A $9-an-hour minimum wage is not enough

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President Obama has proposed to raise the minimum wage from $7.25 an hour to $9 an hour by 2015.   I think there are good arguments for raising it even more.

If the minimum wage had kept pace with inflation since 1968, it would be more than $10 an hour.

Economics writer Dean Baker said that if it had kept pace with the nation’s economic growth, it would be $16.50 an hour.   I don’t think it’s practical at the present time to raise the minimum wage to that figure (nor does Baker), but I think there’s room to raise it to $10 or $12 an hour as proposed by Ron Unz, publisher of The American Conservative.

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Inflation-adjusted minimum wage compared to poverty line

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For more, click on the following links

Raising the Minimum Wage Is Good for Business by Peter Drier and Donald Cohen for TruthOut.

Undoing the Minimization of Wages in America by Ron Unz.

Minimum Wage, Immigration and Affirmative Action by Ron Unz.

The minimum wage and economic growth by Dean Baker and Will Kimball for the Center for Economic and Policy Research.

How raising the minimum wage would give the economy a boost by Doug Hall and David Cooper for the Economic Policy Institute.

Minimum Wage Rates, Inflation and the Poverty Line on the Financial Ramblings web log.

Even with minimum wage hike, U.S. would trail other countries on CNN. [Added 3/5/13]

Thoughts on the Minimum Wage on Daily Kos [Added 3/5/13]

Ron Unz made the interesting argument that a higher minimum wage would price unauthorized immigrants out of the labor market.  With enforcement of a minimum wage of $10 to $12 an hour, there would be no reason to hired unauthorized immigrants rather than American citizens.  This would be true if there were no underground economy.   But as it is, my guess is that most unauthorized immigrants are already working for less than the present minimum wage.

The Poverty Line is based on food costs.  The federal government determines the cost of a basket of food sufficient to provide adequate nourishment for an American family, and multiplies that figure by three.

You can see minor differences in the figures on the different charts.  I think they result from differences in the ways people calculate inflation-adjusted figures.   I don’t think the differences are large enough to affect my argument.

Click on Time for a Raise for a web site devoted to advocating an increase in minimum wage.

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2 Responses to “A $9-an-hour minimum wage is not enough”

  1. Holden Says:

    The minimum wage argument is a tricky one. Greg Mankiw (Harvard Econ Professor) has some interesting insight on his blog.

    http://gregmankiw.blogspot.com/search?q=minimum+wage

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  2. philebersole Says:

    Greg Mankiw makes an argument that never would have occurred to me. Rather than suggesting that a higher minimum wage would result in layoffs, he speculates that a higher minimum wage would draw more people into the labor force, who might replace the current holders of those jobs. I don’t think it likely that many college students would drop out in order to take minimum wage jobs, but they might be able to earn a little more to sustain themselves while they were in college. If a higher minimum wage drew more discouraged workers into the labor force, this would be a good thing, not a bad thing.

    Mankiw quoted from an economics textbook which stated that whenever the minimum wage is raised by X percent, the number of jobs for teenagers falls within a range of Y percent. I don’t see how it is possible to make such a statement without specifying the amount of minimum wage you’re talking about, and how it relates to median wages, productivity and the state of the economy generally. Raising the minimum wage from $1 to $1.50 an hour would be the same, percentage-wise, as raising it from $10 to $15 an hour, but the impact would be very different.

    I believe that there is a lower range of minimum wages in which raising or lowering the wage would have no effect, a middle range in which raising the minimum wage would have a beneficial effect and an upper range in which raising the minimum wage would price workers out of the labor market, as the critics claim.

    My opinion is that it is possible to raise the minimum wage by more than is being discussed. The evidence for this is the information in the charts above, the experience of American cities with Living Wage laws and the experience of prosperous industrial countries with higher minimum wages than in the United States.

    Nobody has ever shown a graph showing unemployment rising or falling with the rise and fall of the minimum wage. I think economists such as Greg Mankiw would say that this would be an unreasonable thing to ask, because the impact of the minimum wage is masked by the economic cycle and other economic factors. If so, it is the economic cycle and the other economic factors we should be concerned about.

    P.S. Information about municipal Living Wage laws can be found in the link to the article above on Raising the Minimum Wage Is Good for Business.

    I didn’t link to any information about international comparisons, but I’ve now corrected this. You can click on the CNN link to read a short article or on the Daily Kos link to read a longer article (you have to scroll down for the international comparisons).

    Long story short: Most high-income countries either have higher minimum wages than the United States or have strong labor unions in lieu of minimum wage laws.

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