Friday, July 25, 2014

More on the minimum wage

Back from vacation and back to blogging.  While I was gone WSJ ran a piece by David Neumark who is in my view the leading expert on minimum wage economics.  Neumark's main point is that the minimum wage is a highly ineffective policy tool for poverty reduction.  A large share (34% by Neurmark's calculation) of minimum wage workers are secondary earners in a household that overall is well above the poverty line.  A bigger problem is that a higher minimum wage is not going to help people who are poor because they cannot find full-time jobs, even at $7.25 per hour.  Needless to say their quest becomes much more difficult if employers become obliged to pay them $10 to $15 per hour!

So why are lefty pols so interested in raising the minimum wage?  This gets us into the murkier discipline of minimum wage politics.  My take is that supporting a higher minimum wage (1) makes it look like the pols are doing something to help the poor and (2) requires no funds from any government budget, all costs are shifted to employers who in turn adjust by raising prices and reducing employment and hours per person.

No comments:

Post a Comment