Monday, February 18, 2013

The Truth About the Minimum Wage

There are people who would like to get rid of minimum wage. But we have to have it, because if we didn't some people would not get paid money. They would work all week for two loaves of bread and some Spam ~ Chris Rock (dob 2/7/1965) an American comedian, actor, screenwriter, television producer, film producer, and director.

The following from a self described "Moderate" regarding President Obama's call for an increase in the minimum wage...

Willis Hart: The minimum wage hurts low-skilled workers and freezes them out of entry level opportunities. A young kid (and that's who generally make minimum wage; youngsters, retired folks, second-wager earners - and even they're only 3-5% of the work force - virtually ZERO bread-winners make the minimum wage and you really have to wonder about the wisdom of a person making minimum wage having kids) who I might be willing to give a chance at $5 an hour but not at $9 an hour (the idiotic suggestion by Obama) - that's the person who ends up getting hurt by the meddling of government. (2/18/2013 AT 2:55pm).

In response I say "baloney". Everything Mr. Hart asserts is completely false. They're Conservative talking points (from a "Moderate") designed to justify the payment of substandard wages (so the wealthy can put that money in their pocket). In my opinion this wage slavery is a form of theft - the most pervasive one that exists in the world.

What follows is an excerpt from the 2/16/2013 broadcast of MSNBC's Up With Chris Hayes, which supports my position (edited for brevity and clarity)...

Chris Hayes: One of the biggest surprises in President Obama's State of the Union address this week was his call for an increase in the federal minimum wage, up to $9 an hour from it's current level of $7.25. The president also called for indexing the minimum wage to inflation to ensure it rises in line with the cost of living.

[Video Excerpt] President Obama, from his SOTU address: Tonight let's declare that in the wealthiest nation on earth no one who works full time should have to live in poverty, and raise the federal minimum wage to $9 an hour (Democrats applaud. Biden stands and applauds while Boner remains seated).

*Edit* (to cut down on the long applause, I presume). This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank. Rent or eviction. Scraping by or finally getting ahead. For businesses across the country it would mean customers with more money in their pockets. [End Obama SOTU excerpt]

Chris Hayes: Republicans and business groups immediately began lining up against increasing the minimum wage. Here's House Speaker John Boehner the next day...

[Video Excerpt] John Boner, lying about the minimum wage: When you raise the price of employment, guess what happens? You get less of it. ...what happens when you take away the first couple of rungs on the economic ladder? You make it harder for people to get on the ladder. [End video clip of Boner lying so wealthy employers can continue stealing from workers]

Chris Hayes: John Boehner was channeling what conventional wisdom and economics 101 textbooks have told us for decades - that increasing the cost of employment causes reductions in employment. But, as it turns out that isn't the case. There's a growing body of strong empirical evidence suggesting that increases in the minimum wage - within a certain range - have no negative effect on employment. In fact, minimum wage increases may actually boost worker efficiency and add new demand to the economy by putting more money in the pockets of low wage workers.

The common GOP trope about those low wage workers is that many of them are teenagers, part-time, or summer jobs. But, in fact, according to the Economic Policy Institute are over 20 years old. Nearly half of those who would benefit from a minimum wage increase are full time workers, and over 54 percent have a combined family income of less than 40 thousand dollars a year.

Joining me now [is] Arindrajit Dube, assistant professor of economics, UMASS Amherst, who has done seminal research on the employment effects of minimum wage increases [and] Lew Prince, owner of Vintage Vinyl, a small business in St. Louis. He met with President Obama at the White House in November as part of a group of small business owners.

Great to have you here. ... if the government mandated that businesses sell a loaf of bread for $5, what we would see is less bread being sold. Because it was more expensive households would consume less of it. This [theory] was applied many years to the minimum wage... then empirical work started being done... Arin, can you walk us through what the research says about what the effect of the minimum wage is?

Arindrajit Dube: Starting in the early 90s, we started seeing a lot of variation [in the minimum wage] across states because the federal minimum wage was stagnant for so long... [this allowed researchers] to study the effects of the [differing] minimum wages. ...starting in the early 90s a set of studies looked at these variations and asked what happens when the minimum wage rises?

The famous one, of course, is by David Card and Alan Krueger [the 1992 study showed "that raising the minimum wage did not necessarily cost jobs"].

Chris Hayes: [Your research] where you have this massive database, 16 years of data... you correlate that - controlling for other factors - with employment, and you find?

Arindrajit Dube: No evidence of job loss in minimum wage jobs in the last 20 years. Whereas there is no reduction in jobs, we find, actually, a strong reduction in turnover.

Chris Hayes: Lew, does that jibe with your experience as a small business owner?

Lew Prince: Absolutely. One of the reason that I never paid a minimum wage is because it is very expensive to find and train good people. By paying more I can retain them. I can demand more of them, and it turns out they demand more of themselves.

Chris Hayes: This is known in economics as the efficiency wage. If you pay a wage above the market-clearing rate, you can actually induce more productivity. You can induce better work in the workers.

My Commentary: You can induce better work from workers by paying them a higher wage than the bare-minimum because people like it when their work is appreciated. Workers who know their work is appreciated will try harder for their employers. This is contrary to what Conservatives believe, which is a wage is only "fair" if it is as low a wage as the employer can possibly pay. That low wage is what the "market" determines... or so says the Conservative. They CLAIM that if the wage is to low that workers will go elsewhere.

What the Conservative IGNORES is the fact that the norm is for there to be an oversupply of workers relative to jobs. So, what happens when the supply of something is in excess of what is needed? The price is driven down! A lot of people looking for work doesn't make the value of their work less! It just makes it easier for employers to screw workers by offering substandard wages.

It's a take it or starve situation. Some people WOULD work for bread and Spam, which is fine by Conservatives (as it means the wealthy business owners can put more money in their pockets), and ensures them (they think) lower-priced goods and services (they always wildly exaggerate how much prices would go up with a higher minimum wage).

SWTD #122, wDel #14.

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