Minimum Wage

posted by Adam (Southern California) on May 22nd, 2006

The idea that minimum wages lead to unemployment is so ingrained in a lot of people who think they’re intelligent about economics that it’s essentially taken on faith from first principles rather than backed up with research. This article in the Knoxville News Sentinel isn’t a controlled scientific study, but it does present some data that suggest that a higher minimum wage correlates with lower unemployment and a healthier economy in general.

The author doesn’t suggest a mechanism for this, but along with the increased spending power of workers on increased minimum wages (still below living wages, though), I’ve long suspected that companies hiring workers at minimum wages aren’t just underpaying them from the workers’ perspectives, but are also undervaluing them from the company’s perspective. In other words, in most industries, unskilled labor is worth more to the company than the federal minimum wage, and increasing that minimum wage still leaves room for plenty of profitable employment.

One area where I’d like to see more research is in the under-the-table labor black market. How far below minimum wage are illegal immigrants being paid to harvest vegetables? How much of a grower’s expenses go to labor, and how would things be affected if they had to pay a legal wage?

Published in: General | on May 22nd, 2006 | Permanent Link to “Minimum Wage” | 5 Comments »

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  1. On May 24, 2006 at 17:02 Adam (Southern California) said:

    More discussion of raising minimum wages to a living-wage level in this article.

  2. On May 25, 2006 at 03:53 Dr Kaihsu Tai (Oxford, England) said:

    One of the findings from the recent Faithful Cities report by the Church of England (which I mentioned elsewhere in these pages) was that the “Government should replace minimum wage with living wage”.

    Alternatively, Clive Lord’s book A citizens’ income (which I also mentioned earlier) gives an even more radical view than “living wage”. You can find the reference in this green economics bibliography.

  3. On May 26, 2006 at 03:49 Adam (Southern California) said:

    So, why have I tried to post a meaningful comment to this post twice now and had it not register, while a cluttersome test post worked?

  4. On May 26, 2006 at 05:47 Mike (Worcester) said:

    Re: Posts disappearing.

    I am currently blacklisting:

    Mr P and I are going to upgrade this thing to WordPress 2 at some point, which should fix these spam issues a bit. I haven’t previously upgraded to 2 because the admin screens are a lot worse than in 1.5.

    Good luck posting, and see if you can avoid one of the words above (minus the NO).

  5. On May 27, 2006 at 19:44 Adam (Southern California) said:

    Ah, OK, I was inquiring about the EITC, where the EIT stands for Earned Income Tax and the C stand for a word that rhymes with “edit.” I was wondering if anybody knew what the scoop was on the EITC. This is kind of like a negative income tax for poor people, as far as I can tell. Some people (mostly conservatives) tout raising it as an alternative to the minimum wage, because it allows wages paid by the employer to be set by the market, but shifting the burden of the guarantee for the poor to have a certain amount of money to the government. Do any of you have any particular insight into this? Does it really work the way people claim it does, or is it not really feasible?

    Also, that “citizens’ income” thing is interesting; I’d always wondered what the deal was with that dividend that Alaskans get.

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