Duncan, I have the flu, and am just sort of dropping by before I take my morning nap. So I really, really don't feel like fighting with such a worthy adversary about the minimum wage. Suffice to say, there are many different opinions on the issue. Why is your article still talking about what happened in 1938, for example, as if it were significant today? We have definitely moved on, haven't we?
Here are some statistics from a speech given by Professor Jane Mauldon at a rally for the Rev. Jesse Jackson, who may be running for president again (thank the goddess)!! I volunteered in his campaign the last time he ran. I really like the way he stirs things up!! Anyway, the statistics are:
"While the poorest one-fifth of Americans make $4 more per MONTH than they did in 1980, the top one-fifth make $2,300 more and the top 5 percent make $6,200 more."
sfgate.com
My own sense is that raising the minimum wage has little or no effect on employment. For example, black teenagers are hired less frequently than other groups for a lot of reasons, not simply because they have fewer skills. According to the article below, however, in the late 1960's the minimum wage was the equivalent of $7.38 in today's dollars. Certainly, it seems only fair that it keep pace with inflation somewhat consistently.
All of these statistics can definitely be skewed one way or another, but my own personal feeling is that it is simply morally wrong in a society as wealthy as ours that adults working full time cannot afford minimal housing and food for their families. This is the kind of situation that leads to higher crime rates, desperation and social unrest, and really has no place in a civilized society. Phasing out welfare benefits, training and rehabilitating people so that they can work, and then letting them discover that there is no way many of them they can actually survive on their wages strikes me as particularly cruel. Of course, America is a ruthless place.
Much ado about $6.15
BY PAUL GLASTRIS
The last time Bill Clinton proposed raising the
minimum wage, back in 1996, Republicans
responded with Nostradamus-like forecasts of
doom. "A job killer cloaked in kindness" is how
House Majority Whip Tom DeLay characterized the
president's plan to hike the minimum wage from
$4.25 to $5.15 an hour. Rep. John Shadegg warned
that 1 in 4 young minority workers not in school
would lose his job. Then Sen. Hank Brown
predicted a juvenile crime wave "of epic
proportions."
Time has not been kind to these predictions. Since
the increase went into effect (in two steps,
beginning Oct. 1, 1996), overall U.S. employment
has climbed nearly 3 percent on a seasonally
adjusted basis; employment of black youth has
gone up about 11 percent; and juvenile crime has
declined. Now the Clinton administration is
proposing to boost the minimum wage again, to
$6.15 an hour by the year 2000. In so doing, it is
making bold claims of its own--namely, that a
dollar-an-hour wage hike will lift many low-income
working families out of poverty.
Will Clinton's hopeful predictions about the effect of
a minimum-wage increase prove any more accurate
than the earlier round of gloomy ones? Probably
not. In fact, recent economic studies tend to
undermine the claims of politicians on both sides of
the debate. Defying received economic wisdom, the
studies suggest that moderate increases in the
minimum wage neither do great damage to the
economy nor provide great benefits to the poor.
Indeed, the harder economists look at
minimum-wage hikes, the more trouble they have
finding effects of any sort.
This is not what standard economics teaches. For
at least the last century, mainstream economists
have insisted that laws like a minimum-wage
provision represent doomed attempts to repeal the
even stronger laws of supply and demand. When
the price of labor goes up--as it must, with a rise in
the minimum wage--employers will buy less of it,
and workers will lose their jobs. Congress passed
the first federal minimum-wage law in 1938. Eight
years later, economist George Stigler concluded,
largely on theoretical grounds, that the new law was
having a "substantial and certain" negative effect on
employment.
Not until the 1970s were well-regarded studies done
of the real-world effects of the minimum wage,
which by then Congress had raised numerous
times. Those studies tended to back Stigler. They
showed that for every 10 percent increase in the
minimum wage, there would be a 1-to-3
percentage-point drop in the employment rate of
teenagers, the group most likely to be paid the
minimum wage.
Minimal impact. But since then, estimates of the
impact of minimum-wage hikes have been revised
downward. In a 1982 study, University of Michigan
economist Charles Brown and colleagues
concluded that a 10 percent increase in the
minimum wage would produce a falloff in teen
employment closer to 1 percent than to 3 percent.
In 1991, Alison Wellington, now of the College of
Wooster, found only a 0.6 percent drop in teen
employment. Then in 1994, Princeton University
economists David Card and Alan Krueger found that
moderate minimum-wage increases have no impact
on jobs.
Card and Krueger compared fast-food workers in
New Jersey, which raised its minimum wage above
the federal level in 1992, with those in
Pennsylvania, which didn't. Standard economic
theory would predict that New Jersey would lose
jobs relative to Pennsylvania. Yet the economists
found that fast-food employment grew slightly faster
in New Jersey than in Pennsylvania, though not by
a statistically significant amount after other factors
(such as differences in the states' overall growth
rates) were taken into account.
Democrats used the study in 1996 as a shield
against GOP charges that raising the federal
minimum wage would kill jobs. But Card and
Krueger were attacked by conservative Republicans
and some economists for allegedly using sloppy
phone survey techniques when gathering data. So
the economists replicated their study, using data
provided by the federal government. Results of the
second study, released earlier this year, suggest
that they were right the first time: The 1992 New
Jersey minimum-wage hike had no measurable
effect on jobs. Several other economists studying
minimum-wage increases in other states have since
reached similar conclusions.
A puzzler. Though the matter is still hotly debated
among economists, the weight of evidence now
strongly suggests that recent minimum-wage hikes
have cost few, if any, jobs. What might explain this
puzzling result? One possibility is that there is
some job loss but that economists have trouble
measuring it because so many other larger
forces--ranging from the vagaries of local economies
to student workers' taking off for spring break--make
low-wage employment levels bounce around more
dramatically.
Another possible explanation involves market
peculiarities that give many low-wage firms some
flexibility over the wages they pay. One pizza joint,
for instance, might offer only the minimum wage,
while another might pay 50 cents more. The first
pizza joint will enjoy lower labor costs but have
trouble attracting and retaining workers. The second
will have higher labor costs but enough staff to
make and sell more pizzas. If the government
boosts the minimum wage by 50 cents, owners of
low-pay pizza joints might fire workers or close up
shop. Other owners might fill chronic job vacancies
and ring up more pizza sales. The evidence
suggests that roughly offsetting numbers of owners
make each decision, so a moderate minimum-wage
boost becomes a wash, neither decreasing nor
increasing employment.
That's not to say that the minimum wage can be
lifted indefinitely without consequence. Even Card
and Krueger argue that there is a "tipping point" at
which an increase in the minimum wage begins to
lower employment levels. Recent boosts apparently
haven't pushed the minimum wage beyond this
"tipping point," in part, many economists reason,
because Congress didn't raise the wage at all from
1981 to 1990, while inflation eroded its real value.
Clinton's proposed $1-an-hour increase would
restore the minimum wage to about where it was
relative to the median wage in the early 1980s. That
would still be well below $7.38, which is what the
minimum wage was worth in today's dollars at its
peak in the late 1960s, when fewer workers were
covered by the law. Whether Clinton's proposed
increase would cross the "tipping point" nobody
knows. But the risk that it might will be seized upon
by conservatives determined to block the measure.
Liberals, for their part, will argue that raising the
minimum wage would divert a portion of the
country's economic prosperity, about $6 billion
worth, into the wallets of low-wage workers. Yet
such a diversion might do almost nothing to
alleviate poverty in any measurable way. This
sounds counterintuitive, but it makes sense when
you understand three things. First, few low-wage
workers are actually paid precisely the minimum
wage; most earn slightly more. Raise the minimum
wage $1 an hour, and the average worker who
benefits will see his or her hourly wage rise only 42
cents. Second, those who earn at or near the
minimum wage are disproportionately, but not
overwhelmingly, poor. The least-affluent 20 percent
of families receive 40 percent of all minimum-wage
income. The rest of that income goes to workers in
families all along the income scale--including to
suburban teenagers working for gas money. Third,
most people living below the poverty line either don't
work or have under-the-table jobs not directly
affected by the minimum-wage law.
Two recent studies looked at what happened to the
poverty rate after past minimum-wage increases.
Neither produced statistically significant results
when all other factors are taken into account, notes
economist Charles Brown (whom both sides of the
debate consider a neutral arbiter). In other words,
when the minimum wage goes up, nothing
measurable happens to the poverty rate.
This lack of impact contrasts sharply with a
program economists almost uniformly prefer as a
poverty fighter, the earned income tax credit. The
EITC essentially gives low-income working
families--and only such families--an annual rebate
on their federal taxes of, on average, $1,700 per
family. That's real money, and it has had a dramatic
effect. The EITC lifted 4.6 million
Americans--including 2.4 million children--out of
poverty in 1996, according to the Center on Budget
and Policy Priorities. Other studies suggest that
the EITC acts as a work incentive: It has induced
large numbers of nonworking single mothers to
enter the work force. Expanding the EITC would be
expensive (it already costs $35 billion), and abuse
of the program, though declining, is still high. That
largely explains why neither party is talking about
it. Raising the minimum wage would cost the
government nothing. Raising the EITC, however,
might actually work as advertised. |
