Thursday, November 23, 2006

Minimum Wage

The minimum wage is something that right-wing pundits traditionally gripe about, despite the fact that the poor and usually ignorant Repub-leaning voters I know support it. These pundits have come up with any number of preposterous theories to tell us why raising (or enforcing in the first place) the minimum wage is harmful to the economy or employees. One such is a theory I came across at Marginal Revolution (basically they espouse complete free-market capitalism). The theory is that "The minimum wage reduces employment, especially among low-skilled workers for whom the minimum wage is most binding." You can go read their "proofs" for yourself, if you so desire. It would be a waste of time, however. Whatever theoretical evidence they might provide for themselves, there is plenty of historical evidence proving that uncontrolled wages result in horrendous economical conditions for the average person. Check this out:

While the rich wore diamonds, many wore rags. In 1890, 11 million of the nation's 12 million families earned less than $1200 per year; of this group, the average annual income was $380, well below the poverty line. Rural Americans and new immigrants crowded into urban areas. Tenements spread across city landscapes, teeming with crime and filth. Americans had sewing machines, phonographs, skyscrapers, and even electric lights, yet most people labored in the shadow of poverty.

But hey, taxes and controlling the accumulation of wealth are bad for the economy!

Seriously, never mind that BS. For a positive example of the minimum wage, check out Oregon (via Kevin Drum):

During the 2002 debate in Oregon, foes of a minimum-wage increase argued that it would chase away business and cripple an economy that traditionally had higher unemployment than the national average. "With so many Oregonians already unemployed, raising the minimum wage and then increasing it annually would devastate our economic recovery," Bill Perry, head of the Oregon Restaurant Association, wrote at the time.

Four years later, though it is impossible to say what would have happened had the minimum not been raised, Oregon's experience suggests the most strident doomsayers were wrong. Private, nonfarm payrolls are up 8% over the past four years, nearly twice the national increase. Wages are up, too. Job growth is strong in industries employing many minimum-wage workers, such as restaurants and hotels. Oregon's estimated 5.4% unemployment rate for 2006, though higher than the national average, is down from 7.6% in 2002, when the state was emerging from a recession.

Doesn't sound like a disaster to me. The folks at the Economic Policy Institute also provide some figures to factor in.

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).
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.

So maybe it's not a cure-all, but maybe it doesn't hurt either. At the very least, there's not good enough evidence to argue against it. And given how directly so many will benefit from it, it's kind of hard to argue based on a vague, marginal backlash supposedly associated with it that you can't provide solid numbers for.

1 comment:

adam said...

Right on.