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Debate:Minimum wage in the United States
From Debatepedia
[  ] [  ] [  ] [  ] [  ] Should the US federal government increase the minimum wage?
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[ ] Background and Context of Debate:
The debate over both the existence of a minimum wage and whether it should be raised at various times has been present in the United States since the 30s. The US minimum wage was established in the US in 1938, after being first passed in 1933 and then ruled unconstitutional by the Supreme Court. Since then, when the minimum wage was $.25 per hour ($3.22 in 2005 dollars), the minimum wage has been raised multiple times to its current level at $5.15, each time encountering a debate similar to the one present in 2006 and 2007. The last time the minimum wage was raised was in 1997. In 2006, the period without an increase had become the longest in history, causing many to argue that an increase has been due. Numerous proposals were made in 2006 for increasing the minimum wage. The ones that appear to have become the most popular were made by Edward Kennedy (S. 1062) and House Education and the Workforce Committee Chairman George Miller (H.R. 2429) that would raise the rate from $5.15 to $7.25 per hour over the next two years. The Republican dominated 109th Congress rejected Kennedy's S. 1062 in the summer of 2006 by a vote of 52 to 46. It rejected 11 other attempts to raise the minimum wage since 1998, "according to a legislative history compiled by Democrats." - Washington Post '06 [1],
Following the Democratic victories in the 2006 mid-term elections, the Democrats are strongly positioned to push the bills forward in the 110th Congress. Nancy Pelosi promised to try and pass H.R. 2429 in the first 100 hours of the 110th Congress. January 11, 2007, the House of Representatives passed a bill to boost the minimum wage to $7.25 an hour.[2]
The Issues: The debate over raising the minimum wage brings to for all of the original questions regarding the net effect on workers, employers, and the overall economy as well as whether there are alternative means of achieving the desired effects of a minimum wage hike and whether it could possibly help deter illegal immigration.[3]
For a more extensive background on the minimum wage in the United States, see Wikipedia's Minimum Wage article
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[ ] [  ] [  ] [  ] [  ] Effect on low-income workers: Would American low-income workers substantially benefit from a Federal minimum wage increase from $5.15 to $7.25 by 2008? Would it help bring poor workers out of poverty?
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[  ] [ ] Yes
Argument that a substantial number of workers and poor workers would benefit: According to the Economic Policy Institute's "Minimum Wage: Facts at a Glance", an estimated 14.9 million workers (11% of the workforce) would receive an increase in their hourly wage rate if the minimum wage were raised from $5.15 to $7.25 by 2008. Of these workers, 6.6 million workers (5% of the workforce) currently earn less than $7.25 and would be directly affected by an increase. The additional 8.3 million workers (6% of the workforce) earning slightly above the minimum may also be likely to benefit from a higher minimum wage due to “spillover effects”. With a raise to $7.25, the Economic Policy Institute estimates that 7.3 million children would see their parents income rise.
Living standards would improve significantly among the needy, according to some sources: The Economic Policy Institute 10/25/06 - "Over 650 economists, including five Nobel Prize winners and six past presidents of the American Economics Association, recently signed a statement stating that federal and state minimum wage increases 'can significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed' (EPI 2006)."
Argument that an increase in the minimum wage would help the poor escape poverty: Center for Budget and Policy Priorities 1/5/07 - "A $7.25 minimum wage would be a useful step in helping working families escape poverty...Raising the minimum wage from its current level of $5.15 an hour to $7.25 in 2009, as has been proposed, would ensure once more that a family of four with a parent working full time at the minimum wage does not have to raise its children in poverty. The increase would mean an additional $4,200 in annual earnings for a full-time, minimum-wage worker. It also would automatically trigger $1,140 in increases in the family’s EITC and refundable Child Tax Credit, enough to roughly offset the decrease in the family’s food stamp benefits resulting from the increase in the family’s cash income. As a result, the family would be lifted 5 percent above the poverty line, instead of being 11 percent below the poverty line in 2009, as it would be under current law."
- According to Edward Kennedy 6/21/06, workers receiving the current minimum wage earn only $10,700 a year, "almost $6,000 below the poverty line for a family of three".
- Associated Press 12/01/06 - "At the current minimum wage, households where everyone makes minimum wage would need more than three full-time workers to pay market rent on a two-bedroom apartment in New York, New Jersey, New Hampshire, Massachusetts, California, Colorado and Nevada, according to the National Low Income Housing Coalition. A jump to $7.25 would make a two-bedroom apartment affordable to families with two minimum wage earners in all but 19 states, said Danilo Pelletiere, research director at the housing coalition. 'If you're a single mom or dad with a kid, who can't sleep in one room, you're still out of luck,' he said. But for families with more than one full-time minimum wage earner, an increase could cut the number of jobs they would need."
- Economic Policy Institute, "Minimum Wage: Facts at a Glance" - "As welfare reform forces more poor families to rely on their earnings from low-paying jobs, a minimum wage increase is likely to have a greater impact on reducing poverty."
Contention that a minimum wage increase is due in historical perspective; that it had been too long since a minimum wage increase and that the purchasing power of the minimum wage level is at an historic low: The Economic Policy Institute maintains in its "Minimum Wage: Facts at a Glance" that the purchasing power (adjusted for inflation) of the minimum wage has deteriorated by 20% since 1997 when it was set at $5.15. It has declined 30% since 1979. Additionally, the minimum wage was at its lowest level since 1955, after adjusting for inflation. On Dec 2, 2006, it will have been the longest period since 1938 with no change in the minimum wage, which many believe indicates that a minimum wage increase is due.
Arguments that raising the minimum wage would not lead to job-loss and higher unemployment: A 1998 Economic Policy Institute study could not find any systematic, significant job loss associated with the 1996-97 minimum wage increase. In fact, after this increase, the low-wage labor market performed better than in past decades (e.g., lower unemployment rates, increased average hourly wages, increased family income, decreased poverty rates).
- Economic Policy Institute "Minimum Wage Facts At a Glance" - "Studies of the 1990-91 federal minimum wage increase, as well as studies by David Card and Alan Krueger of several state minimum wage increases, also found no measurable negative impact on employment." Their study has been widely cited on this side of the debate. In Card and Krueger's 1997 book Myth and Measurement: The New Economics of the Minimum Wage (ISBN 0-691-04823-1), they look at the 1992 increase in New Jersey's minimum wage, the 1988 rise in California's minimum wage, and the 1990-91 increases in the federal minimum wage, and found the negative employment effects of minimum-wage laws to be minimal if not non-existent (at least for the United States). Their conclusions appear to indicate that demand for low-wage workers is somewhat inelastic, which would go against looking at a strict supply/demand graph to measure the effects of a minimum wage increase (counter -> Supply/Demand graph).
- Economic Policy Institute, "Minimum Wage: Facts at a Glance" - "New economic models that look specifically at low-wage labor markets help explain why there is little evidence of job loss associated with minimum wage increases. These models recognize that employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale."
- Fiscal Policy Institute (FPI) "States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth" Spring, 2006 - This study found that in states with minimum wages higher than the federal level, that there was no evidence of negative employment effects on small businesses. They actually found that when the minimum wage was increased in these states, the average retail employee's hours actually appeared to increase from a mean of 30.7 hours per week to 31.3. The study writes, "There may be a Henry Ford effect at work here. If you pay workers more, they can buy more, boosting the overall economy, especially among small retail businesses." The presumption made here by FPI is that such an economic stimulus helps stimulate the demand for work. negative employment effect resulting from the minimum wage increases there.
- States and cities in which raises in the minimum wage are claimed to have had no negative effect on employment (these findings and claims are often cited in the larger debate): **Argument that the cumulative effect of state minimum wage increases has been positive: A Center for American Progress and Policy Matters Ohio study by John Alexander Burton and Amy Hanauer "Good for Businesses: Small Business growth and state minimum wages" 5/10/06 - "A new study by the Center for American Progress and Policy Matters Ohio illustrates that these state initiatives [that increased the minimum wage] have proven to be good government policy. The study compares the performance of small businesses with under 500 employees in the 39 states that accepted the federal minimum wage before 2003 to the 12 states (including the District of Columbia) that had minimums above the federal level in January 2003. The study found that between 1997 (when more states began having higher minimums) and 2003: Employment in small businesses grew more (9.4%) in states with higher minimum wages than federal minimum wage states (6.6%) or Ohio; Inflation-adjusted small business payroll growth was stronger in high minimum wage states (19.0%) than in federal minimum wage states (13.6%) or Ohio.; Small business retail employment grew more in higher minimum wage states (9.2%) than in low minimum wage states (3.0%) or Ohio; Retail payroll grew more in higher minimum wage states (12.3%) than in low minimum wage states (6.4%) or Ohio; States with high and low minimum wages had similar growth in number of restaurants, restaurant payrolls, and restaurant employment."
- Santa Fe University of New Mexico Study on Santa Fe's minimum wage increases 8/06 - concluded that there was no negative employment effects resulting from an increase of the minimum wage.
- Oregon a NY Times Editorial 1/3/06 - argues that despite having one of the highest minimum wages in the country in 2006 at $7.25 an hour, Oregon had twice the rate of job growth as the rest of the country. According to the article, job growth was strong in industries employing many minimum-wage workers, such as restaurants and hotels.
- San Francisco NYTimes 1/06/06 - "Even in San Francisco, where the minimum wage is now $8.82 per hour and rises annually with the cost of living, raises have not adversely affected employment or resulted in business closures, said UC Berkeley economist Michael Reich."
- Foreign Case studies finding that there is no negative employment effect resulting from an increase in the minimum wage:
- Czech Republic case study of their 1999 and 2002 minimum wage increases: Tor Eriksson and Mariola Pytlikova "Consequences of Minimum Wage Increases: Empirical Evidence from Czech and Slovak Republics" 12/02 - "For both countries there are not any significant negative influences on firms’ labour demand. Rather in both periods the employment effects of minimum wage increases are positive in firms with relatively many low-paid workers for both countries. This is especially true for the Czech Republic and for the second period 1999 – 2000, when the net minimum wage exceeded the minimum subsistence wage, and thus the minimum wage earners were more likely to work."
- Key figures that appear to agree with the above conclusions: [http://www.epi.org/content.cfm/bp178 The Former Federal Reserve Vice Chairman and current Princeton economist Alan Blinder said in 2006: "Elementary economic reasoning...suggests that setting a minimum wage...above the free-market wage...must cause unemployment...Indeed, earlier editions of this book, for example, confidently told students that a higher minimum wage must lead to higher unemployment. But some surprising economic research published in the 1990s cast serious doubt on this conventional wisdom." (2006, 10th edition, 493)
Center for American Progress "Raise the Minimum Wage Progress Report" (no date) - "Teenager Myth: Conservatives have argued against the minimum wage by claiming that it only benefits teenagers. In 2005, about a quarter (26 percent) of minimum wage earners were 16 to 19 years old; nearly half (46 percent) were age 25 or older. A minimum wage increase would help people besides teenagers working their first job. Thirty-five percent of minimum wage workers are their family's sole earner, and 65.5 percent of these workers are women. About three-fourths (76 percent) of minimum wage earners work full-time."
- Argument that the demand for labor is inelastic, and that any change in wage levels would have only a small impact on demand: Half Sigma "Does a minimum wage hurt the worker?" 4/30/05 - "Evidence suggests that the demand for low wage labor is extremely price inelastic, which means that an increase in the price of labor only causes a tiny decrease in demand...The demand for low wage labor is like the demand for gasoline. If the price goes up, employers still demand the same amount. (And even if a tiny fraction of workers are laid off, there is still a net benefit to the class. For example, if the minimum wage increases by 20%, but this causes 1% of minimum wage workers to lose their jobs, there is still a net benefit of 18.8%.)"
Argument that low-wage job-seekers lack negotiating power and knowledge of their own worth, that any negotiated wage may not reflect the real market value of labor, and that raising the minimum wage would solve this problem for minimum wage workers: An argument presented in Wikipedia's "Minimum Wage" article - "[A minimum wage] forces employers to pay at least the wage society thinks human labor is worth, rather than low-balling potential first time employees with salary offers below their true worth. Employers know that first time employees don't really know how much they're worth and have little bargaining power because if they try to negotiate for a higher wage, the employer can just find another person who doesn't know how much he's worth and give him the job instead." -
Argument that a minimum wage increase would be appropriate in light of more frequent Congressional pay raises: Washington Post 6/22/06 - "Democratic House and Senate candidates are contrasting the stagnant pay for the country's lowest-paid workers with the regular cost-of-living pay raises lawmakers have granted themselves in recent years. [In June, 2006] the House rejected an effort to block a $3,300 annual increase in the base salary for a member of Congress. If the raise goes through, rank-and-file members will earn $168,500 -- a $31,600 increase since the last minimum-wage increase was enacted in 1997."
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[ ] [ ] No
Evidence and claims that job-loss would accompany a minimum wage increase: The most basic argument that a minimum wage will decrease employment is made by an analysis of a classical supply/demand graph (right). In this argument, a higher wage theoretically reduces the demand for labor, creating a surplus of labor supplied (unemployment).
- The Wall Street Journal 11/03/06 - "Economists David Neumark of the University of California at Irvine and William Wascher of the Federal Reserve Board [the main opposition to David Card and Alan Krueger's findings] say a review of more than 90 studies in more than 15 countries since the early 1990s shows nearly two-thirds of the studies find a 'consistent' though not always statistically significant negative impact on employment. Fewer than 10 found a consistently positive impact. While there's 'no consensus,' they say, 'the weight of empirical evidence' supports the traditional view."
- David Holland, Washington State University Study 11/06 - "For the economy as a whole, a 5 percent increase in the minimum wage leads to a loss of roughly 2.5 percent of all minimum-wage jobs."
- The CATO Institute "Minimum Wage Socialism" 7/5/06 - "The National Federation of Independent Business estimates that if the federal minimum wage is increased to $6.65 per hour, nearly 217,000 workers would lose their jobs."
- Claim that restaurant industry job-loss accompanies a minimum wage increase: Neumark argues that there were substantial restaurant industry losses following the last minimum wage increase, according to Hospitality Trends.com 10/04/06 - Neumark conducted "An analysis based on a nationwide survey of 1,000 restaurant operators [that] showed that over 146,000 jobs were cut from restaurant payrolls, with operators postponing plans to hire an additional 106,000 new employees after the last federal wage increases."
- According to the John Locke Foundation, Neumark and Wascher re-did the Krueger study, concluding that the study conducted by Card and Krueger on New Jersey restaurant chains in the early 90s had used sloppy data collection techniques, because they purportedly relied on phone interviews with managers and did not define the time interval. When Neumark and Wascher used payroll data instead of telephone survey data, they reached the opposite conclusion of Card and Krueger, concluding that there had been substantial job loss.
- Argument that raising the minimum wage would entail negative effects on teenage employment: Greg Mankiw, Harvard University Professor of Economics, Principles of Economics (2006) - "Although there is some debate about how much the minimum wage affects employment, the typical study finds that a 10 percent increase in the minimum wage depresses teenage employment between 1 and 3 percent. In interpreting this estimate, note that a 10 percent increase in the minimum wage does not raise the average wage of teenagers by 10 percent. A change in the law does not directly affect those teenagers who are already paid well above the minimum, and enforcement of minimum-wage laws is not perfect. Thus, the estimated drop in employment of 1 to 3 percent is significant."
- David Neumark and William Wascher "Employment Effects of Minimum and Sub-Minimum Wages" Study 1992 - "Using panel data on state minimum wage laws and economic conditions for the years 1973-89, the authors reevaluate existing evidence on the effects of a minimum wage on employment. Their estimates indicate that a 10% increase in the minimum wage causes a decline of 1-2% in employment among teenagers and a decline of 1.5-2% in employment for young adults, similar to the ranges suggested by earlier time-series studies."
- A study published by the Federal Reserve Bank of San Francisco concludes, according to The National Center for Policy Analysis, that minimum wage hikes are accompanied by job loss among young and unskilled workers. The study concluded that the effects of the 1996 and 1997 minimum wage increase were harmful to young and unskilled employment. At the low end of the range, at least 90,000 teenage jobs were lost in 1996 and another 63,000 jobs lost in 1997. At the higher end, job losses may have equaled 268,000 in 1996 and 189,000 in 1997. It estimates that a $1 rise in the minimum wage will further reduce teenage employment by between 145,000 and 436,000 jobs.
- National Center for Policy Analysis Study "Minimum Wage Teen-age Job Killer" 5/20/99
- Claim that raising the minimum wage might cause employers to replace less skilled workers with more skilled workers: Hospitality Trends "New Study Concludes Minimum Wage Hikes Do More Harm Than Good" 10/04/06 - "A manager might respond to a minimum wage hike by replacing three less-skilled workers with two more-skilled workers, or by investing in equipment that allows the restaurant to produce the same amount of food with fewer workers. [Professor] Neumark [of UC Irvince] notes that the empirical evidence tends to confirm these predictions."
- Claims of negative state and local employment effects resulting from a rise in the minimum wage:
- Judgments by other key players that a minimum wage increase harms employment:
Claim that a minimum wage increase would decrease the hours of work employers are willing to ask of employees, which might negate any benefits to the employee.
Argument that raising the minimum wage would not be an effective tool for reducing poverty:
- Argument that the benefits of a minimum wage increase would be greater among higher income groups: Stanford University researchers Thomas MaCurdy and Frank McIntyre concluded that 57 percent of the workers who benefit from minimum-wage increases live in higher-income categories.
- Economist Martin Feldstein "Minimum Wage Effects on Training on the Job" American Economic Review 12/82 - "For the disadvantaged, the minimum wage law may have the ironic effect of lowering life time incomes by a very large amount."
- Economists Richard Burkhauser (Cornell University) and Joseph Sabia (University of Georgia) "Raising the Minimum Wage: Another Empty Promise to the Working Poor" 8/05 - "A beneficiary from a proposed federal minimum wage hike to $7.25 an hour is far more likely to be in a family earning more than three times the poverty line than in a poor family. In total, only 12.7 percent of the benefits from a federal minimum wage increase to $7.25 an hour would go to poor families. In contrast, 63 percent of benefits would go to families earning more than twice the poverty line and 42 percent would go to families earning more than three times the poverty line."
- Claim that it will cause non-poor families to fall into poverty more than it will cause poor families to escape poverty: David Neumark and William Wascher "Do Minimum Wages Fight Poverty?" (1997) - "a one-to-two year period, minimum wages increase both the probability that poor families escape poverty and the probability that previously non-poor families fall into poverty. The estimated increase in the number of non-poor families that fall into poverty is larger than the estimated increase in the number of poor families that escape poverty, though this difference is not statistically significant. We also find that minimum wages tend to boost the incomes of poor families that remain below the poverty line. The evidence indicates that in the wake of minimum wage increases, some families gain and others lose. On net, the various trade-offs created by minimum wage increases more closely resemble income redistribution among low-income families than income redistribution from high- to low-income families. Given these findings it is difficult to make a distributional or equity argument for minimum wages." Neumark has "estimate[d] poverty rates increase between 3 percent and 4 percent for every 10 percent increase in the minimum wage by depressing employment of low-skill workers."
Contention that a minimum wage increase would harm the future income potential of workers, according to some sources: Masanori Hashimoto "Minimum Wage Effects on Training on the Job" 1982 cites Economist Sherwin Rosen as saying - "The effect of a minimum wage is to put a ceiling on the range of learning opportunities to workers...[as a result their] range of choice is severely constrained and guarantees a relatively flat life-time income pattern." He goes on to describe two explanatory lines of argument:
- That a higher minimum wage may incentivize drop-outs: Hashimoto writes that a minimum wage increase may reduce the incentives to stay in school to gain more skills and so-forth because a higher paying job is more easily obtained without a degree.
- David Neumark, William Wascher 1995 study - "year observations for the period 1977 to 1989. The results show a negative influence of minimum wages on school enrollment and a positive effect on the proportion of teens neither employed nor in school. We further suggest that our results are consistent with substitution by employers of higher- for lower-skilled teenagers, with the displaced teens ending up both out of work and out of school." In states which allow students to drop out of school before they are 18, they concluded that a 10 percent increase in the minimum wage would cause teenage school enrollment to drop by two percent.
- Heritage Foundation "Raising the Minimum Wage Hurts Vulnerable Workers' Job Prospects Without Reducing Poverty Heritage Foundation" 7/25/06 - "Duncan Chaplin of the Urban Institute, Mark Turner of John Hopkins University, and Andreas Pape of Michigan State University examined teenagers’ continuation ratios—the proportion of a school’s students in any year who either graduate or progress to the next grade level. They found that higher minimum wages decreased continuation ratios and led teenagers to drop out of school."
- Greg Mankiw Principles of Economics (2006) - "In addition to altering the quantity of labor demanded, the minimum wage also alters the quantity supplied. Because the minimum wage raises the wage that teenagers can earn, it increases the number of teenagers who choose to look for jobs. Studies have found that a higher minimum wage influences which teenagers are employed. When the minimum wage rises, some teenagers who are still attending school choose to drop out and take jobs. These new dropouts displace other teenagers who had already dropped out of school and who now become unemployed."
- Claim that raising the minimum wage may limit the ability of low-skill job-seekers to exchange their low-wage labor for job training and other fringe benefits: Masanori Hashimoto "Minimum Wage Effects on Training on the Job" 1982, cites a number of arguments that a higher minimum wage undermines a workers ability to trade training and experience for a low wage.
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[ ] [ ] [ ] [ ] [ ] [  ] Effect on employers: Would a minimum wage increase be beneficial and/or fair to employers?
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[ ] [ ] Yes
View that employers can fairly easily absorb the costs of a minimum wage increase: Economic Policy Institute - "[Economic] models recognize that employers can absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale."
86% of small businesses entrepreneurs felt that a raise in the federal minimum wage would not affect their business because they already hired above it. - Wells Fargo/Gallup poll 10/06
Some have "pointed to studies showing higher wages reduce companies’ losses due to high turnover rates and employee theft." - NYTimes 01/02/06
Evidence that in some cases, the restaurant industry is growing robustly, despite minimum wage increases, indicating that the industry is not negatively affected by an increase in the minimum wage:
- San Francisco: NYTimes 01/06/06 - According to UC Berkeley economist Michael Reich, "Employment in San Francisco restaurants has been growing faster than the general business average since the city's wage laws were enacted in 2003. Small increases in prices and improvements in workers' productivity pay for the difference, Reich said. Average prices of menu items have risen about 3% more than those of restaurants outside the city on the east side of San Francisco Bay, according to a recent report coauthored by Reich."
- Oregon Study concludes that its employers (particularly in agriculture and restaurant industries) have fared very well and are hiring despite having one of the highest (and inflation indexed) minimum wages: Oregon Center for Public Policy 9/16/06 - "Measure 25, adopted by voters in 2002, increased Oregon’s minimum wage to $6.90 on January 1, 2003 and established annual adjustments based on official cost of living calculations. After two years of annual adjustments, the state minimum wage is now $7.25. On January 1, 2006, it will rise to $7.50, giving a full-time worker an additional $520 a year. An OCPP analysis found that restaurant jobs generally increased by 7.7 percent between the first quarter of 2002 and the first quarter of 2005. Fast food restaurants saw job gains of 10.3 percent over the same period. By contrast, overall non-farm payroll employment in Oregon grew just 4.1 percent. According to a National Restaurant Association projection released in August, restaurant employment in Oregon is expected to grow 14 percent over the next 10 years. 'Oregon’s restaurant industry continues to bellyache that the small annual increases wreak havoc and produce job losses, but that’s not what has happened in their own industry,' said Sheketoff. 'On the contrary, restaurants in Oregon are adding jobs more quickly than businesses generally.' Total agricultural employment in Oregon was up 6.5 percent between 2002 and 2004, the OCPP found. Total non-farm jobs in Oregon, by contrast, increased by just 1.3 percent over the same period."
Claim that the competitiveness of firms will not be affected by a minimum wage increase. As one Portland restaurant owner put it to the Wall Street Journal 12/03/06, "I don't worry about it, because if I have to raise prices, next door will have to do the same thing, too."
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[ ] [ ] No
Contention that a minimum wage increase is an "income transfer" that "places the entire burden on one small group the employers of low-wage workers and, to some extent, their customers." - Steven E. Landsburg, Professor of Economics at the University of Rochester, "The Real Case against the Minimum Wage", Slate 7/9/04 - "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 Income Tax Credit, for example, accomplishes pretty much the same goals as the minimum wage but without concentrating the burden on a tiny minority.
Claim that raising the minimum wage would also force employers to raise the wages of employees that were well above the minimum wage ("wage creep"): According to a NYTimes Op-ed 1/3/06, a restaurant owner in Ohio, said in 2006, "If the minimum wage is $7 and I have to pay $8 or $9 to hire a dishwasher, then the cooks are going to say they want more." The article cited this as a common concern among employers that is known as "wage creep".
Industries in which employers have expressed the most concern regarding a minimum wage hike:
- The restaurant industries.
- The farming industry.
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[ ] [ ] [ ] [ ] [ ] [ ] Economics: Would a minimum wage increase benefit the economy as a whole?
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[ ] [ ] Yes
Argument that there is no overall negative economic impact: The NewMexican.com, "Santa Fe - "Study: No harm yet from wage law": - "The city’s minimum-wage ordinance doesn’t seem to have harmed Santa Fe’s economy, according to a preliminary analysis released Monday by The University of New Mexico’s Bureau of Business and Economic Research. In fact, job growth is strong and reliance on social-assistance programs in Santa Fe County is down since the city imposed the $8.50 hourly minimum on employers with more than two dozen workers (in mid 2004 - this study was conducted after the second quarter of 2005)."
A minimum wage increase "stimulates consumption, and thus economic growth, by placing more money in the hands of poor people who spend much, if not all, of their paychecks." - an argument presented in Wikipedia.
- NYTimes Editorial "A Fair Day's Pay", 1/3/06 - "Low-wage workers tend to spend more of their income than the upper and middle classes", which was pointed out in this editorial as a possible reason for raising the minimum wage.
Argument that a worker with a higher wage is likely to work harder and be more productive: Contention presented in Wikipedia - "Increases the work ethic of those who earn very little, as employers demand more return from the higher cost of hiring these employees."
Evidence that a higher minimum wage may not cause price inflation:
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[ ] [ ] No
A minimum wage may be inflationary: In Santa Fe, a restaurant owner said to the Free New Mexican that a wage increase there from $8.50 to $9.50 cost him $80,000 in 2005, and that he had to raise prices 5 percent. This would have many effects, most important of which would be a lower level of consumption.
- Debatabase - "As all pay levels are likely to rise, the minimum wage will be disadvantaged by inflation - increased costs are passed on to the consumer, stoking ‘cost-push’ inflation. For the NAIRU (non accelerating inflation rate of unemployment) to remain static, a rise in wages in one part of the economy would have to be balanced by a fall in another wage sector."
It may increase the cost of government social programs, according to one source, because assistance programs may have to divert more funding toward aiding laid-off workers.[4]
Some argue it will decrease the quality of human capitol over time by discouraging people to remain in school or return for a higher education because these people might find that they can earn enough without the extra cost (in time and money) of schooling. - Wikipedia
May undermine work ethic with longer-term economic consequences: Study by David Neumark University of California-Irvine Feb. 2006 - "The evidence indicates that even as individuals reach their late 20's, they earn less and perhaps work less the longer they were exposed to a higher minimum wage at younger ages. The adverse longer-run effects of facing high minimum wages at young ages are stronger for blacks."
Argument that market intervention is, generally, a bad idea: An argument was cited in Wikipedia that the value of a job should be determined by the market, not by what society believes is right for workers, which may risk being arbitrary.
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[ ] [ ] [ ] [ ] [ ] [ ] Alternatives: Are there no alternatives to raising the minimum wage?
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[ ] [ ] Yes
"The federal Earned Income Tax Credit (EITC) combined with the minimum wage helps to reduce poverty, but the EITC is not a replacement for a minimum wage increase." - Economic Policy Institute - "...For example, in 1997, a single mother of two children working 40 hours per week year-round at the minimum wage would have earned $9,893 (after Social Security and Medicare taxes) and would have been eligible for the maximum EITC of $3,656, which would have put her family income at $13,549, a mere 5% above the 1997 poverty threshold of $12,931 for a family of three. But because the minimum wage has not kept up with increases in the cost of living since 1997, the same family is now below the poverty line. In 2005, a single mother with two children would have combined earnings and EITC of $14,177, or 11% below the 2005 poverty threshold of $15,735 for a family of three."
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[ ] [ ] No
Expanding the Earned Income Tax Credit could be a better route to improving the living standards of poor workers, according to some sources:
The Economist - "The EITC is a type of negative income tax for poor workers and is America's most efficient anti-poverty tool. If Democrats are serious about helping poor workers, they should advocate further expansion. But few Democrats mention the EITC on the hustings. Instead they want to raise the minimum wage, a market-meddle whose costs are debated, but which few would prescribe as the most efficient route to helping the poor—particularly since not all minimum-wage workers are poor."
- Claim that it doesn't concentrate effects on employers: "If you want to transfer income to the working poor, there are fairer and more honest ways to do it. The Earned Income Tax Credit, for example, accomplishes pretty much the same goals as the minimum wage but without concentrating the burden on a tiny minority." - Slate
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[ ] [ ] [ ] [ ] [ ] [ ] Write Subquestion here...
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[ ] [ ] Yes
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[ ] [ ] No
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[ ] [ ] [ ] [ ] [ ] [ ] Would a minimum wage increase help discourage illegal immigration?
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[ ] [ ] Yes
A minimum wage increase may, some maintain, elevate the desirability of working low-wage jobs, which would infuse Americans into the market where illegals most frequently work. Arizon Watch 4/4/05- "One of the big explanations of why illegal immigrants are “required” in the Arizona economy is that legal employees will not work at difficult jobs for the minimum wage rate. One might argue that raising the minimum wage will serve to curtail illegal immigration, since workers will be able to earn a 'livable wage' washing dishes or picking cotton or whatever they ostensibly don’t want to do now."
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[ ] [ ] No
Some argue that a higher minimum wage would marginally increase the potential wages as well as the demand for illegals, creating a greater incentive for illegals to immigrate: Washington Times Editorial August 9, 2006 - "[A raise in the minimum wage would] be a magnet attracting more Mexicans and other Latin Americans to illegally cross our border. Employers who evade the increased labor costs by paying illegal workers less than the new higher wage by going underground or paying off the books would eliminate potential new job opportunities for legal workers. Because illegal workers are exploitable, their dollar equivalent worth to some employers could be more than the new higher minimum wage, in which case the illegals would be retained at the expense of legal workers. Going off the books would also save employers the significant costs of employment taxes and non-wage benefits, which could lead them to fire legal workers and hire illegals. Honest business people who follow the rules would try to compete with employers who disregard the law. But the gap between off-the-books pay and legal compensation would force many small businesses to fail or succumb and break the law."
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[ ] [ ] [ ] [ ] [ ] [ ] Where does the American general public stand?
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[ ] [ ] Yes
A Pew study (4/19/06)
found 83% of its respondents favored raising the federal minimum wage to $7.15 per hour.
Social conservatives appear to overwhelmingly favor an increase: In a 2005 Pew Research Center poll, 86 percent of respondents, including 79 percent of social conservatives, supported increasing the minimum wage to $6.45 an hour.[5]
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[ ] [ ] No
"Some free-market conservatives, heirs to the original opponents of the Fair Labor Standards Act of 1938, oppose it on ideological grounds."NYTimes 1/03/06
"Business interests, led by the restaurant industry, have lobbied to keep the minimum wage low." - NYTimes 1/3/06 One example is the Ohio Restaurant Association, which strongly lobbied to prevent the elevation of Ohio's minimum wage up from $4.25 (the lowest in the country) in 2006.[6]
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[ ] [ ] [ ] [ ] [ ] [ ] Where do US State governments and their public's stand?
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[ ] [ ] Yes
State minimum wages that were higher than the federal level before the November, 2006 elections:
- Washington State: Has the highest minimum wage in the country. In January, 2007, the state's minimum wage was set to rise from roughly $7.6 per hour to $7.9 per hour. Washington indexes minimum wage to inflation.[7]
- Oregon: Oregon indexes its minimum wage to inflation.[8]
- Florida: In 2004, voters passed legislation to raise the minimum wage by a margin of roughly 70% to 30%.[9] Florida indexes its minimum wage to inflation.[10]
- Nevada: In 2004, voters passed referendums to increase their states' minimum wage laws by margins of roughly 70 to 30 percent.[11]
The majority of states had increased minimum wages above the federal level by April, 2006: Following the November, 2006 elections, over 60% of states had higher minimum wages than the federal level. In April, 2006, a majority of states had minimum wages above the federal level.[12]
November, 2006 election propositions to increase the minimum wage from the current federal minimum of $5.15 PASSED in six states.[13] They joined 18 other states that have set wages higher than the federal mark of $5.15 since this practise was allowed under the Clinton administration.
- Arizona[14] - raised to $6.75.[15]
- Colorado[16]
- Missouri[17] - raised to $6.50.[18]
- Montana[19] - raised to $6.15. [20]
- Ohio[21] - raised to $6.85 from $4.25 (the lowest in the country before the raise).[22]
- Nevada[23] - raised to $6.15.[24]
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[ ] [ ] No
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[ ] [ ] [ ] [ ] [ ] [ ] Where does the US federal government (including Senators and House Reps) stand?
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[ ] [ ] Yes
Democrats tend to support raising the minimum wage and are making it majority legislative priority for the 110th Congress: In the November, mid term elections, raising the minimum wage became a major rallying point for Democrats. In the Democrat-dominated 110th, raising the minimum wage will become a major priority.
- Sen. Edward Kennedy - one of the most outspoken advocates of raising the minimum wage in the Senate - said in mid-November, 2006 that "increasing the federal minimum wage from $5.15 to $7.25 would be his top priority as chairman of the Senate Committee on Health, Education, Labor and Pen
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