Going Meta on the Minimum Wage

February 25th, 2013 at 9:32 pm

MSNBC host Martin Bashir has been doing yeoman’s work highlighting the President’s proposal to raise the minimum wage to $9.  I’m a veteran of these debates and lemme tell ya, it takes a lot of agitation to get them over the legislative goal line.

Here’s a piece on the topic from Martin’s blog to which I contributed, featuring a fascinating graph that summarizes literally decades of research on the impact of the minimum wage on employment.  (Hint: the answer clumps around zero…)

Print Friendly, PDF & Email

12 comments in reply to "Going Meta on the Minimum Wage"

  1. foosion says:

    The minimum wage is one of the most interesting issues in economics.

    Simple theory says if you raise the price of something, you get less demand for that item, so if you make workers more expensive, employers would employ fewer of them.

    Yet, as you point out, theory doesn’t carry over to reality. Raising the minimum wage has approximately zero effect on employment.

    The cognitive dissonance this causes simplistic thinkers is fun to watch. Alas, most of them just ignore trifles such as evidence.

  2. Barry Deutsch says:

    If you have time, could you explain the graph a little more, please?

    Does the “elasticity” label on the graph refer to the elasticity of demand for teenage minimum age workers?

    And why the decision to look only at teenagers? (I think I know, but I’d like to be sure I have it right when I describe this graph to other people!)


  3. Larry says:

    I was “shocked” to read today that in Germany (5.5% unemployment) almost 20% of the labor force (8/45M) makes less than the French (10.5% unemployment) minimum wage. No wonder the French PM just got quoted as wanting to “reinvent the French model”. (HT Sumner)

  4. Stuart Levine says:

    Do you have a link to the Doucouliagos and Stanley paper?

  5. Artemis says:

    I’ve been thinking a lot about the minimum wage as a base-line setter for small businesses. I wonder (hint hint Jared) if this is common:

    I work in a business that has ranged from 4 to 9 employees over the 18 years I’ve been here. We rarely pay minimum wage, even for the most “grunt-work” oriented jobs, but we use the Oregon minimum wage as a gage for how wages are set in our business. If the Oregon minimum goes up, so does everybody else’s wages. Partly this is purely pride-based: “We ALWAYS pay more than minimum wage!” (said with a somewhat superior smirk). And partly this is practicality: we want to retain people, even those in entry-level positions, so we always use the minimum as a comparison wage when we select an hourly that, while meager, says, “we value you even though we are still training you.”

    I think of that Chris Rock thing that flies around facebook every few weeks: “You know what that means when someone pays you minimum wage? You know what your boos was trying to say? “Hey if I could pay you less, I would, but it’s against the law.”

    We don’t want to pay less. Not only to we want to comply with the law, we want to be better than the legal minimum, if only slightly. So, the basic question is, does a rise in the legal minimum motivate many small (or bigger) businesses to bump their pay rates up?

    • Artemis says:

      “boss” not “boos” – sorry for not checking the spelling in my copy-and-paste fervor.

    • Jared Bernstein says:

      It definitely happens. And thanks for sharing that info–interesting and resonant. Another place you clearly see this sort of thing is in “spillover effects” where firms give raises to workers who were already earning above the new min wg (so they were not directly affected).