Raise The Wage

Building off Jason’s point over at The McLean Parlor about the minimum wage and economic security, last week the left-leaning think tank Economic Policy Institute published this graph on the security it used to provide:

EPIminimumwage

As the author, David Cooper, writes:

Up until the early 1980s, an annual minimum-wage income—after adjusting for inflation—was enough to keep a family of two above the poverty line. At its high point in 1968, the minimum wage was high enough for a family of three to be above the poverty line with the earnings of a full-time minimum-wage worker, although it still fell short for a family of four. The falling minimum wage has led to poverty and inequality.

The movement to raise the federal minimum may go nowhere anytime soon, but that’s not stopping several state and local governments from pursuing solutions on their own. While the falling value of the minimum wage isn’t a new point it is one worth reiterating insomuch as it used to represent a much higher floor.

This is one of those subjects that tends to divide, rather than conquer, differences. I get it. Still, I happen to think there’s a very good case for raising it whatever your priors. It’s true that economists (other than PK) with columns tend to dislike the minimum wage in general, at least in my perception, compared to [insert preferred alternative]. That being said, while the evidence is rather mixed, most of the research shows employment effects clustering around zero — not nothing, so it were, but close enough to discount claims of disaster (see Figure 1 here). Outside of the punditry bubble there is considerable disagreement among academic economists, as an IGM forum earlier this year showed, but few of them disagreed that the benefits to low-skilled workers would outweigh whatever distortionary effects might happen from raising the minimum wage.

All of that and much more was recently well-summarized by Arin Dube in the NY Times. The whole piece deserves your time, even you oppose raising the federal minimum wage, because I think it’s the fairest pro-argument. Here’s a part relevant to Jason’s post (but the last emphasis is mine):

International comparisons also show how out of line our current policy is: the United States has the third lowest minimum wage relative to the median of all Organization for Economic Cooperation and Development countries. This erosion of the minimum wage has been an important contributor to wage inequality, especially for women. While there is some disagreement about exact magnitudes, the evidence suggests that around half of the increase in inequality in the bottom half of the wage distribution since 1979 was a result of falling real minimum wages. And unlike inequality that stems from factors like technological change, this growth in inequality was clearly avoidable. All we had to do to prevent it was index the minimum wage to the cost of living.

That this one part of increasing inequality was “clearly avoidable” is infuriating. If you oppose a raise because it doesn’t satisfy some napkin-sketched idea of Shangri-la; stop. The alternative to a more livable wage isn’t your ideal economy, it’s the reality of doing nothing. Raising the price floor on labor would benefit a whole lot of people who need relief now. If you want to start debating ideals after that, well, cool. Something along the lines of this would suit me just fine.

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2 responses to “Raise The Wage

    • Apologies for the delayed response — holidays and all. On Noah’s idea, given the right balance, sure. Of course there are better alternatives to just raising the minimum wage. I won’t, or don’t, deny that. But as I wrote, absent the possibility of a realistic alternative, I believe raising it is better than nothing.

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