well-intentioned laws written without a real understanding of their impact.

  • OdinsEye2k responded...

    Wrong. Minimum wage is a weird thing to muck around with, same as the "Laffer Curve." Typical economic analysis is an extrapolation from two reasonable extremes. Namely, very low wages would have full employment (but people would die of starvation working these jobs) while high employment would have very few people working. However, we are pretty ignorant of what goes on in the middle.

    The elasticity of jobs with respect to wage is back to being a contraversial subject, especially with the recent experiences of states like Oregon that showed no major employment problems even after a decent wage hike. Further, there are a large number (558, with 4 Nobel prize winners) of ecnomists that called for a wage hike back in 2004. I have even heard of an economist or two revising their textbooks on the subject due to the results of new empirical studies.

    Cato, Heritage, et al. continue to say the case is closed on minimum wage and unionism in order to enable their corporate clients to absorb an unfair share of the profits they generate. Of course, this is a long-term no-go, because these companies are now taking their profits from the capital of the lower and middle classes (evidenced by a negative savings rate), rather than the profitable exchange and fair sharing that built the middle in the first place. They are cornering themselves into unsustainability (no worries of course, because the Street only sees one quarter ahead) with these practices. Building the middle was sustainable, as in the wisdom of Henry Ford allowing his workers to purchase the fruits of their own labors.

    Of course, one may object to EPI, since it is liberal in its thinking (meaning to the left of Mellon-Scaife), but here is their summary of the state-of-the-art of research:

    http://www.epi.org/content.cfm/bp178

    Of course, note that they cite the research of real academics (meaning they still participate in the peer-review world), rather than think tank hacks.

• Anonymous said...

  Actually, minimum wage is one of those things that is essential to ensure that people are not abused by industry. Back before there were minimum wage laws and child labor laws, businesses would hire people for pennies (though those pennies paid for far more than they do today) and hire children for even less. People were used as chattel and their health and wellbeing ignored except where it harmed output of products.

  People were on the verge of starving, barely able to scratch out a substenance income with husband, wife, and several children working. Minimum wage ensured that these people would be allowed to earn enough so they could actually survive something like a parent getting ill or an injury in the family.

  Industry then chose to respond to this by upping their prices so their profits wouldn't be cut into. Thus minimum wage had to be increased again and again. But it is not minimum wage that is truly to blame. It is the mixture of taxation, minimum wage, greed, and the decreased purchasing value of the dollar that has allowed the situation to go out of control... and leaving minimum wage alone (or abolishing it) won't fix things.

  I'm not sure what will, to be honest.

Links

Reference

• Wikipedia
• Conservapedia "The left wing in American politics tends to present a minimum wage as benefiting the lower class by helping to lift poor people out of poverty. Conservatives and libertarians generally counter this argument with statistics showing that every increase in the minimum wage has increased unemployment ... [and] obliges companies to outsource many jobs to China and the Third World."
• CWRE: myths about minimum wage (reality flatly contradicts Conservapedia)
• dKosopedia offline since 2015; archive
• SourceWatch: no information as of 2014-03-12
• Vermont Legislative Research Shop: The Effects of Increases in the Minimum Wage
• Minimum Wage Issue Guide (PDF) (updated 2009-07-21)

Research

• Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis$ "Card and Krueger's meta-analysis of the employment effects of minimum wages challenged existing theory. Unfortunately, their meta-analysis confused publication selection with the absence of a genuine empirical effect. We apply recently developed meta-analysis methods to 64 US minimum-wage studies and corroborate that Card and Krueger's findings were nevertheless correct."

to file

• 2006-11-15 Raising The Minimum Wage by hilzoy

Related

• 2014/07/16 [L..T] Everybody I know is on Food Stamps. "Everybody I know is on Food Stamps. We have jobs, but the jobs pay so low that we still need help. We stock shelves, pump gas, and cook your food. Stuff that needs to be done, but is somehow not "Real Work" or a "Real Job." Let's not even go into the fact that a good chunk of us went to college so we could have a "Real Job" but when we finished those "Real Jobs" turned out to be as mythical as the Yeti or Brownies."
• 2014/07/06 [L..T] A Company Liberals Could Love Douthat argues that liberals should support Hobby Lobby because of their internal minimum wage policy, and goes on to argue something about liberal intolerance of religious diversity.
• 2014/05/18 [L..T] Switzerland Votes on World's Highest Minimum Wage "Switzerland's citizens voted Sunday on whether to create the world's highest minimum wage of 22 Swiss francs ($24.70) an hour."
• 2014/05/09 [L..T] Mitt Romney Backs A Minimum Wage Hike "Former Republican presidential nominee Mitt Romney said Friday that he believes the Republican Party ought to get on board with raising the minimum wage."
• 2014/05/01 [L..T] Seattle Announces $15 Minimum Wage, Highest In The U.S. "Seattle will raise its minimum wage to $15 an hour over the coming years under a deal brokered by Mayor Ed Murray and blessed by labor and business groups alike, city leaders announced Thursday afternoon."
• 2014/05/01 [L..T] One Year Later, Here's What San Jose Looks Like After Raising the Minimum Wage "One year ago, San Jose, Calif. raised its minimum wage to $10 an hour. From the moment an increase was first discussed, opponents quickly painted a grim scenario. San Jose Mayor Chuck Reed (D) said that a higher minimum posed "the biggest threat" of any issue to the city's economic development."
• 2014/04/23 [L..T] Six Studies That Show Everything Republicans Believe is Wrong "The great 20th-century economist John Maynard Keynes has been widely quoted as saying, "When the facts change, I change my mind. What do you do, sir?" Sadly, in their quest to concentrate economic and political power in the hands of the wealthiest members of society, today's Republicans have held the opposite position – as the evidence has piled up against them, they continue spreading the same myths."
• 2014/04/03 [L..T] Would Walmart's Prices Spike If They Paid Their Employees More? "This video crunches the numbers on how much Walmart, the single biggest beneficiary of the food stamp economy, might have to raise prices across the board to help a typical worker earn a living wage."
• 2014/03/04 [L..T] Obama to Republicans: You're Right, Let's Expand the Earned Income Tax Credit
• 2014/02/18 [L..T] The Effects of a Minimum-Wage Increase on Employment and Family Income "Increasing the minimum wage would have two principal effects on low-wage workers. Most of them would receive higher pay that would increase their family's income, and some of those families would see their income rise above the federal poverty threshold. But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly."
• 2013/04/18 [L..T] Hobby Lobby Raises Minimum Wage to $14 for Full-Time Employees "Arts and crafts giant Hobby Lobby Stores Inc. announced on Monday that effective immediately, the minimum wage for its full-time hourly employees at its stores and affiliate Hemisphere was increased to $14. The hourly wage for part-time employees was also increased to $9.50."
• 2013/02/14 [L..T] A 2011 Study Exploded One Of The Biggest Fears About Raising The Minimum Wage "This far from settles the fight over raising the minimum wage, but does address concerns that a rise in the minimum wage would lead to across the board job losses."
• 2013/02/14 [L..T] Economists disagree on whether the minimum wage kills jobs. Why? "Except that the real world seems to be much murkier. Yes, a number of studies have found a link between a higher minimum wage and higher unemployment. But many others, such as this recent paper from U.C. Berkeley that exploited differences across state borders, have found no effect at all."

Video

• 2014/04/03 [L..T] Would Walmart's Prices Spike If They Paid Their Employees More? "This video crunches the numbers on how much Walmart, the single biggest beneficiary of the food stamp economy, might have to raise prices across the board to help a typical worker earn a living wage."