The Real Reason To Oppose The Minimum Wage

Discussion in 'Current Events' started by NATO AIR, Jul 12, 2004.

  1. NATO AIR
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    NATO AIR Senior Member

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    great article, worth a debate, how useful is the minimum wage? are there better alternatives?

    http://slate.msn.com/id/2103486/

    The Sin of Wages
    The real reason to oppose the minimum wage.
    By Steven E. Landsburg
    Posted Friday, July 9, 2004, at 6:19 AM PT



    John Kerry wants to raise the minimum wage, and President Bush, at least in principle, is on board—provided, says the president's spokesman, that it can be done without placing unreasonable costs on "job creators."

    The president is trying to cast doubt on Kerry's proposal by alluding to the old canard that minimum wages cause unemployment and therefore hurt the very people they're supposed to help. Obviously that's occasionally true. If you contribute $6 an hour to your employer's bottom line, and if he's forced to pay you $7 an hour, you'll soon find yourself out on the street.

    But so what? Sure, you've lost your job. But don't forget, this was a minimum-wage job in the first place. Losing a lousy job might not be a whole lot worse than keeping it. Meanwhile, lots of minimum-wage workers keep their jobs and are presumably grateful to the politicians who raised their wages.

    In fact, the power of the minimum wage to kill jobs has been greatly overestimated. Nowadays, most labor economists will tell you that that minimum wages have at most a tiny impact on employment.

    Twenty years ago, they'd have told you otherwise. Back then, dozens of published studies concluded that minimum wages had put a lot of people (especially teenagers, blacks, and women) out of work. As the studies continued to pile up, you might think we'd have grown more confident about their common conclusion. Instead, the opposite happened. Even though the studies were all in agreement, they managed to undercut each other.

    Here's how: Ordinarily, studies with large sample sizes should be more convincing than studies with small sample sizes. Following the fates of 10,000 workers should tell you more than following the fates of 1,000 workers. But with the minimum-wage studies, that wasn't happening. According to the standard tests of statistical significance, the results of the large-scale studies were, by and large, neither more nor less significant than the results of the small-scale studies. That's screwy. Screwy enough to suggest that the studies being published couldn't possibly be a representative sample of the studies being conducted.

    Here's why that matters: Even if minimum wages don't affect employment at all, about five out of every 100 studies will, for unavoidable statistical reasons, appear to show a significant effect. If you could read all 100 studies, that wouldn't be a problem—95 conclude the minimum wage is pretty harmless as far as employment goes, five conclude it's a big job-killer, you realize the latter five are spurious, and you draw the appropriate conclusion. But if the 95 studies that found no effect were deemed uninteresting and never got published, then all you'd see were the spurious five. And then the next year, another five, and the next year another five.

    Even when the bulk of all research says one thing, the bulk of all published research can tell a very different and very misleading story.

    How do we know what was in all the unpublished research about the minimum wage? Of course we don't know for sure, but here's what we do know: First, the big published studies were no more statistically significant than the small ones. Second, this shouldn't happen if the published results fairly represent all the results. Third, that means there must be some important difference between the published and the unpublished work. And fourth, that means we should be very skeptical of what we see in the published papers.

    Now that we've re-evaluated the evidence with all this in mind, here's what most labor economists believe: The minimum wage kills very few jobs, and the jobs it kills were lousy jobs anyway. It is almost impossible to maintain the old argument that minimum wages are bad for minimum-wage workers.

    In fact, the minimum wage is very good for unskilled workers. It transfers income to them. And therein lies the right argument against the minimum wage.

    Ordinarily, when we decide to transfer income to some group or another—whether it be the working poor, the unemployed, the victims of a flood, or the stockholders of American Airlines—we pay for the transfer out of general tax revenue. That has two advantages: It spreads the burden across all taxpayers, and it makes politicians accountable for their actions. It's easy to look up exactly how much the government gave American, and it's easy to look up exactly which senators voted for it.

    By contrast, the minimum wage places the entire burden on one small group: the employers of low-wage workers and, to some extent, their customers. Suppose you're a small entrepreneur with, say, 10 full-time minimum-wage workers. Then a 50 cent increase in the minimum wage is going to cost you about $10,000 a year. That's no different from a $10,000 tax increase. But the politicians who imposed the burden get to claim they never raised anybody's taxes.

    If you want to transfer income to the working poor, there are fairer and more honest ways to do it. The Earned Icome Tax Credit, for example, accomplishes pretty much the same goals as the minimum wage but without concentrating the burden on a tiny minority. For that matter, the EITC also does a better job of helping the people you'd really want to help, as opposed to, say, middle-class teenagers working summer jobs. It's pretty hard to argue that a minimum-wage increase beats an EITC increase by any criterion.

    The minimum wage is nothing but a huge off-the-books tax paid by a small group of people, with all the proceeds paid out as the equivalent of welfare to a different small group of people. If a tax-and-spend program that arbitrary were spelled out explicitly, voters would recoil. How unfortunate that when it is disguised as a minimum wage, not even our Republican president can manage to muster a principled objection.


    Steven E. Landsburg is the author, most recently, of Fair Play: What Your Child Can Teach You About Economics, Values, and the Meaning of Life. You can e-mail him at armchair@troi.cc.rochester.edu.

    Illustration by Robert Neubecker. Photograph of the waitress on Slate's home page from Corbis.
     
  2. nycflasher
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    nycflasher Active Member

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    I think the minimum wage should be 10 dollars.
     
  3. NATO AIR
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    NATO AIR Senior Member

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    i think every american should get COLA (Cost of Living Allowance) like we do overseas in the military.
     
  4. Said1
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    Said1 VIP Member

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    That's not a bad idea, depending on your income. I get a monthly Child Tax Credit, which is based on my income, and spouses income (single mother, N/A). This helps a great deal.
     
  5. NewGuy
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    NewGuy Guest

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    It is sickening you guys can't see that for every notch the minimum or "learning wage" goes up, the skilled labor rate GOES DOWN.

    IF skilled labor=20/hr, and min wage is 5, that is a percentage of 400 that the skilled labor is worth over unskilled.

    Boost min. wage to 10/hr over 5 years, and what is 20./hr skilled equal to now?

    NOTHING.

    You want to know what is happening to American economics?

    Socialist minimum wage.

    It started as a learning wage for high school students.

    Greedy socialist turned it into the concept of "Living wage".

    It is an excuse now for go-nowhere people to keep ambitionless and leech off the govt. programs.

    It sabotages us at every turn. If people can't hack it, they need to get some ambition and start a business.

    Work or starve.
     
  6. Said1
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    Said1 VIP Member

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    I do run my own business, and in doing so I make a lot less money - go figure.
     
  7. NewGuy
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    NewGuy Guest

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    Technique.

    PM me if you want to change it.

    If you don't make 3-4x more MINIMUM, something is wrong.
     
  8. Said1
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    Said1 VIP Member

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    I'm limited financially by the type of business I'm in. I work with kids, and leagally, I can only have 5 children in my care. I have the full five, which means the buck stops there.

    This is my choice, and it allows me to be at home with my daughter. I do ok, but a monthly Child Tax Credit really helps where my ex doesn't.
     
  9. NewGuy
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    That's fine but you said you make a lot less than you should and you run your own business.

    This implies that you CANT do better financially.

    Again, even though you are capped at how many people you can work with, you CAN do better.

    Choosing not to is fine also.

    -But we need to distinguish the fact that it isn't the fault of "the system" or minimum wage.
     
  10. MtnBiker
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    MtnBiker Senior Member

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    Why not $25?
     

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