Robert Reich Is Right: Raise the Minimum Wage

He writes:

Robert Reich's Blog: Tenth Anniversary of Minimum-Wage Hike. Democrats Should Do it Again.: Message to Democrats: It's time to do it again. Current estimates are that 12 million Americans are at the federal minimum wage (now $5.15 an hour). Almost all the 1996 increase has been eroded by inflation. Democrats should propose increasing it to at least $7 an hour. Force Republicans to vote on it. If they refuse to, or they vote it down, make it a big issue in the fall campaign.

Contrast the plight of America's 30-million working poor with the fortunes of America's CEOs. The CEO of Exxon-Mobile just raked in over $400 million for his efforts last year. Assuming he worked a normal work week (not counting time on the golf course with members of his compensation committee), he got about $200,000 an hour....

In 1996, Republicans predicted that the raise from $4.25 to $5.15 would result in millions of job losses. But in fact, about 13 million new jobs were added to the American economy between 1996 and 2000. Earth to Congressional Democrats: Now's the time. Tenth anniversary. All the gain then now lost to inflation. 85 percent of Americans favor it. Mid-term election in the fall. It's a no-brainer.

---

Remember from October 13, 2004, when George W. Bush claimed to be in favor of raising the minimum wage?

washingtonpost.com: Third Presidential Debate -- President Bush and Sen. John Kerry: BUSH: Actually, Mitch McConnell had a minimum-wage plan that I supported that would have increased the minimum wage...

Note that he had to specify: McConnell's plan was to increase and not decrease the minimum wage.

Impeach George W. Bush. Impeach him now.

Comments

[Macneil]

Impeach him, yes. But not for that reason. A higher EITC would make more sense to fight poverty than a higher minimum wage.

Sure, I bet it will score some political points for the Democrats. A perfect stunt. But does that mean the minimum wage makes sense? No. So long as it doesn't get too high I guess it doesn't matter, but think of what that's saying.

[trotsky]

Last fall Michael Hiltzik of the LA Times (soon to be formerly of, I reckon) wrote about farmers' being unable to attract adequate numbers of workers paying around the minimum wage because an unskilled immigrant laborer could make at least $10 an hour on construction sites in California. Forget about Americans being too good to pick strawberries; undocumented Mexicans are too good for the work -- at least at the price being offered.

My point: If market forces have already pushed workers at the very bottom of the economic ladder well above the minimum wage, how important is that minimum wage?

[chuckles]

Professor DeLong--

As far as I can tell, you have gotten to the point where any disagreement with you on a policy issue is grounds for impeachment and removal from office.

That's pretty democratic of you, Bradford.

[Jonathan King]

trotsky writes:
> My point: If market forces have already pushed workers at the
> very bottom of the economic ladder well above the minimum
> wage, how important is that minimum wage?

Well, I suggest you ask the estimated 12 million people who are only getting the minimum wage. And then ask the millions of others who are going to get a raise in pay because the minimum wage goes up, either because the minimum wage "crosses" their current wage on the way up, or because other low wages that are now designed to be something like $2 above minimum creep up after the minimum itself goes up.

The situation you describe, where undocumented workers have a choice between picking strawberries at around $5 per hour or slapping up drywall at $10 per hour is a little bit unusual, and may depend on construction jobs that won't be there when demand for new housing declines, as it already has since last fall in many places.

[aaron]

I doubt changing the minimum wage will have much affect, good or bad.

[anne]

Of course, the minimum wage should be raised to protect workers by offering living wages when unions are not strong enough to so protect workers. Supposed worrying about the few who may not be hired at living wages is only a pretense. Spurring growth through monetary and fiscal policy will take account of general employment, but living wages should surely be assured.

[anne]

The possibility of not making $7 an hour should be impossible in America. Imagine possibly caring for oneself and a family at $5.15 with no social services even approaching those found through western Europe.

[Slocum]

As the minimum wage is increased, fewer teenagers will find part time and summer jobs. Fewer mentally and physically impaired persons will find paid work of any kind (do minimum wage proponents think these are bugs or features?) Retirees who could use a bit of extra money to supplement pensions but mostly want a pleasant way to stay busy will not be free to do this--unless they accept the alternate minimum wage of $0/hour (e.g. volunteer work). But why should a retiree on social security be able to work for $0/hour or for $7/hour but nothing in between?

The minimum wage is also blunt instrument.. Why should the minimum wage be the same in Manhattan as in rural Alabama (where incomes and the cost of living are dramatically lower?)

[bakho]

If the big discount stores are only paying minimum wage, then that forces down wages for businesses that must compete with them. There are social costs that are paid by wages and benefits. If businesses do not pay social costs for their workers, then the costs are externalized and dumped into the laps of the taxpayers.

What is wrong with having standards? How much should taxpayers be asked to subsidize business?

[Bruce Webb]

Slocum, the plural of anecdote isn't data. You can assert that an increase in the minimum wage causes job losses but can you bring some evidence to the table? The minimum wage in the State of Washington is $7.64/hour. Yet strangely enough you can still buy a Big Mac here. And know that the checker at the supermarket is getting paid at least that.

When an employer of minimum wage workers insists his concern is "jobs" you can be pretty sure he is lying. He would cut staff loose in a second if he thought he could maintain production.

There really is an extortion effort built in to the resistance to raising the minimum wage. They suggest that 12 million Americans should forego a raise because otherwise Jimmy the Stock Boy loses his job. Well lets quantify that. How many jobs would be lost? And how many net pay dollars? And how does that compare with the increased pay dollar for everyone who keeps their job? And what is the average time for Jimmy to land a new job at the now higher wage?

A hard lesson is going to be delivered to the economic Right, (perhaps starting this morning if the Social Security Report is released (as reported by Atrios)), which goes something like this "Your economic numbers, where you actually even present numbers, are a bunch of lying crap. You can't back them up, you have nothing but shopworn slogans. You are either lying or a simple dupe of liars."

Harsh? Perhaps. But in his books Remo Williams claimed the ability to travel through walls. Which explains much about the quality of his economic reporting. Slipping through the gap between a stud and the wallboard will do that to a guy.

http://en.wikipedia.org/wiki/Remo_Williams

[save_the_rustbelt]

I watch labor markets in the Rustbelt rather closely, and other than illegals and "kid jobs" (the Dairy Queen, etc.) I can't find many people working for the minimum.

What appears to be the real problem is that people who used to work for $18-an-hour are now working for $9-an-hour, and there seems to be a market cap of about $12 an hour on most non-union blue collar jobs.

Workers are very transitory, there is little loyalty in either direction.

Not a good beginning to the 21st century.

[Slocum]

"If the big discount stores are only paying minimum wage, then that forces down wages for businesses that must compete with them."

I think you've got that backwards. Walmart doesn't pay minimum wage, but the small independent, struggling to compete with Walmart may do so. Small shops can pay less than Walmart because working conditions are more pleasant (slower-paced, non-corporate environment, the owner is friend, etc). Increases in the minimum wages are likely to hurt small businesses competing with Walmart rather than the other way around.

Would you rather work at Walmart for, say, $7.50/hr or a local hardware store or book shop for $5.50/hr? Not an obvious choice, is it? For somebody who really needs the cash, Walmart may be the more attractive option. But a teenager or retiree for whom the income is supplemental rather than primary, the lower wage combined with more pleasant, informal conditions may be better choice (not to mention that a teen is likely to learn a lot more working at an ACE hardware than at Walmart).

[anne]

Oh, good grief, if working for $5.15 an hour is the only way to save us all from been gobbled up for lunch by Wal-Mart, then I would suggest thinking through an alternative framework for competition. Look to Europe, oh dear, Europe, and learn ever so little about what we might do to improve labor prospects.

[Slocum]

"Slocum, the plural of anecdote isn't data. You can assert that an increase in the minimum wage causes job losses but can you bring some evidence to the table?"

How about this:

http://www.nber.org/papers/w10656

"And know that the checker at the supermarket is getting paid at least that."

And the checkers that are no longer there because of the U-Scan lanes? You don't think it's true that the higher the minimum wage, the greater the incentive to replace workers with automation?

"When an employer of minimum wage workers insists his concern is 'jobs' you can be pretty sure he is lying."

Yes, opponents of the minimum wage a flinty-eyed, greedy, liars.

But I'm not an employer of minimum wage workers and one of my concerns are that my high-school aged kids be able to find summer jobs. Probably my son is going to be a volunteer trainee-counsellor at a kids summer camp. He hopes that if he does that, next year it will be a paid job. What do you think the likelihood of that happening is at $5.15 vs $7.50 vs the probability of being offered only another volunteer 'opportunity' next year? I also have a partly disabled relative who is working at a low wage job. What do you think the effect of a minimum wage increase will be on the probability of keeping that job?

"Well lets quantify that. How many jobs would be lost? And how many net pay dollars? And how does that compare with the increased pay dollar for everyone who keeps their job?"

Do you think it's OK just to offset the dollars lost to unemployment and the dollars gained by raises? The people who fall off the bottom of the wage scale (or can't get on in the first place) are harmed much more than the others are helped.

It's mystifying to me why people in favor of minimum wage hikes don't prefer raising the EITC (as I do). The EITC specifically targets people who really need the money (low wage workers supporting families) and doesn't cause the harm of unemployement. I really just don't get it.

[anne]

Possibly if the minimum wage were raised, no one would ever be allowed to work again in America, but, raise the minimum anyway. Simply think of the cost of university education, before fretting over just how little a teenager should be allowed to earn.

[Firebug]

The minimum wage should not only be increased - preferably to above $10 an hour - but indexed for inflation. It is a disgrace that someone can work full time in the United States and gross under $11,000 a year. There should be no such thing as the "working poor" - it is a mockery of the American dream and a slap in the face to the values we claim to hold. The EITC is not only an inadequate stopgap measure (have you seen how low your income actually has to be in order to qualify?) but also an unjust subsidy to low-wage employers.

Every time the minimum wage is increased, employers claim it will cost jobs. They're always lying. And Remo Williams, as usual, is full of BS: The Soviet Union officially had an unemployment rate of 0%, and I didn't believe that either. Unemployment-to-population is worse than in 1996 - the difference is we have more "discouraged workers" today, who are removed from the rolls. And the median wage stagnation would not happen if unemployment was really that low.

Increase the minimum wage and ban immigration. It's the only way to protect the working class.

[Bruce Webb]

"It's mystifying to me why people in favor of minimum wage hikes don't prefer raising the EITC (as I do). The EITC specifically targets people who really need the money (low wage workers supporting families) and doesn't cause the harm of unemployement. I really just don't get it."

Because it is just another way of subsidizing corporations using my tax dollars. It is all bait and switch: reduce taxes on corporate profits and earnings from captial in favor of programs paid from income taxes that fall more and more on the middle class.

MacDonalds needs to sell hamburgers. They sell them in Washington State. And at the same prices pretty much as everywhere else, its not like people in Seattle order off the "$1.35 menu". College kids in Washington State get summer jobs. Those jobs pay the State minimum of $7.64 per hour. Look if you can scrounge up some graphs that show that teen unemployment in Washington State substantially lag those in states paying the $5.15 federal minimum then have at it. But frankly you got slogans and not numbers.

[Bruce Webb]

"And the checkers that are no longer there because of the U-Scan lanes? You don't think it's true that the higher the minimum wage, the greater the incentive to replace workers with automation?"

Which is why I don't use U-Scan lanes. And have never, not once in 49 years of life shopped at a Wal-Mart. And would not think of crossing a picket line unless those picketers were between me, my seriously injured kid and the emergency room.

Worker Solidarity, it is not just a slogan, it is a way of organizing your life. Or you can adopt the Enron mentality: "Screw Gramma Millie, I got mine". Some people are telling workers they need to be cowering in fear because Jimmy the Stock Boy might lose a job or that some suburban college kid might not find one and just ignore the 12 million people earning the current minimum and those whose pay rates are driven by the minimum (like the Assistant "Manager" at MacDonalds). Show me the dollar figures that would prove I am a selfish bastard because I want to take home a bigger paycheck.

Somehow "greed is good" only works went you to get the Corporate Suite. Workers are expected to rally around Jimmy the Stock Boy. Well yeah, that two dollar an hour raise might cause a Jimmy or a thousand Jimmy's to lose a job, but it represents $4000 annual gross in Billy the cashier with two kids pay check. Somehow I think I would rather have Billy's back on this one.

[sd]

Bruce Webb wrote:

"Because it is just another way of subsidizing corporations using my tax dollars. It is all bait and switch: reduce taxes on corporate profits and earnings from captial in favor of programs paid from income taxes that fall more and more on the middle class."

The logic here is Orwellian. Providing aid to the poor out of general revenues is a "subsidy" to employers of low skilled workers because instead we could just be mandating that those employers pick up the tab?

Well, I'm tired of subsidizing you by buying my own beer. After all, every time I buy a 6-pack out of my own pocket its just a transfer payment from me to you, since in a just world you'd have to buy my beer.

I find the logic of minimum wage laws tremendously suspect. The basic premise seems to be that in a fair and just and civilized society its not acceptable for people to live below a certain poverty threshold. That we have a collective responsibility to take care of the least fortunate among us. Fine, no problem there. I'll happily pay more taxes to raise the EITC.

But a minimum wage doesn't have anything to do with a collective responsibility to the less fortunate - its a politically convenient tool to force the entire burden of lifting the poor out of poverty onto the employers of low skilled labor. Microsoft doesn't face a nickle of increased cost from the minimum wage. McDonald's does. But why the hell is it "fair" that corporations that operate in businesses that employ exclusively high-skilled workers whose market value of labor is many times the minimum wage don't have to bear any of the burden of taking care of the poor while corporations that operate in businesses that employ low-skilled workers whose market value of labor is below the minimum wage have to bear a significant burden.

[J.Goodwin]

Posted by: Jonathan King | April 30, 2006 at 10:59 PM

"I doubt changing the minimum wage will have much affect, good or bad."

It certainly won't have an affect. It may have an effect though.

[Bruce Webb]

http://www.nber.org/papers/w10656

That was pretty pathetic. A blind link to a paper that requires a payment to read without any extraction of anything that would actually support your argument?

A fair reading of the precis suggests that workers who get stuck long term in a minimum wage job have lower long range income prospects. Well no shit. Only this sentence begins to support your assertion: "The evidence indicates that even as individuals reach their late 20's, they work less and earn less the longer they were exposed to a higher minimum wage, especially as a teenager." As I parse this out all I see is that other things being equal people will stick it out in a crap job earning $7.64/hour longer than they will in a job earning $5.15/hour. And this possibly is true but there is an odd suggestion built in that paying that extra $2.39/hours is doing the worker a disservice because otherwise they would be motivated to get off their ass and get a better job. As if turnover and training weren't the worst heartburn the typical minimum wage employer has to face.

I don't suspect many owners of fastfood chains spend a lot of time worrying that their employees are ruining their long term career paths because they don't move on in a few months.

Perhaps that paper had more substantive points to make. You can either extract them or send me the five bucks they want to download it. And BTW a hyperlink is not an argument.

[Bruce Webb]

"Microsoft doesn't face a nickle of increased cost from the minimum wage. McDonald's does."

Well of course Microsoft faces those costs. Do you think the toilets just get cleaned by magic? Or that the landscaping all gets performed by grasshoppers with implanted chips? How much are they paying the busboys in the myriad food shops on the Microsoft campuses?

Work is not welfare. "A fair day's work for a fair day's pay" builds in the idea of a living wage

"But why the hell is it "fair" that corporations that operate in businesses that employ exclusively high-skilled workers whose market value of labor is many times the minimum wage don't have to bear any of the burden of taking care of the poor while corporations that operate in businesses that employ low-skilled workers whose market value of labor is below the minimum wage have to bear a significant burden."

Fine by me. Lets boost corporate income tax levels and individual marginal rates back to Reagan era levels and use that to provide some economic justice. Somehow I don't think you want to go down that rhetorical path. I'll gladly unleash my Inner FDR if you really want to go there.

[Slocum]

"Well yeah, that two dollar an hour raise might cause a Jimmy or a thousand Jimmy's to lose a job, but it represents $4000 annual gross in Billy the cashier with two kids pay check. Somehow I think I would rather have Billy's back on this one."

But increasing the EITC would allow the thousands of Jimmys to keep their jobs AND at the same time provide more money for Billy-with-two-kids to feed. Not to mention that the costs of a minimum wage increase tend to fall on those with modest incomes (or do you think it's the wealthy who eat at fast food joints and shop at discount stores?) whereas an increase in the EITC can be funded with progressive income taxes.

They're both, in effect, income transfer schemes, but the EITC is targeted, is funded progressively (or at least *should* be), and does not have unfortunate side effects.

[Bruce Webb]

"businesses that employ low-skilled workers whose market value of labor is below the minimum wage have to bear a significant burden"

Well this could stand some unpacking. What establishes the "market value of labor"? I would think that the minimum wage weighes in strongly here. It establishes a floor, it essentially says "If you want a job this is where you start". And given a reasonable supply of teen and entry level workers employers can make it stick. If the choice is "job or no job" a substantial number of workers will choose "job". To repeat, Washington State McDonald's franchise owners are not living in cardboard boxes. Somehow they manage to buy their big ass houses and their big ass cars in a real estate market that would make people in Peoria swoon and still are working off the same Dollar Menu even though the minimum wage here is $7.64/hour.

[Bill]

Wouldn't it be better to just give people a transfer through a negative income tax to ensure they have the means to survive rather than pricing people out of the labor market through a minimum wage?

[Bruce Webb]

Well I leave this thread and let whoever wants have the final word. But first:
"They're both, in effect, income transfer schemes, but the EITC is targeted, is funded progressively (or at least *should* be), and does not have unfortunate side effects."

One, you have yet to demonstrate that those "unfortunate side effects" actually exist. Two, "funded progressively (or at least *should be)", well to near quote your pal and mine Rummy "You don't go to class war with the tax structure you want, you go with the tax structure you have.". The current tax structure is anything but progressive and getting less so all the time.

See ya'll. I'll be back around if and when they release the Social Security Report today.

[anne]

No; what makes sense is stronger worker rights coupled with reasonably expansive fiscal and monetary policies to encourage employment. We could always, of course, do away with minimum wage completely and do away with unions and other assorted worker and social services protections and find just how poorly workers really could be treated.... Of course, paying, say, $3 an hour would employ all sorts of workers. Try $2 an hour?

[kharris]

This setting doesn't do a perfect job of clarifying arguments. Too much running off to look at supporting links (when the link leads somewhere) and the like. However, one thing we can do is try to engage is real discussion, rather than in cutsie "gotcha" kinds of arguments. Sometimes hard to do, I know, but there are ways. For instance, anyone of good will who really wants to hold a discussion rather than just assert their own view and declare victory could avoid things like --

"Fewer mentally and physically impaired persons will find paid work of any kind (do minimum wage proponents think these are bugs or features?)"

Of course, it is understood that sneering at those who disagree with one's views is oh, so pleasant. If one absolutely must engage in sneering rather than discussion, one could try to be a bit more original.

[Lord]

We need to create fewer jobs Americans don't want to take. We need to reduce the demand for illegal immigration. Doubling the minimum wage would be a step in the right direction and is long overdue.

[Taggert J. Brooks]

It is such a blunt and inefficient instrument. Cost of Living varies substantially across the US, as does productivity. Why impose a national minimum that doesn't acknowledge these facts? $10 might not be binding in NYC, but it would be painful for many northern wisconsin cities. I guess if you want to expedite the move from small towns to cities this will contribute. Still I think there are other, more effcient ways to achieve the desired outcome.

[spencer]

Slocum -- assume for the sake of argument that you are right that an increase in the minimum wage leads to a lose of jobs -- not that the data agrees with you.

But why is that a bad thing. No one I have every heard of has seriously argued that increasing the minimum wages causes business sales to fall. So given your assumptions, after a minimum wage hike sales are the same but with fewer employees. This means that the real income and/or marginal product of the remaining employees has risen. But in a dynamic capitalist system that is exactly what we want to happen -- it means that the real income of the remaining employees have risen sharply and in a dynamic growing economy the very small percentage of those who lose their jobs are quickly able to find replacement jobs. If you look at the history of the US that is what every time the minimum wage has increased. That is why the data never shows the job loses you claim a minimum wage hike would generate.

What you are really arguing in favor of is a cheap labor policy that keeps the income of labor from rising. If you really believe in free market capitalism the way you claim, why do you not want everyone to share in the benefits of the greatest wealth creating machine ever developed?

By the way the automatic check out machine has been developed and brought to market completely since the last increase in the minimum wage. So the fact that automatic check out machines have been devloped has nothing to do with the minimum wage.

However, this is a good example of what I am talking about. The automatic check out machine increases the productivity of check-out clerks several-fold. In theory this should be accompanied by an increase in the wages of check-out clerks. Right, that is the theory you are fighting for isn't it?. So why hasn't it? Why have most of the benefits of higher productivity from the automatic check out machine gone to the owners and management rather then labor?

[Bob McBob]

Of course, raising the minimum wage does no good for a country that allows free trade and outsourcing to a country with no minimum wage. That is obvious. Why are economists so dense?

Impeach economists. Impeach them now.

[s9]

What do we want? Larger cages. Longer chains. Thicker gruel. When do we want them? Now!

I hate to be the jaded cynic, but the way it really seems to work in America is that we raise the standards of living enjoyed by our wage slaves only when we start to be concerned that they might do more damage by rioting than it would cost to keep them marginally satiated.

Oh, sorry about that. I used the phrase "wage slave" didn't I? And you were probably eating lunch at the time.

[Ari]

"Of course, raising the minimum wage does no good for a country that allows free trade and outsourcing to a country with no minimum wage."

What about the Europeans? Why do the French or Germans not worry about this?

[Bill]

I think that we can all agree that labor market conditions in the U.S. are generally more favorable that those in Europe. Unless you prefer double-digit unemployment. Again, why price a teenager out of a summer job when a transfer via a negative income tax can allow people to have the minimum necessary to survive?

[Dustin]

Are there more than a handful of Democrats opposed to raising the minimum wage?

[anne]

"I think that we can all agree that labor market conditions in the U.S. are generally more favorable that those in Europe."

Accept for me, for I do not agree, and find labor market conditions remarkably robust in Europe once workers have gained regular employment while free university education and services such as health care cushion and prepare the young until they are employed. There is a reason the French youth forced the government to abandon a program to ease employer constraints for young workers, and the youths were well supported by older workers.

[anne]

Ha :) While Europeans are constantly berated by Americans for the foolishness of policies that well protect workers, Europeans just as constantly turn from change evidently thinking rather highly of the continental system they have shaped. European companies, curiously enough, are completely competitive even with worker protections. As for younger workers, more immediate opportunity is needed but delayed opportunity is compensated for.

[Karmakin]

More middle managers with absolutly no concept how actual work or employment works.

Businesses hire for one reason, and one reason only. They need X units of labor. They have certain jobs that need to be done in order to stay in business. So they hire people to do those X units of labor.

Increasing the minimum wage does NOT reduce the labor of units. In fact, in the current economy it may very well increase the units of labor. It increases consumer financial health, and in a service based economy that means more demand for services, and that means more labor that needs to be done.

In this way, productivity growth is a double-edged sword. It lowers the units of labor available, but at the same time, theoretically it's supposed to open up whole new pools of labor. But if it does the first but not the second, then the labor economy becomes very unstable.

You know, you can learn more about this stuff actually working than just watching other people work.

[anne]

http://www.nytimes.com/2006/05/01/world/europe/01cnd-spain.html

May 1, 2006

Western European Nations Open Doors to East
By RENWICK McLEAN - International Herald Tribune

MADRID — Four Western European countries threw their doors open today to workers from the east and four others eased restrictions as the European Union entered a new phase in integrating its newest members.

Spain, whose economy is the largest of the four and a former exporter of workers, is now hungry for immigrants to sustain its growing economy. Its decision to lift the restrictions takes the 25-member bloc a step closer to fully integrating the generally poorer countries from Eastern and Central Europe that were admitted two years ago.

Portugal, Greece and Finland also lifted restrictions on workers from the 10 new European Union members today, while France, Italy, Belgium and Luxembourg softened them.

The restrictions were imposed in May 2004 by 12 of the E.U.'s 15 members prior to expansion. The other three — Britain, Ireland and Sweden — decided from the start to let workers from the new members in.

The 12 imposed the limits in response to concerns that cheap labor from the new member — Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia — would flood into the more dynamic economies to the west and push native residents out of work.

Spanish officials said they did not expect the lifting of restrictions to have a direct impact on immigration flows to Spain, which became a member of the E.U. in 1986.

"When Spain joined the E.U., eliminating barriers did not cause Spanish workers to leave like many people had warned," said a senior aide to Prime Minister José Luis Rodríguez Zapatero, who requested anonymity because he is not authorized to speak publicly about government business. "We suspect it will be the same with the countries from the east."

By lifting the restrictions on workers from Eastern Europe, the government is hoping to send a message that Spain is receptive to foreigners and is an attractive place for immigrants to work, Spanish officials say. The government wants to portray the country as a tolerant and open society where immigrants are not just welcome but needed to fill the gaps created by an aging workforce and an expanding economy....

[sd]

anne:

The labor markets in Europe are indeed quite nice if you're one of the lucky few able to find a fulfilling, well-paying job out of school. And by golly what a coincidence - those lucky few are dis-proportionately white and dis-proportionately drawn from the most elite universities and trade schools. If I was one of those kids I'd march against changes in the laws that would make it less risky for employers to hire Algerians instead of me too. After all, the "continental model" has protected the flower of native-born European youth from competition from ambitious immigrants for decades now.

If however I was instead one of those chronically unemployed or underemployed Algerians I might find it a little less "civilized" that I could rely on a generous public dole to protect me from starvation for the years, maybe decades it takes me to find a job that will give me enough income to move out of the housing projects (conveniently located miles away from the civilized bakeries and cafes of Old Paris).

[Bruce Webb]

"Of course, raising the minimum wage does no good for a country that allows free trade and outsourcing to a country with no minimum wage. That is obvious. Why are economists so dense?

Impeach economists. Impeach them now."

Hmm, Bob. Exactly how do you outsource that kid that asks "Do you want to Supersize that?"

The whole argument against raising the minimum wage rests on shoddy assumptions that the jobs currently exposed to minimum wage are somehow at risk to an increase. High end hotels have an irreducible minimum number of chambermaid and busboy positions. MacDonalds and Pizza Hut are not going to flee your state in favor of opening a new store in Ghana because you raised the minimum wage to $6.00 or $7.00. Nor are you going to be able to ship your garden or pool to Bangladore to have it maintained or cleaned.

B mc B. We are not new. And accusing us of ignoring the "obvious" may make you feel superior, but from my perspective a lot of the denseness is on your side.

Fire away.

[Slocum]

"What you are really arguing in favor of is a cheap labor policy that keeps the income of labor from rising. If you really believe in free market capitalism the way you claim, why do you not want everyone to share in the benefits of the greatest wealth creating machine ever developed?"

I'm arguing in favor of freedom and flexibility for employees. Yes, jacking up minimum wages will tend to force the extinction of low-paid, low-skill, inefficient, slow-paced work. But is that what we really want? There are lots of quirky independent businesses that will have a much harder time adapting to a high minimum wage than big chains. And teens, retirees, and non-bread-winning spouses who would like part time work but don't find it do not affect the unemployment rate--the harm to them is invisible by that measure.

"By the way the automatic check out machine has been developed and brought to market completely since the last increase in the minimum wage. So the fact that automatic check out machines have been devloped has nothing to do with the minimum wage."

Yes, even with existing prevailing wages (which are generally well above the legal minimum), there are pressures in the direction of automation. But higher minimums will increase those pressures.

"However, this is a good example of what I am talking about. The automatic check out machine increases the productivity of check-out clerks several-fold. In theory this should be accompanied by an increase in the wages of check-out clerks. Right, that is the theory you are fighting for isn't it?. So why hasn't it?"

It has, but you're looking at the wrong people. Those employees who have benefitted from the higher productivity of automated checkout machines are the engineers who design the bar-code reader and write the checkout software and inventory and electronic banking networks and the technicians who keep it all running. That's where the money goes. That and into the pockets of the customers who are saving money by scanning their own items and bagging their own stuff.

The attendant at a bank of U-Scan stations has a job little more skilled than that of a bathroom attendant handing out hand-towels at a fancy hotel. It really doesn't make any more sense to attribute the productivity of the U-Scan lanes to that person than to the greeter handing out sales flyers at the door.

Look, the increases in the minimum wage that are being contemplated will only bring the de jure minimum wage up to the level of the defacto minimum in most places, so the effects (both positive and negative) will be minimal and lost in the noise in gross measures like unemployment and poverty rates. So in this particular instance, it's a lot of arguing about nothing much. But, in principle, it is just the WRONG way to provide help to low income people. Very large increases in minimum wages (e.g. "Living wages") would have non-trivial harmful effects that wouldn't be at all difficult to measure.

[Ottnott]

52 weeks x 40 hrs x $5.15 = $10,712.

Talk of raising the minimum wage about $5.15 would be a good discussion to have...in countries like Slovenia or Cyprus, where per-capita GDP is about half that of the U.S.

But here?

[Cranky Observer]

> I think the minimum wage should be $50,000
> a year. If $7 an hour would help the poor,
> wouldn't $50,000 a year help even more?

I think you should drink 50,000 litres of water per day. After all, since you will die if you drink no water, but feel much better if you drink 2 litres/day, surely 50,000 litres/day would help even more?

As it happens I had several friends who worked at a local community hospital for many years. Good solid community resource; good medical care; indigent program; rates were not excessive. Around 1995 this hospitial was acquired by a very large health care chain. You know which one since their CEO has been in the news a bit in the last year. The nurses aides, OR techs, etc had their salaries cut 40% and were told to train janitors to take over their jobs. They tried to cut nurses' pay 40% too but they all left and became independent contractors charging 2x the rate for the same work. The CEO paid himself a $200 million bonus for his great work in "improving efficiency".

But raising minimum wage $0.50/hr will break the economy. Sure.

Cranky

[kharris]

"I think that we can all agree that labor market conditions in the U.S. are generally more favorable that those in Europe."

Ummm, debatable. I think what you mean is "the jobless rate" or "demand for labor" rather than "labor market conditions." Labor market conditions is vague enough to include things like job security, pension security, paid parental leave, a flatter income distribution...you know the kind of thing. I'd guess that a fair share of Europeans prefer the system they have, at their higher jobless rates, to that in the US.

Not sure what the European point has to do with the choice between the minimum wage and the EITC (or why we should have to choose). Part of the debate here involves the lack of evidence that a minimum wage law reduces hiring in reality. We all understand that it does in some textbooks.

Dang, I shoulda scrolled down first. Hi, Anne.

SD,

One of the "few" who have good jobs? An unemployment rate under 10% means an employment rate over 90%, with greater job security, better health insurance, and on and on. It isn't cricket to assert as facts things that are so readily disputed. Income distribution is flatter in Europe than in the US. More people have "good" jobs, relative to the upper echelon, in Europe than in the US.

Is there discrimination in employment in Europe? Certainly. Now let's see...Jobless Rate in March, White Population, 4.0%...Jobless Rate in March, Black Population, 9.3%. Hmm, more than double. Won't bother with the rate among black teenagers, 'cause anybody who hasn't slept through class knows about that. Here, too, I await convincing evidence that Europe is worse than the US on enough measures that matter to call a clear winner. We in the US see virtue in our system. They see virtue in theirs. No fair declaring victory unilaterally.

Rick,

Public subsidies, such as the one you've described, are not wiped out by a boost to the minimum wage. If you think public intervention to help the handicapped is a good idea, fine. Calibrate it to whatever the minimum wage happens to be.

[D Kruz]

Sorry about the duplicate trackbacks! I was having trouble with typepad and it seems like it fired off several duplicate pings.

Many apologies.

[anciano]

Well put, Bruce Webb. Raising the minimum wage is no panacea. It won't prevent nuclear war, global climate change or mercury pollution of the oceans. However, at a time of record corporate profits and shrinking benefits (I mean disappearing pensions, increasing copays for Medicaid and reduced numbers of people covered in some states )it is a small gesture toward social balance. I don't care whether Brad has data, this country needs peace and justice.

[anne]

http://www.calvorn.com/gallery/photo.php?photo=5483&u=23252%7C7%7C...

Baltimore Oriole About to Feed Chicks in Nest
New York City--Central Park.

K Harris, nice response :)

[Ari]

SD

The comments about European emplyoment are absurd. First, employment is high enough in several countries that there is a labor shortage. Second, employment as KHarris has pointed out is high everywhere in Europe. Third, employment is well-paid, carries excellent benefits, and is secure. Fourth, employment of European immigrants ranges from very high to fairly high from country to country. Fifth, unemployment is concentrated among youth and as Anne pointed out youth receive free schooling and other public services.

[sd]

kharris:

My apologies if my tone was a bit strident. I was genuinely peeved that anne's comments had so casually dismissed unemployment among the young in Europe.

Yes, unemployment rates in Western Europe are below 10% (though roughly twice as high as in the US, as far as we can tell given differences in measurement methodology). But that's the economy-wide number. The unemployment rate for those under the age of 30 is considerably higher, and among those under the age of 25 looking for work it often tops out at around 25%.

anne's (to my eye) flipant dismissal that this is OK because there is a generous welfare state to fall back on seems to me to be highly callous. The dole may keep jobless 25 year olds from starving or sleeping on the street, but it isn't enough to give them the confidence to start families, to put down roots, to get on with having a life.

The higher unemployment rates in Western Europe are generally not what they are because those economies create fewer net jobs. Its because the length of unemployment is much longer. I'm going from memory here, but I think the average length of unemployment in Germany is well over a year, while in the US its just a few months. The rigidity of European hiring and firing laws makes it less likely that you'll lose your job but a helluva lot harder to find a new one when you do. Thus the burden of unemployment is less evenly distributed - a handful of people suffer greatly to make everyone else more secure.

If indeed everyone was equally likely to fall into the unlucky chronically unemployed bucket then it would be a wash. But the young and immigrants are more likely to suffer because it is (perceived to be) riskier to hire them because you can't fire them.

And yes, the US has racial disparities in unemployment. But so too in Europe, where unemployment rates for ethnic minorities hover in the 15-20% range.

[saul]

I simply asked Brad to explain why he supports a minimum wage hike to at least $7.00.

I also gave BLS figures on unemployment in 1996 (5.5%) and 2006 (4.8)

Yet Brad took down the message.

Brad, if you support a policy, isn't it more interesting to explain why as an economist than erase the question?

- remo williams

[anne]

http://www.nytimes.com/2006/04/14/opinion/l14france.html

A Victory in France

To the Editor:

If the ruling class has lost, does it follow logically that French workers and students have also? No.

Through weeks of protests and strikes, France has forced its elected leaders to listen, and to back down. This is what democracy looks like.

The "reform" that Prime Minister Dominique de Villepin, President Jacques Chirac and their business counterparts supported is evidence of the steady chipping away of social capitalism. The students did not seek to secure lifelong jobs; they sought to demonstrate opposition to the law that would make them terminable at the drop of a hat.

The French resist change that destabilizes their livelihood; with a conscience, who wouldn't? Free-market ideology cannot penetrate Europe as easily as in the United States. Sorry, but the working class won.

Marit Knutson
Olympia, Wash., April 11, 2006

[anne]

KHarris:

"An unemployment rate under 10% means an employment rate over 90%, with greater job security, better health insurance, and on and on. It isn't cricket to assert as facts things that are so readily disputed. Income distribution is flatter in Europe than in the US. More people have 'good' jobs, relative to the upper echelon, in Europe than in the US.

"Is there discrimination in employment in Europe? Certainly. Now let's see...Jobless Rate in March, White Population, 4.0%...Jobless Rate in March, Black Population, 9.3%. Hmm, more than double. Won't bother with the rate among black teenagers, 'cause anybody who hasn't slept through class knows about that. Here, too, I await convincing evidence that Europe is worse than the US on enough measures that matter to call a clear winner."

[anne]

Unemployment is a small problem in many European countries, from Ireland to Finland. As for unemployment of youth in France or Germany or Italy, that is too high, and there has long been a need to better and properly integrate African immigrant families in national life. Still I find the combination of free health care and free education through university coupled with worker security to be most attractive, as do a great majority of Europeans. We, however, are wondering whether $5.15 as a minimum wage with no health insurance and ever more expensive public university education for youth and minimal worker security is enough. I think there is much to learn from Europe.

[snoopy_came_home]

It is sort of hard comparing gini coefficients across countries when France doesn't seem to have a widely reported number after 1995.

Japan's gini coefficient is now about .35, up notably from the 1993 report where .25 was listed. (The U.S. is around .44)

Brad would just delete my post if I provided data, but does anyone else have it?

-remo williams

[Bruce Webb]

"Yes, jacking up minimum wages will tend to force the extinction of low-paid, low-skill, inefficient, slow-paced work. But is that what we really want? "

Boy you cannot even begin to unpack the casual classism built into this statement. I hope to God you don't live in a neighborhood inhabited by busboys, chambermaids, and landscapers that would certainly agree that their job was low paid, disgree somewhat on low-skill (no job is as easy as it looks on the outside), but would kick your ass on the "inefficient" and "slow-paced" front. The implicit notion that most minimum wage workers are just slowly pushing a mop around while office workers are grinding away ignores certain realities. Ya think they just get to shut down the factory line or the picking field because Alice has a birthday? Or have you never worked in an office environment?

Look I understand that meetings can be hard work, I have participated in plenty of planning sessions that required hard thought and focus. But generally we had comfortable chairs and donuts. To casually wave away minimum wage jobs as "inefficient, slow paced" displays a class based contempt for workers that is itself contemptible.

[Slocum]

Bruce Webb: 'To casually wave away minimum wage jobs as "inefficient, slow paced" displays a class based contempt for workers that is itself contemptible.'

Hmmm -- looks like my first response got lost. Let me try again, because I think you're missing the point, I think. I am not suggesting that all low-wage jobs are 'inefficent' and 'slow-paced'. Certainly doing landscaping, drywall or tearing old shingles off a roof is damn hard work.

What I'm saying is that SOME minimum-wage jobs are inefficient and slow-paced and that is a GOOD thing for some employees and employers alike. There millions of people in the country (teens, pensioners, non-breadwinning spouses) who want to work (often part time), but don't rely exclusively on their earned income, and want to be able to trade working conditions off against the pay rate. In other words, these people don't want (and would not take) a full-time, efficient, fast-paced job with a living wage. They want a flexible, part-time job with pleasant, relaxed working conditions and they're willing to accept lower pay to get these things. Think of part-time work in an antique shop or an independent book store. In most cases, such businesses don't generate anywhere near as many dollars per square foot as chains, the owners rarely make a great deal of money and can't match what the chains pay in wages, but they CAN offer much more pleasant working conditions. A 'living wage' law would kill a lot of these little independent businesses. Along the same lines, there's this for example:

http://www.coyoteblog.com/coyote_blog/2005/03/case_studies_on.html

What I'm saying is that quite apart from the debate about effects on unemployment, a high minimum wage could have other non-obvious effects that we might not like very much.

[anne]

Though the argument against a fair minimum wage can be focused on including those who may have difficulty employing or working under such contraints, the argument fails in implicitly accepting poor working conditions for those who would find positions strengthened had workers more influence. That is precisely why the idea of arguing over a $5.15 minimum wage, obviously with no meaningful benefits, would be darkly comical to a European. The idea that workers are better left to themselves to earn $5.15 with no benefits or security is only darkly comical.

[douglas]

What a painful thread. It's ugly to watch sadistic people try to rationalize that other people will be better off by not being better off. Why not eliminate age restrictions on labor? If you don't think there should be a minimum wage or that the current minimum wage should be increased, then you are an asshole. An insufferable asshole that lacks fully developed emotions and consciousness. No economic argument is necessary. That someone would prefer to watch a person's wages be ground away to nothing by inflation is disgusting. I hope these words have offended some people. Because some people here have certainly offended me.

[xia smith]

"Hmmm -- looks like my first response got lost"

This is what is truly sad about the thread. Brad DeLong is a top economist well versed in history, yet he has no problem deleting and often blocking posters who point out evidence that in some way contradicts him.

As Mankiw would point out, this common deleting is completely anti-intellectual.

remo wiliiams

[gordon]

Has anybody calculated the net cost of paying illegal immigrants the minimum wage? Can the US afford that? Or will a guest worker program be designed so that below-minimum wages can still be paid?

[Neil']

A late reminder if needed: getting the real dollar value of the MW up to where it was before isn't even "raising" it in actual terms - it should have been pegged to CPI in the 60s and we wouldn't need this discussion.