The Case For Raising The Federal Minimum Wage

President Franklin D. Roosevelt enacted the first federal minimum wage law in 1938.

President Franklin D. Roosevelt enacted the first federal minimum wage law in 1938.

Despite critics and naysayers the federal minimum wage in will celebrate its 75th anniversary in October.

Some economists and many conservatives despise the federal minimum wage, but it has proven both popular and enduring.

Due to political opposition, the minimum wage remained the same for a decade until 2007 when congress agreed to a three-step increase to it current level. This fact has greatly eroded the buying power of the minimum wage and those who earn it during a time economic upheaval.

Originally enacted as reaction to the Great Depression, a new a new effort is underway to significantly raise the minimum wage in the wake of the Great Recession.

Minimum Wage 101: The The American Prospect

What’s to like about the proposed minimum-wage hike? Almost everything.

Here to discuss the minimum wage as a policy is Arindrajit Dube, a professor of economics at the University of Massachusetts Amherst and a widely respected scholar of labor markets and the minimum wage.

Along with T. William Lester and Michael Reich, he is the author of Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties (2010), a major study that found no adverse employment effects of minimum wages increases by studying counties that cross state lines.

Read the full Q&A here

A number of prominent economists and academics have called upon President Obama and Congress to raise the federal minimum wage

Statement: Time To Raise The Minimum Wage

July 23, 2012

Dear Mr. President, Speaker Boehner, Majority Leader Reid, Congressman Cantor, Senator McConnell, and Congresswoman Pelosi:

As the three-year mark since the federal minimum wage was last raised approaches, we urge you to once again raise the federal minimum wage.

A three-step raise of 85 cents a year for three years—which would mean a minimum wage of $9.80 by 2014—and then indexing to protect against inflation (corresponding to the legislation proposed by Senator Tom Harkin and Representative George Miller) would be a reasonable approach.

The increase to $9.80 would mean that minimum wage workers who work full-time, full-year would see a raise from their current salary of roughly $15,000 to roughly $20,000. These proposals also usefully raise the tipped minimum wage to 70% of the regular minimum.

This policy would directly provide higher wages for close to 20 million workers by 2014. Furthermore, another nearly 9 million workers whose wages are just above the new minimum would likely see a wage increase through “spillover” effects, as employers adjust their internal wage ladders.

The vast majority of employees who would benefit are adults in working families, disproportionately women, who work at least 20 hours a week and depend on these earnings to make ends meet.

At a time when persistent high unemployment is putting enormous downward pressure on wages, such a minimum wage increase would provide a much-needed boost to the earnings of low-wage workers.

In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum wage workers, even during times of weakness in the labor market.

A minimum wage increase can also serve to stimulate the economy as low-wage workers spend their additional earnings potentially raising demand and job growth.

Therefore, pursuing a higher minimum wage at this juncture will not only provide raises for low-wage workers but would provide some help on the jobs front as well.

Sincerely,

Daron Acemoglu, Elizabeth and James Killian Professor of Economics, Massachusetts Institute of Technology

Robert Frank, H.J. Louis Professor of Management and Professor of Economics, Cornell University

Richard Freeman, Herbert Ascherman Professor of Economics, Harvard University, Department of Economics

Lawrence Katz, Elisabeth Allison Professor of Economics, Harvard University, Department of Economics

Lawrence Mishel, President, Economic Policy Institute

Michael Reich, Professor of Economics, Director, Institute for Research on Labor and Employment, University of California at Berkeley

Robert Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley, Former Secretary of Labor

Jeffrey Sachs, Director, The Earth Institute, Columbia University

Joseph Stiglitz, Nobel Laureate, Professor of Economics, Columbia University

Laura Tyson, Professor of Global Management, Haas School of Business, University of California at Berkel

Arguments In Favor Of Minimum Wage Laws

Supporters of the minimum wage claim it has these effects:
  • Increases the standard of living for the poorest and most vulnerable class in society and raises average.[35]
  • Motivates and encourages employees to work harder[36]
  • Stimulates consumption, by putting more money in the hands of low-income people who spend their entire paychecks.[35]
  • Increases the work ethic of those who earn very little, as employers demand more return from the higher cost of hiring these employees.[35]
  • Decreases the cost of government social welfare programs by increasing incomes for the lowest-paid.[35]
  • Encourages people to join the workforce rather than pursuing money through illegal means, e.g., selling illegal drugs [37][38]
  • Encourages efficiency and automation of industry.[39]
  • Removes low paying jobs, forcing workers to train for, and move to, higher paying jobs.[40][41]
  • Increases technological development. Costly technology that increases business efficiency is more appealing as the price of labor increases.[42]

(Source: Wikipedia)

Graphic Arguments For Raising The Minimum Wage

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