Wages of min

December 6, 2013

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“You can’t turn a virtual corner this week without tripping over a discussion about the US minimum wage,” Cardiff Garcia writes in a rather comprehensive round-up of the issue. You can add President Obama to Garcia’s list of people who’ve tackled this topic lately — not to mention the thousands of fast food workers who went on strike this week asking for higher wages. “There’s no solid evidence that a higher minimum wage costs jobs, and research shows it raises incomes for low-wage workers and boosts short-term economic growth,” Obama said.

Ezra Klein said Obama’s speech was the president’s best to date on the economy. The focus was income inequality, but Obama also spent time taking on some of the arguments against raising the Federal minimum wage, which is currently $7.25 an hour. In many areas of the country, that’s well below what’s considered a living wage; MIT has a nice calculator showing living wages compared to minimum wages by county.

Garcia argues that we actually don’t know if raising the minimum wage is a good idea. Not raising the minimum wage, he writes, makes the poor much more likely to need government benefits, costs which would ultimately be passed on to taxpayers. On the other hand, he writes, some research has found that raising the minimum wage can, in fact, lead to lower employment.

Dylan Matthews runs through a battery of studies on minimum wage hikes, and finds that there’s little research to suggest there’s much economic stimulus to be found in raising the minimum wage. Garcia, like Matthews, thinks the minimum wage just isn’t that efficient at fighting inequality. A “redistributive, post-outcome transfer mechanism would probably be better than a minimum wage hike,” he writes.

Allison Schrager argues that it’s wrong, as Paul Krugman asserts, to say raising the minimum wage has no effect on employment. There’s considerable disagreement on that point among experts, she says, and importantly, their views are based on studies of small increases in the minimum wage. There just isn’t enough data on the job market impact of large hikes in the minimum wage, like the one recently implemented in a Seattle suburb.

Last year, David Leonhardt said that while raising the federal minimum wage would help curb inequality, it’s probably not one of the bigger causes of inequality’s rapid rise in the last few decades. Taking into account local and state increases, the effective minimum wage has outpaced inflation by 10% since 1990. In 2012, only 60% of the population was affected by the Federal minimum wage, Leonhardt writes. That number could continue to fall if a wave of local campaigns are successful. — Ben Walsh and Ryan McCarthy

On to today’s links:

Your Daily Outrage
Rio’s slums are being ‘socially cleansed’ – The Guardian

How to commit fraud and get away with it: a guide for CEOs – Ashwin Parameswaran

Right On
Three cheers for small banks – Felix

Blackstone vs. Jon Stewart – Dan Primack

“The size of the British Empire correlated with the level of its relative income” – BI
The state of the US job market in 5 charts – Ben Walsh

Primary Sources
US adds 203,000 jobs in November, unemployment rate falls to 7% – BLS

“Malinvestment is an inevitale consequence of doing business” – Frances Coppola
The winners and losers of ultra-low interest rates (plus one big caveat!) – Timothy Taylor

Incipient Threats
“Uptalk is becoming more prevalent and systematic” – BBC

The crimes you can commit in a room by yourself – FT

Facebook says words have more value than dumb meme photos – Peter Kafka

Nelson Mandela’s unsung economic legacy – Charles Kenny

Selling Bitcoins is pretty tough – Buttcoin

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