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Why the minimum wage is better than a professional economist thinks
2004.07.21 — Business | Jobs | by Derek Jensen
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Jobs. |
Steven Landsburg writes for Slate. His article "The Sin of Wages" describes how the minimum wage isn't as bad as conservatives think, but concludes that it is still bad. But he's wrong. It's good, and I can prove it.
Landsburg first casts doubt on studies that suggest the minimum wage costs the economy jobs. He says that the overall distribution of data suggests that there are many studies that are inconclusive and therefore never published. Only the anomalies get printed. That's a clever theory (altho it makes me wonder why there aren't just as many studies that show the minimum wage increases jobs as well as decreases them, anomalies being equally wrong and all).
But he then concludes that the minimum wage is still bad because it's like a tax. But it's not.
Landsburg thinks that the minimum wage is like a tax on a small group of people (small business owners) that is then handed over to a different small group of people (low wage earners). This doesn't seem especially horrible to me, since we mandate other things from small business owners to benefit their employees, like overtime pay and safety equipment. But the tax metaphor doesn't even hold up.
But if your pay is mandated by the government to rise to $45,000, that could affect your boss's demand for it. |
Unlike real taxation (on income and such), jobs affected by the minimum wage are still subject to market forces. If your taxes go up (or down), that doesn't change the demand or supply of your labor at $40,000 a year; it only affects your take-home pay (it's likely to eventually change the market, but much more slowly and indirectly). But if your pay is mandated by the government to rise to $45,000, that could affect your boss's demand for it. You may be worth 40 grand, but you may just not be worth 45 grand.
[T]hat must mean that the jobs that remain at the higher pay were actually worth that higher pay all along. |
Since an increase in the minimum wage doesn't significantly decrease jobs (as Landsburg stipulates), that must mean that the jobs that remain at the higher pay were actually worth that higher pay all along. That suggests that other forces were acting to keep their pay artificially low. We can guess that these forces are usually social factors like class and ethnic discrimination.
Before you suggest that the minimum wage really only applies to burn-outs and teenage part-timers, the Bureau of Labor Statistics says that 60% of minimum wage earners are 20 or older, 50% are 26 and older, and 10% are seniors (who presumably have gone back to work to supplement their paltry retirement income, not because they can score babes by wearing the blue Wal-Mart greeter vest).
So, raising the minimum wage, gradually and judiciously, to at least keep up with inflation, is a powerful and positive force for good, reducing poverty and the effects of social discrimination.
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