The Minimum Wage

3664 Words8 Pages
bulb-icon

Recommended: History of minimum wage

"The minimum wage is something that F.D.R. put in place a long time ago during the Great Depression. I don't think it worked then. It didn't solve any problems then and it hasn't solved any problems in 50 years."

-- John Raese

For many years it has been a matter of conventional wisdom among economists that the minimum wage causes fewer jobs to exist than would be the case without it. This is simply a matter of price theory, taught in every economics textbook, requiring no elaborate analysis to justify. Were this not the case, there would be no logical reason why the minimum wage could not be set at $10, $100, or $1 million per hour.

Historically, defenders of the minimum wage have not disputed the dis-employment effects of the minimum wage, but argued that on balance the working poor were better off. In other words, the higher incomes of those with jobs offset the lower incomes of those without jobs, as a result of the minimum wage l "levitan".

Now, President Obama is advancing the novel economic theory that modest increases in the minimum wage will have no impact whatsoever on employment. This proposition is based entirely on the work of three economists: David Card and Alan Krueger of Princeton, and Lawrence Katz of Harvard. Their studies of increases in the minimum wage in California, Texas and New Jersey apparently found no loss of jobs among fast food restaurants that were surveyed before and after the increase [ l "card-92b", l "krueger", and l "katz".

While it is not yet clear why Card, Katz and Krueger got the results that they did, it is clear that their findings are directly contrary to virtually every empirical study ever done on the minimum wage. These studies were exhaustively surveyed by the Minimum Wage Study Commission, which concluded that a 10% increase in the minimum wage reduced teenage employment by 1% to 3%.

The following survey of the academic research on the minimum wage is designed to give nonspecialists a sense of just how isolated the Card, Krueger and Katz studies are. It will also indicate that the minimum wage has wide-ranging negative effects that go beyond unemployment. For example, higher minimum wages encourage employers to cut back on training, thus depriving low wage workers of an important means of long-term advancement, in return for a small increase in current income. For many workers this is a very ...

... middle of paper ...

...g (1996), " `Who Gets What' from Minimum Wage Hikes," Industrial and Labor Relations Review 49 (April): 547-52.

· ------, and T. A. Finegan (1989), "The Minimum Wage and the Poor: The End of a Relationship," Journal of Policy Analysis and Management 8 (Winter): 53-71.

23w

· Card, D., and A. Krueger (1995), Myth and Measurement (Princeton, N.J.: Princeton University Press).

· Deere, D., K. M. Murphy and F. Welch (1995), "Employment and the 1990-1991 Minimum Wage Hike," American Economic Review Papers and Proceedings 85 (May): 232-37.

· Gramlich, E. (1976), "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity 2: 409-51.

· Lang, K. (1994), "The Effect of Minimum Wage Laws on the Distribution of Employment: Theory and Evidence," Working Paper, Boston University.

· Neumark, D., and W. Wascher (1995), "The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys," NBER Working Paper No. 5092, April.

· Smith, R., and B. Vavrichek (1992), "The Wage Mobility of Minimum Wage Workers," Industrial and Labor Relations Review 46 (October): 82-88.

Show More
Related

  • Persuasive Essay On Raising Minimum Wage

    1668 Words  | 4 Pages

    Many people against raising the minimum wage create arguments such as, “it will cause inflation”, or, “ it will result in job loss.” Not only are these arguments terribly untrue, they also cause a sense of panic towards the majority working-class. Since 1938, the federal minimum wage has been increased 22 times. For more than 75 years, real GDP per capita has consistently increased, even when the wage has been

    Read More

  • The Economic Impact of Raising the Minimum Wage

    1480 Words  | 3 Pages

    “Franklin Roosevelt’s 1937 impassioned speech calling on Congress to help the one-third of Americans who were “ill-housed, ill-clad, and ill-nourished” heralded in the Fair Labor Standards Act of 1938 and with it a national minimum wage. Echoes of that speech are still heard today. Senator Edward Kennedy (1989: S14707), in his criticism of the most recent increases in the minimum wage, declared:

    Read More

  • Raising Minimum Wage Essay

    982 Words  | 2 Pages

    Minimum wage is a topic that has been popping up since the 1980s. From whether we should lower it, or even raise it, but now in the 2000s minimum wage has been the center of attention more than ever. There are two sides to this topic of minimum wage; whether it creates more jobs or does not create jobs. Those who argue that raising minimum wage will create more jobs will have a rebuttal which is that it does not only cause the loss of jobs but that it would make things much worse and vice versa for those arguing raising minimum wage will cause loss of jobs. There will be two authors representing opposite views, Nicholas Johnson supporting minimum wage will not cost jobs with his article “ Evidence Shows Raising Minimum Wage Hasn’t Cost Jobs”

    Read More

  • Founding Principles Of The Republican Party

    1193 Words  | 3 Pages

    ...the national minimum wage have not been followed by increased employment. Looking even closer, Congress raised the minimum wage in 2009 by just over ten percent. This was followed by the loss of over 600,000 jobs for people age sixteen thru nineteen. The rates of low employment for this age group remain extremely low. Similar statistics were recorded for all age groups as relatively unskilled workers of all age groups receive the minimum wage. An argument in favor of minimum wage is that it is a stimulus that introduces new income and spending into the market. But was there more income to spend in 2009 when nearly 600,000 jobs were lost? Common sense says that every dollar a minimum wage worker receives must have come out of somebody else’s pocket, either small business owners or their customers. The money for a higher minimum wage does not come from thin air.

    Read More

  • Congress Should NOT Raise Minimum Wage

    650 Words  | 2 Pages

    “Minimum wage increases often lead to employers replacing disadvantaged adults who need a job with suburban teenagers who do not.” says James Sherk. Currently, minimum wage earners are seven times more likely to be teenagaers instead of adults. In fact, half of the 3.8 million people employed in minimum wage jobs are under the age of twenty-five (Furchtgott-Roth). Many people use minimum wage jobs as a ...

    Read More

  • Minimum Wage: Impact on American Poverty

    1282 Words  | 3 Pages

    Currently, in the United States, the federal minimum wage has been $7.25 for the past six years; however, in 1938 when it first became a law, it was only $0.25. In the United States the federal minimum wage has been raised 22 times since 1938 by a significant amount due to changes in the economy. Minimum wage was created to help America in poverty and consumer power purchasing, but studies have shown that minimum wage increases do not reduce poverty. By increasing the minimum wage, it “will lift some families out of poverty, while other low-skilled workers may lose their jobs, which reduces their income and drops their families into poverty” (Wilson 4). When increasing minimum wage low-skilled, workers living in poor families,

    Read More

  • The Minimum Wage Must Be Raised

    1033 Words  | 3 Pages

    "When we talk about the kind of folks whose lives will be made better by raising the minimum wage, we're not talking about a couple teenagers earning extra spending money to supplement their allowance. We're talking about providers and breadwinners. Working Americans with bills to pay and mouths to feed."

    Read More

  • The Benefits Of Raising The Minimum Wage

    698 Words  | 2 Pages

    Meer, Jonathan, and Jeremy West. “Effects Of The Minimum Wage On Employment Dynamics.” (2013): EconLit. Web 24 Oct. 2013.

    Read More

  • Minimum Wage

    747 Words  | 2 Pages

    A federal minimum wage was first set in 1938. The first minimum wage was just 25 cents an hour in 1938. Can you imagine surviving off of 25 cents an hour? Now just over 70 years later the federal minimum wage is now 7.25. The question at hand is the federal minimum wage enough to meet the minimum requirement for a good, happy and healthy life? Some states and cities say no. While a select few states and cities have mirrored the federal minimum wage of 7.25, some states have placed their state or city/county minimum wage marginally higher than the federal minimum wage. So why would some states prefer to have a higher level than required by the federal minimum wage when some state have decided to match or even go below the federal minimum wage level. The answer to this question lies within each state city and county and how they perceive the cost of living in the presiding area. Minimum wage needs a makeover in America despite some of the negative effects that may come along with it. This paper will explore the reasons behind federal and state minimum wages and why some of them differ among states counties and cities across America.

    Read More

  • History of Minimum Wage

    1128 Words  | 3 Pages

    Linda Gorman. "Minimum Wages." The Concise Encyclopedia of Economics. 2008. Library of Economics and Liberty. Retrieved April 24, 2014 from the World Wide Web: http://www.econlib.org/library/Enc/MinimumWages.html

    Read More

  • We Should NOT Raise the Minimum Wage

    1177 Words  | 3 Pages

    "Bill Gates: Raising Minimum Wage Can Destroy Jobs." The Foundry Conservative Policy News from The Heritage Foundation. N.p., n.d. Web. 14 Mar. 2014.

    Read More

  • Essay On Panpsychism

    750 Words  | 2 Pages

    The first that it is crazy. On the surface panpsychism goes against common sense. As Goff stated in his research paper titled, Panpsychism, panpsychists often receive incredulous looks of disbelief when they bring up the idea that electrons have consciousness (Goff 6-7). The idea that panpsychism should be dismissed just because it seems to go against common sense is just unfair. There is a long history of scientific theories being ‘crazy.’ Take for example Einstein’s Theory of Special Relativity. This was a preposterous idea that went against common sense, but through the years we have come to accept it. The same can be said for the idea that the earth is round, when it was previously thought to be

    Read More

  • The National Minimum Wage

    1866 Words  | 4 Pages

    On the 1st of April 1999, the National Minimum Wage (NMW) was introduced in the UK at a rate of £3.60 per hour for workers aged 21 and older, and at a rate of £3.00 for workers aged 18-21. Since then, it has grown steadily to reach a rate of £6.31 per hour today. The NMW is “the minimum pay per hour that almost all workers are entitled to by law” (www.gov.uk). In 1999, 1.9 million people were paid less than £3.60, sometimes even below the Living Wage due to the dismantling of unions by the Thatcher government. The idea of a minimum wage then came up, supported by the Labour Party, in order to reduce the increasing poverty and to prevent low wages workers from being exploited by their employers. The Conservative Party, supported by employers, was strongly opposed to this project, arguing that a minimum wage will damage the economy and create poverty due to higher unemployment levels. So, how does the NMW really affect poverty and employment in the UK?

    Read More

  • The Minimum Wage Must Be Increased

    1491 Words  | 3 Pages

    Bernstein, Jared. “Would Raising the Minimum Wage Harm the Economy?” The CQ Researcher 16 Dec. 2005:1069.

    Read More

  • The Big Bang Theory: The Beginning Of The Universe

    865 Words  | 2 Pages

    The big bang theory reveals the beginning of the universe. It states that the Universe was formed about 14 billion years ago for a giant explosion of very dense and hot matter which then expanded and as it expanded, it started to cool down by going through different transitional phases. Since, it has been expanding.

    Read More

More about The Minimum Wage

Open Document