Tag: minimum wage

The Politics and Economics of Raising the Minimum Wage

Cross posted from The Stars Hollow Gazette

Writing for his New York Times blog, Conscience of a Liberal, Nobel Prize winning economics professor Paul Krugman makes two salient observation about President Barack Obama’s proposal to raise the minimum wage from the current $7.25 per hour to $9.00 per hour indexed to inflation. His first observation is the political “trap” for Republicans leaders who are opposed, even though a vast majority of voters support a wage increase (pdf) and that includes a string majority of Republican women but not men. Prof Krugman notes that while Republicans want you to believe that they are concerned workers might lose their jobs, he gives two examples of why this faux sincerity “won’t wash”:

1. The truth is that top Republicans have so little regard for ordinary workers that they can’t even manage to pretend otherwise. Case in point: on the last Labor Day, Eric Cantor declared,

   “Today, we celebrate those who have taken a risk, worked hard, built a business and earned their own success”.

Yep: even on Labor Day, Cantor had nothing positive to say about workers, just praise for their bosses.

2. Consider a working couple with two children, earning the current minimum wage. How much federal income tax do they pay? If I’m doing the math right, the answer is, none – they get a refund. (They pay plenty of payroll taxes, sales taxes, etc., but that isn’t supposed to count). In the minds of Republicans, this makes them lucky duckies, members of the 47 percent, part of what’s wrong with America. The GOP just can’t credibly claim to suddenly be deeply concerned about their job prospects.

Prof. Krugman’s second observation is about the economics of raising the minimum wage:

First, as John Schmitt (pdf) documents at length, there just isn’t any evidence that raising the minimum wage near current levels would reduce employment. And this is a really solid result, because there have been a lot of studies. We can argue about exactly why the simple Econ 101 story doesn’t seem to work, but it clearly doesn’t – which means that the supposed cost in terms of employment from seeking to raise low-wage workers’ earnings is a myth.

Second – and this is news to me – the usual notion that minimum wages and the Earned Income Tax Credit are competing ways to help low-wage workers is wrong. On the contrary, raising the minimum wage is a way to make the EITC work better, ensuring that its benefits go to workers rather than getting shared with employers. This actually is Econ 101, but done right: given a second-best world in which you use imperfect tools to help deserving workers, two tools together can produce a better outcome than either one on its own.

As usual, if you want comprehensive, in depth discussion without the political talking points and invective, at the same time presenting both sides, Chris Hayes and his guests on Up with Chris Hayes this past Saturday provided just that. Joining Chris to discuss the president’s proposal to raise the minimum wage were by Arindrajit Dube, assistant professor of economics at University of Massachusetts-Amherst; Lew Prince, owner of Vintage Vinyl, Inc. a small business in St. Louis, Missouri; Jennifer Sevilla Korn, executive director of the Hispanic Leadership Network; and Tsedeye Geeresslasse, staff attorney of the National Employment Law Project.

Republicans and business groups have lined up in opposition to a minimum wage increase, and in doing so, they’ve repeated a talking point that has been common in Washington for decades: that an increase in the minimum wage would lead to reductions in employment. As it turns out, there’s a growing body of empirical evidence that indicates that minimum wage increases, within a certain range, have no negative impact on employment, and may actually boost worker productivity and consumer demand, providing a much-needed stimulus to the economy.

Most Minimum Wage Earners Can’t Afford Necessities of Life

Crossposted from Antemedius

Jeannette Wicks-Lim completed her Ph.D. in economics at the University of Massachusetts Amherst in 2005, and now specializes in labor economics with an emphasis on the low-wage labor market and has an overlapping interest in the political economy of race, and is now Assistant Research Professor at the Political Economy Research Institute (PERI). She is author of a paper produced at PERI entitled Creating Decent Jobs in the United States (.PDF), in which she concludes that “collective bargaining presents a powerful way to turn the tide on the declining workers’ pay and benefits we have seen for decades“, finds that “a union worker has a 20 percent greater chance of having a decent job than a similar non-union worker“, and shows that “that there is no strong evidence that higher unionization rates lead to higher unemployment rates“.

Her dissertation: Mandated wage floors and the wage structure: Analyzing the ripple effects of minimum and prevailing wage laws (.PDF), is a study of the overall impact of mandated wage floors on wages.

In her dissertation Wicks-Lim provides empirical estimates of the extent to which mandated wage floors cause wage changes beyond those required by law, either through wage effects that ripple across the wage distribution or spillover to workers that are not covered by mandated wage floors.

When asked in an interview published at PERIThough living wage laws may increase pay for some workers, by raising costs for employers might these laws have perverse effects on other workers? From a policy perspective, how do you reconcile the income benefits from living wages with their disemployment effects?“, Wicks-Lim replied with:

I think it is important to first consider whether an employer will actually need to reduce his/her workforce. Whether an employer will actually need to reduce his/her workforce has a lot to do with whether the law increases the costs of doing business significantly or not. The increased costs to employers are typically quite small – on the order of two percent or less of their sales revenues. For employers in the restaurant and hotel industry who are more affected by these laws, increased costs are typically on the order of three to four percent of their sales revenue. So, the fact that most employers face modest cost increases raises the question of whether there are other ways that these costs may be offset-perhaps through increased productivity and lower turnover rates of their now better-paid employees, or perhaps through modest price increases or small reductions in their profit margins. In fact, past research has indicated that minimum wage laws, for example, have not had large disemployment effects, suggesting that employers may react differently to these types of laws from what standard economic theory predicts.

Even for those employers that face more substantial cost increases, it’s important to consider their possible range of responses and then evaluate whether there is still a way to avoid disemployment effects, and if not, see if there is a way to minimize them so that the income benefits more than offset those negative effects.

Here Jeannette talks with Real News Network’s Paul Jay and makes a proposal to combine minimum wage and earned income tax credit policies to guarantee a decent living wage for all.

Real News Network – December 31, 2010

…transcript follows…

Ask them about the Minimum Wage; It’s the Least we can Do.

Raese says Minimum Wage is Unconstitutional

by Alison Knezevich, The Charleston Gazette — Oct 14, 2010

CHARLESTON, W.Va. — Republican candidate for U.S. Senate John Raese doesn’t just want to abolish the minimum wage.  He also calls it possibly unconstitutional.


Democratic Gov. Joe Manchin’s campaign seized on Raese’s remarks as a sign that Raese, a multimillionaire, is out of touch with West Virginians.


West Virginia is one of the nation’s poorest and oldest states. Nearly 18 percent of West Virginians live in poverty, compared to 14 percent of Americans, according to the U.S. Census Bureau.

Rachel Maddow has some sage advice, on how to turn “out of touch” rhetoric like this, into Electoral Gold …

Would YOU work for $3000 a year?

Apparently many workers in China would — for how much longer though is not entirely clear.  You see the Chinese, want to make more, improve the Standard of Living for their families — just like Americans and Europeans do.


8-12% Raises in Minimum Wages across China, in 2005!?

Apparently, Workers around the World, AREN’T Working just for the Fun of it!

This new trend toward leveling the the Global playing field, doesn’t bode well for the Wal-Marts of the world, who rely on such “captured cheap labor markets” —

to remain quiet, dutiful, and

happy with a pittance.

Afterall Billions of Dollars (and Euros) are at stake — those Foreign Workers must not upset that Apple cart.

They should just be happy they have a Job!

Shouldn’t they?

The Media gladly enables Canadian Strawmen, while silencing Real Doctors

The President gave a compelling prime time Press Conference last week mostly about Health Care Reform — the most pressing Issue of our time, and what was the lead story for the next several days?

The merits of Public Option competition?

The plight of 14,000 citizens losing their Health Insurance each day?

No, the lead story was the President’s take on the arrest of his friend — on the emotionally charged “wedge issue” of Racial Profiling. A worthy discussion, no doubt —

But what about the issues of Health Care Reform?  What about that Debate?

Of course the Media has been failing to have a Real Health Care Debate for some time now …

ABC Censors Obama’s Longtime Doctor, Dr. Scheiner

OAC Archive: The Shaky Foundations of the Fight Against a Decent Minimum Wage

Archival posting of One America Comittee blog

BruceMcF in Arguments & Analyses, 7/06/2006 at 7:15 AM EST

This last Sunday, I was reading the local paper, and was surprised to “learn” that the proposed rise in the Minimum Wage would cost the Buckeye State 12,000 jobs.

The source was a study from the “Employment Policies Institute”. I do not know their story, but they appear to be opponents of minimum wage increases.

And then I looked into the details. And when I looked into the details, it turned out that the formal and professional looking report was built on a foundation of sand.

Pic: Strategy: Get the Employment Impacts in Fast Food wrong, then apply statewide

(NB. This is not the image from original OAC posting)

OAC Archive: Big Idea: Tertiary Education Contribution System … TECS

Archive post from OAC blog, shutting down today

BruceMcF in Arguments & Analyses Feed of

8/17/2006 at 9:24 AM EST

(Original picture: Graduation at Maysville Community and Technical College,

no idea where this one is from)

There are two sides to public funding of tertiary education. One is education as a requirement for career opportunities. To the extent that education is required for entry into “good” careers, then our American ideals demand public funding of those without the means to go proceed with tertiary education on their own. Otherwise higher education becomes a means of establishing a permanent class system, and ends the dream of a land of opportunity.

This diary is not about that aspect of public funding to tertiary education. It is about the other aspect: education as a tool of economic development.

I am proposing a system here to identify skills that we need to develop sustainable competitive advantages, and then to help fund the education of most qualified candidates for those programs.

When I refer to it as the Tertiary Education Contribution System, I am making three references. First is a reference to the Australian HECS (H is for Higher) system, from which I borrow freely (but not entirely). Second is a reference to the Student Contribution portion of the program. Third is a reference to the Contribution that the successful students will make to their Nation’s Economic Independence.

OAC Archive: Big Idea: Fair Trade

Archived from the OAC Blog, shutting down today

BruceMcF in Arguments & Analyses

4/18/2006 at 1:13 PM EST

Why are the experts wrong so often about the impact of “free trade”?

What is wrong with “fair trade” agreements?  Why is it that the North American Free Trade Agreement (NAFTA) was sold as a job creator but turned out to be a destroyer of jobs both North and South of the border?

Its very simple.  The arguments for these so-called “free trade” agreements are about how the agreements work in a make-believe world.  The make-believe world is different from the real world in very important ways.  So when set loose in the real world, the predictions turn out to be false.

Why should ordinary people care about “fair trade”?

The thing is, there is a lot to like about that make-believe world.  If we could move the real world closer to the make-believe, it would benefit America.  And that’s what I call a fair-trade agreement — a system that tries to actually deliver the benefits that so-called “free trade” agreements can never deliver.

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