Raise the Floor!

August 9th, 2013 at 7:52 am

Talkin’ about the arguments and counterarguments for a higher minimum wage over at the NYT Economix blog.

Not wanting to go on for too long, I left out one piece of the opponent’s argument: the incorrect claim that the minimum wage affects only young kids whose families don’t need the money.

Part of this comes from a sleight of hand that you’ve got to watch out for.  When opponents talk about who’s earning the minimum wage, they’re often referring to the demographics of those at today’s minimum.  But that’s not the relevant sample when you’re evaluating a proposed increase in the wage floor.  In that case, you have to look at the demographics of the “affected range:” those earning between the current and new minimum wage.

EPI does so here, considering an increase to $10.10/hour, finding:

–88% are adults (20+); 56% are women

–44% have at least some college education

–55% work full-time

–They need the extra money: the average affected worker brings home half of her families’ income.

Also, as EPI Larry Mishel shows, the decline in the real minimum explains more than half of the increase in wage inequality in the bottom half of the wage scale, 1979-2009, i.e., the growth of the gap between median and low-wages (the 50th and 10th percentile wage).

End of the day, the wage setting story in contemporary America is much more of a bargaining power story than you’d get from the usual economists’ rhetoric (my friend Phillip Swagel omits this critical factor here, focusing, as many do, exclusively on technology and globalization–I hope to respond to his essay soon).  Or, to be more precise, extreme lack of bargaining clout at the low end, and very high clout enabling excessive “rent extraction” at the high end.

Since little of this has to do with benign concepts like “marginal product”–it’s about power, not product–market corrections are needed, including a higher wage floor at the low end and progressive tax policies, along with financial market oversight, at the top (a financial transaction tax kind of scratches both of those itches, no?).

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8 comments in reply to "Raise the Floor!"

  1. Tyler Healey says:

    I’d rather see a massive expansion of EITC, because it would add money to the economy and the money would go directly to the working poor.

  2. Kevin Rica says:

    Being for low-wage immigration and against low wages is like being for motherhood and against sex.

    If you want wages to go up without employers paying them or if you think that you can increase both wages and labor supply at the same time — you can’t have it both ways.

    At least Matthew Yglesias consistent.


    He obviously doesn’t know much about Ag Econ, but his priorities are consistent: Keep domestic help cheap for rich people!

  3. save_the_rustbelt says:

    Yes, what Kevin said.

    It is beginning to look like both political parties will sell out US workers and the US legal system with an amnesty bill.

    For the Chamber of Commerce Repubs, it is all about depressing blue collar wages.

    Fries with that?

    • Fred Donaldson says:

      Even more dangerous is the “bipartisan” proposed Visa increase of imported engineers to work 12 hours a day, six days a week for $45,000 (or less) to compete with our brightest and best, thus destroying engineering education and jobs in America. Next will be doctors, lawyers and economic bloggers.

  4. Fred Donaldson says:

    The EITC is a subsidy for companies that don’t pay a living wage – plain and simple! People with EITC just about make enough to eat, thanks to government payments to them and not the middle class, and get to work to be a wage slave for yet another day. Finally, business figured out how to have the middle class pay for the folks who owe their souls to the company store.

    Raising the minimum wage will improve the lives of not just folks at $7.25 an hour, but everyone making more than that up to a certain level. If you are currently at $2 above minimum wage and minimum goes up $7, you most likely will get something close to a $7 raise to keep the variance between you and the lowest paid worker.

    More taxes paid, less welfare, fewer heads bowed to receive corporate-loved, government “benefits.” The GOP and Progressives should love it, but the middle of the road compromisers for corporate interests – will not be too happy at such a prospect.

  5. Perplexed says:

    -“End of the day, the wage setting story in contemporary America is much more of a bargaining power story than you’d get from the usual economists’ rhetoric.”

    Maybe its time we started coupling reductions and objections to safety net programs to measurement and elimination of rents; when faced with this trade-off, the beneficiaries of the rent re-distributions of income and wealth will focus on protecting their existing government granted advantages instead of trying to increase them at the expense of the most vulnerable. Its way past time they were compelled to defend these gifts in light of the enormous advantages that could be gained by public investments in education and safety net programs.


  6. Kevin Rica says:

    How about higher minimum wages (middle class wages) for all new immigrants?

    If they don’t have an employer willing to pay them the minimum wage, they have to leave or won’t be allowed to enter.

    I suggest:

    $15/hr and full health benefits for illegals currently here and supporting families and applying for amnesty-by-another-euphemism.

    $20/hr and full health benefits for single illegal immigrants applying for amnesty-by-another-euphemism.

    $25/hr for unskilled labor (zero qualifications)and full health benefits for all applying immigrants currently abroad. For those with skills, they must earn the median wage for the skill set.

    For temporary or seasonal work, they would still have to earn the full annual equivalent regardless of how many hours they actually worked. Employers must pick up all travel expenses.

    However, the jobs would have to go to all qualified Americans first at those wages.

    The jobs must first be advertised at those wages in a special section on Monster.com

    How’s that? A real minimum wage, but no increase in unemployment for Americans.

    How about it Jared? It will really improve the lives of those who are here to do the vital work that “Americans won’t do.” (unless Americans will do them at a higher wage — in which case, it will improve the jobs of Americans).

  7. Peter Ruark says:

    Re: When opponents talk about who’s earning the minimum wage…

    Those EPI statistics are really helpful, and they break it down by state as well.

    I’ve made this point before in another context, but minimum wage opponents really “step in it” when they start speaking about who would benefit from a minimum wage increase as an argument *against* a minimum wage increase. Doing so gets them into making a “deserving vs. undeserving” argument which is inappropriate for discussing a wage floor, the underlying implication being that some people should be paid less than others for doing the same work