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The Minimum Wage and Employment

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mwkruse
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The American Enterprise Institute held a seminar yesterday called A Review of Evidence from the "New Minimum Wage Research." If you are interested, there is a 1.5-hour video and pdf of the paper. Here is AEI's description of the event. (HT: Greg Mankiw)

The Democratic leadership has announced plans to pass an increase in the federal minimum wage soon after their party takes over Congress in January. The current rate of $5.15 per hour has not been raised since 1997. Some argue that an increase in the minimum wage is long overdue to help America’s poorest workers. However, others argue that raising the minimum wage does more harm than good, resulting in less hiring and scaled-back hours for low-wage workers.

What effect does the minimum wage have on employment? To answer this question, David Neumark of the University of California at Irvine will present his comprehensive review of the “new minimum wage research” from the past fifteen years. Jared Bernstein from the Economic Policy Institute and Harry Holzer of the Georgetown Public Policy Institute will discuss Dr. Neumark’s review.

I haven't watched it yet, but I thought some of you might be interested.

Comments

12 responses to “The Minimum Wage and Employment”

  1. dlw Avatar
    dlw

    Dr Neumark was my advisor.
    I’m telling ya’ the right strategy is to press for regional min-wages that’ll be phased in for better assessment of their anti-poverty effectiveness and updated in terms of their real values every year.
    You press for that and a global min wage, and it’ll be a winning combination.
    dlw

    Reply
  2. Michael W. Kruse Avatar
    Michael W. Kruse

    “Dr Neumark was my advisor.”
    Very cool! I still haven’t listened to this yet but I hope to by the weekend.

    Reply
  3. dlw Avatar
    dlw

    He wasn’t an easy person to work with but I did learn a good deal from him.
    And, like I said, if you want to be cutting edge on this issue, I recommend reframing it and offering a serious counter…
    dlw

    Reply
  4. Michael W. Kruse Avatar
    Michael W. Kruse

    “He wasn’t an easy person to work with but I did learn a good deal from him.”
    LOL. I have had that experience more than once.
    As to being cutting edge, the minimum wage is largely a peripheral issue to me. There are two interrelated issues. First is what real impact it has. My general take is that to the degree it helps in addressing poverty, it does so at marginal levels. If your goal is to get the biggest bang for your buck fighting poverty, this isn’t it. We can debate endlessly the precision of my take but I think it is an accurate take. But this is all secondary to me.
    My issue is with people who say they want to fight poverty and hold this up as the crown jewel of saving the poor. Whatever benefit it may bring it will be peripheral to other more effective measures. Things like EITC are more effective. The problem is that EITC doesn’t feed the animus that class warfare leaders want to generate towards business and entrepreneurs and I am convinced that that is what drives much of the passion behind the min. wage. It has little to do with genuine concern for the poor or they would be perusing other avenues. This is my central concern.

    Reply
  5. dlw Avatar
    dlw

    It is not “wonderful”, but it’s what’s happening and I think we need to adjust our activism to what is happening.
    I think given the political currents, we are more likely to have an impact, if we advance a different vision than trying to stonewall min-wages.
    I think part of the prob is that the EITC costs too much in raising taxes, while min-wages burdens fall more on smaller businessmen and fast-food restauranters.
    But, you know, if we made min-wages automatically updated at a reasonable level, then “liberals” wouldn’t be able to use it as a bloody flag for why they are so “pro-poor people”.
    In economics-oriented stuff, it’s always a matter of political jujitsu. It is smarter to propose an alternative more moderate course than to resist completely what your opponent is pushing for.
    dlw

    Reply
  6. Michael W. Kruse Avatar
    Michael W. Kruse

    “In economics-oriented stuff, it’s always a matter of political jujitsu. It is smarter to propose an alternative more moderate course than to resist completely what your opponent is pushing for.”
    I’ll agree with that. Where we may just differ is the way we perceive political currents have changed. I think one of the reasons we have a Democrat congress is because of Republicans who couldn’t control spending, inept leadership and salesmanship by a president in prosecuting the war, and a frustration by some that things weren’t conservative enough.
    The Democrats have been given a wonderful opportunity to build a centrist alliance or they can just as easily hang themselves by provoking a conservative-centrist backlash.
    But again, my central issue isn’t the wage. It is challenging people, especially Christians, to really struggle with matching sound policy with good intentions.

    Reply
  7. dlw Avatar
    dlw

    I can’t say I know the future. My hope is in the emergence of third party coalitions to change the nature of state-level governance into unilateral hybrids between majority-rule and representational legislative systems. The goal would be to give third parties a toe-hold so they can sustain more voice and votes in elections and be more successful in getting the main parties to adapt their platforms if they successfully appeal to the center with their ideas.
    I think that the unholy alliance between economic conservatives and religious conservatives is toast. It sounds like you are pushing for a new alliance between religious conservatives and economic centrists.
    We’ll see.
    I think it is a datum that there going to go forward with the min wage increase and on that specific policy area that something around my idea would be the right “centrist” thing to do… I hope you’ll get on board the bandwagon and get the ideas more currency because that’s what’ll take.
    dlw

    Reply
  8. Michael W. Kruse Avatar
    Michael W. Kruse

    “It sounds like you are pushing for a new alliance between religious conservatives and economic centrists.”
    Maybe I need to post a disclaimer here at my blog but my aim is not to push for any particular movement or alignment. I want to discuss ideas and, occasionally, public policy. My interest in political parties and their fortunes is observation from my standpoint, not advocacy. There are countless sites where people can go to bash each other over politics and that is not my central interest here.
    So as to your observation, I don’t really think about religious conservatives much. I do think the nation on balance is center to right of center on economics and social issues. Republicans have failed to represent this view. To the degree Democrats can capture this agenda I think the can win but I seriously doubt there ability to do that. I think what is more likely is a chastened retooled GOP returning in 2008. I am not championing that. I am just saying that is what I see at this point.

    Reply
  9. norse701 Avatar
    norse701

    Let’s apply a little logic to the minimum wage discussion. There are two groups of people this might help. The first group is those that are not motivated to work for minimum wage. If they are not motivated to work for $5.15/hour does anyone really believe that an additional $2.00/hour will make a difference? If they aren’t motivated to work, the amount isn’t the problem.
    How about those that are working for $5.15/hour. The rural areas may be different, but in any city of any size, even the burger flippers make more than minimum wage. You don’t even have to habla englaise to make $7.00/hour.
    Add a little experience to your “resume” and you get close to $10.00/hour. It isn’t exactly a wonderful life, but the problem isn’t the miminum wage.

    Reply
  10. Michael W. Kruse Avatar
    Michael W. Kruse

    Norse701, dlw has pointed out some circumstances where the wage may be helpful and yet is also destroys jobs, or at least slows their formation. He has suggested that regional minimums might be a better way to go. Then you can measure what impact the min. wage has in a number of circumstances. The min wage in Boston, MA, would be a much different thing in Ellsworth, KS.
    I think significant jumps in the fed min. wage is on the whole a net negative but not a disaster. The Census Bureau reported a couple years ago that the median household annual income for a min. wage earner is $40,000 a year. About 20% live in households that make more than $80,000 a year. Only 15% come from poverty households. I don’t know the exact numbers but clearly many of the min. wage earners are teens or first time workers getting experience.
    If you increase the min. wage in middle class (or higher) neighborhoods, employers may decide to hire fewer workers. That means a teen’s first employment opportunity may be delayed until they get a little older when they have more education and experience, and thus are more employable.
    However, if you are a 16 year old kid in a poor neighborhood living in a single parent home with a Mom who has a drinking problem, and you have no skills and your high school is essentially a daycare center, you likely don’t have the skills and/or experience to command a job at current min. wage levels. If the employer isn’t willing to take a chance on you at $5.15, why is he likely to at $7.15? In fact, if employers are labor intensive, they may move to a place where they can find a labor supply that is worth the $7.15 an hour. Some will close altogether because the tightening of profit margins will force the less efficient ones out of business.
    I can’t prove it statistically but intuitively I suspect the damage done by min. wage hikes falls disproportionately on the poor. Whatever the case, the fed. min. wage is at the very best a weak measure to improve the lot of the poor.

    Reply
  11. dlw Avatar
    dlw

    I agree that min wages do nothing for hard-to-employ workers. But as I’ve said before, I take a min wage increase as a political datum and think the smart thing is to counter with an alternative that will help minimize the fall-out.
    An alternative for me, would be to compell working teens, who are not from impoverished backgrounds, to have a significant fraction of their salaries garnished by the gov’t until they turn 18, at which time they will receive it with interest to go to college or what-not. The idea would be to discourage teen employment/hyper-consumerism so that they will focus more of their time and energy on their school work.
    This’ll free up more of the lower-skilled jobs for low-skilled adult workers.
    I have no problems with advocacy. I think disinterested analysis is not typical. We are all imbued with subjectivities and participating in the process of reshaping the world as we perceive it.
    I think the rub is the need to love our enemies in this process and not imply that there is necessarily something wrong with them for not seeing things as we do.
    dlw

    Reply
  12. Michael W. Kruse Avatar
    Michael W. Kruse

    Well I can’t say that I would favor gov’t garnishment. That is a little too much social engineering for my taste. I think EITC could help some families in poverty.
    I don’t think the biggest problems for many of the poor is lack of cash. More cash will provide a temporary boost but without better life skills nothing changes. These are things that I am not sure government can do a lot about. I think Bush had some good intentions with the faith based initiative stuff but that whole thing blew up early on. The more I’m around this stuff the more I’m a believer in subsidiarity; equipping people closest to the situation to handle their own situations.
    I think one thing that government can address, which we still don’t have solution for, is the inferior schools in poor areas. That alone would improve the life chances of many.

    Reply

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