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Letter: Wage increases cost jobs

Doug Hall makes an interesting case for minimum wage (Monitor, May 3). However, Hall’s anecdote is an atypical minimum wage employee.

According to the Bureau of Labor Statistics, 55.8 percent of minimum wage workers are under the age of 25 and 31.1 percent are teenagers. This means that the majority of those who benefit from a minimum wage increase are not likely to be poor.

In fact, a recent study demonstrates that only 11.3 percent of workers who would benefit from a minimum wage hike are classified as “poor.”

Furthermore, there is the known disemployment effects of minimum wage.

Minimum wage increases cost jobs, either immediately or future hiring, as well as lead to other effects that can mute the benefits, such as higher prices, reduced hours and reduced nonmonetary compensation.

The increased costs to the business would have to come from somewhere. There are ways to help the poor earn more money, but making it harder for them to get jobs is not one of them.



Legacy Comments6

Let us not forget why many conservatives favor raising the minimum wage. Because taxpayers subsidize these huge corporations by having to give benefits to the workers who can not exist on these wages.

An increase in the minimum wage is long overdue. It’s a matter of fairness, and a matter of justice. By the writer's logic, cutting wages would create more jobs. In effect, that's what has happened over at least the last 3 decades: wages have not kept pace with productivity gains, and those gains have instead gone right to the top tier. Good jobs have not ensued from depressed wage scales--only a race to the bottom for too many Americans. Some of the regular commenters on this site imply there should be no minimum wage at all. Do they really think life would be better if that were the case? Perhaps they’d like to see what would amount to indentured servitude, the return of company stores, and company script in lieu of cash. Ah… for the good old days. Whether a big increase would actually cost 500,000 jobs, as the CBO has said, is questionable. There is lots of research arguing otherwise, and a number of economists have been critical of the CBO study so often cited by opponents. In any case, there are always trade-offs, and the ripple effect on wages overall is likely to be positive—a real example of a rising tide lifting all boats. While we’re discussing the minimum wage, how about setting a maximum wage? One writer suggests that the highest paid person in a company be paid no more than 25 times what the lowest paid person makes. This is more in line with European and Japanese executive salaries,and judged by any metrics, their executive performance has been at least as good as that of our own much more highly paid CEOs.

With respect, there is some misinformation in your comment: 1) Wages have kept up with productivity gains ( Those who say it hasn't are comparing apples to oranges. They are looking at average workers gains. That is unfair as the vast majority of workers do not earn minimum wage because they are more productive. When you control for the factors, you can see that minimum wage does mirror productivity. 2) There is nothing in my logic that says cutting wages would create more jobs. It may, but that is not likely. Although you do seem to defeat your own argument suggesting that depressed wages (which, by the way, is also a myth, but a discussion for another time), allowed for job growth over the past 30 years. 3) There is ample research showing the disemployment effects of minimum wage. In fact, some 85% of papers over the past 20 years have shown this to be true ( 4) There are trade offs but the ripple effect is unlikely to be positive. As I mentioned above, the vast majority of research shows there to be negative net benefits, not positive. As I said, there are reductions in other ways that will (and do) mute the effects of the minimum wage. 5) Finally, on the issue of justice. Here I register my strongest objection. There is nothing just about the minimum wage: it costs jobs, it raises prices, it does not accomplish what it is designed to do, and even its economist proponents agree that it would have a "negligible" effect. It simply is a bad policy. Let me end with two questions: 1) Suppose the president of the United States randomly chooses 500,000 of the lowest-skilled workers in America and, with Congressional and Court approval, orders these workers to quit their jobs. “You must remain unemployed indefinitely,” the president commands these workers. “My reason for ordering you to enter and to remain in the ranks of the unemployed is that, by removing you from the workforce and thereby artificially reducing the supply of labor, the wages of 16.5 million other low-skilled workers will rise. So do not despair! Your sacrifice is for the greater good. My policy easily passes the cost-benefit test.” Would you favor such a policy? 2) If food prices suddenly jumped 25%, would your behavior change? If no, why not?

Your thought experiment is not far off the mark in describing what has happened to the American industrial worker since 1980. Factory jobs that once paid good wages are gone, leading to underemployment and unemployment in the formerly blue collar middle class. These jobs vanished thanks to technology advances, but also thanks to deliberate policies encouraging globalization, deregulation, privatization, and weakened labor laws. Thanks to 3 decades of laissez-faire economic policy, we no longer produce good jobs at good wages. We’ve allowed questionable economic orthodoxy to supplant sensible industrial policies that would have protected jobs, invested in the future, and insisted on a level playing field before sending investment, jobs, and technology overseas. Aren’t you contradicting yourself, when you say there is nothing in your logic that says cutting wages would create more jobs, then write that minimum wage laws cost jobs? I don’t think the research on minimum wage effects is nearly as clear-cut as you claim. And in a better, fairer economy, anyone who works full-time should be able to make a living wage. If the minimum wage were $15.00/hour, Walmart prices would go up by 5%, while their employees would be earning over 40% more. In essence you’re stating: lower wages create jobs. The reality is more complicated, you can’t ignore the fact that American corporations have been shedding jobs AND lowering wages for 3 decades. The claim that when total compensation is used rather than only wages, then income gains match productivity, is misleading at best. Feldstein and others are using averages rather than median compensation to justify their claims, and the big compensation gains at the top decidedly skew their figures. One more quibble: Feldstein and others also ignore the regressive nature of the Social Security tax, included as income/compensation but fail to consider it’s also a regressive tax falling disproportionately on those in the working and lower middle classes. All this is by way of making the case that tax rates on higher income levels should go up dramatically, and we should have more brackets—Tim Noah argues for 6—rather than “simplifying” to Ryan’s two brackets. Our economy worked just fine in the 1950s when the top marginal rate was 92%. That’s what I call the good old days.

Revisionist economics - Social Security payments by citizens are for a retirement income where they receive far more back than they input - that is what liberals call regressive - liberals ....sheeeeesh

BPR, it's time for you to play the old soldier and "fade, fade away." It really helps if one replies to what was actually written, not what is echoing around in his mind. Try not to laugh out loud while denying that payroll taxes are regressive.

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