bord du rasoir (bord_du_rasoir) wrote in shoresofavalon,
bord du rasoir

Efffect of Raising Minimum Wage

I'm not sure if you will find this subject dull, interesting or some place inbetween. Someone on my friends list made a post yesterday in opposition to raising the minimum wage, saying an increase would hurt the poor and referring those who question him to the works of Murray Rothbard, Ludwig von Mises or Friederich Hayek.

I got somewhat excited because I know there's the tendency for people in here to be liberal and I thought perhaps I or someone in the community could put up a strong argument in opposition to raising the minimum wage. So I started researching. The basic argument of all three is that it's more than obvious that a minimum wage increase will increase the wages of most minimum wage workers while eliminating other minimum wage workers' jobs entirely. I think what they say will happen is correct. Still, this doesn't lead me to oppose a minimum wage increase but rather to acknowledge that such an increase has negative and positive effects. The answer is in balance: How many workers are we raising out of poverty? How many workers are we causing to be unemployed?

Here's what people are saying:
There is no evidence of job loss from the last minimum wage increase.

o A 1998 EPI study failed to find any systematic, significant job loss associated with the 1996-97 minimum wage increase. In fact, following the most recent increase in the minimum wage in 1996-97, the low-wage labor market performed better than it had in decades (e.g., lower unemployment rates, increased average hourly wages, increased family income, decreased poverty rates).
o Studies of the 1990-91 federal minimum wage increase, as well as studies by David Card and Alan Krueger of several state minimum wage increases, also found no measurable negative impact on employment.
o New economic models that look specifically at low-wage labor markets help explain why there is little evidence of job loss associated with minimum wage increases. These models recognize that employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.
o A recent Fiscal Policy Institute (FPI) study of state minimum wages found no evidence of negative employment effects on small businesses.
Randel K. Johnson, Chamber vice president for labor, immigration and employee benefits:
“The majority of economists agree that raising the minimum wage kills job creation. Placing this burden on small businesses will stifle our economic growth.” Johnson pointed to a study by the Employment Policies Institute, Job Loss in a Booming Economy, 2nd Edition, that suggests that the 1996 minimum wage increase of only 50 cents per hour destroyed approximately 645,000 entry-level jobs.
Tim Kane:
A survey published in the Winter 2005 Journal of Economic Perspectives, an academic publication, reports that 71 percent of economists at America’s top universities agree with the statement “a minimum wage increases unemployment among the young and unskilled.” About one-third of the economists agree outright, and another third agree with reservations.
In the end, regardless of arguments over economic effects, I just think it should be illegal if business owners themselves are not in poverty to keep their full-time workers below poverty level:
In 1997, a single mother of two children working 40 hours per week year-round at the minimum wage would have earned $9,893 (after Social Security and Medicare taxes) and would have been eligible for the maximum EITC of $3,656, which would have put her family income at $13,549, a mere 5% above the 1997 poverty threshold of $12,931 for a family of three. But because the minimum wage has not kept up with increases in the cost of living since 1997, the same family is now below the poverty line. In 2005, a single mother with two children would have combined earnings and EITC of $14,177, or 11% below the 2005 poverty threshold of $15,735 for a family of three.
History of the minimum wage in multiple countries:
  • Post a new comment


    Anonymous comments are disabled in this journal

    default userpic