Saturday, January 27, 2007

Reasons to Boost The Minimum Wage

False arguments with no basis in real events swirl around the federal proposal to increase the minimum wage for the first time in a decade. Guest-blogger at NIT this weekend, Glen Dean offers up this topic today.

Thru state actions already completed or set to be complete later this year, only 19 states will retain the current federal minium standard of $5.15 per hour. Has the economic well-being in these states with higher minimums plunged them all into disaster? Far from it. This part of the debate is often ignored by those who oppose increases in a wage, which at $5.15 an hour, adjusted for inflation, has the buying power of $3.95 an hour.

Studies have shown that in states where the federal minimum was replaced with the state's own higher wage, both job growth and overall business growth is much greater than in states where the federal minimum is the standard. For instance:

Employment in small businesses grew more (9.4%) in states with higher minimum wages than federal minimum wage states (6.6%)

More details of note:

-- The number of small businesses across the economy with fewer than 50 employees grew by 5.4% from 1998 to 2003 in the higher minimum wage states, compared to a 4.2% increase for the balance of the states.

-- Retail employment in New York increased faster from 2004 to 2005 than overall
employment, while retail’s growth was slower than total employment growth in
neighboring states and in the U.S. as a whole; and

-- The positive effects of the increased minimum wage on low-wage workers’ income were not negated by reduced hours of work.

This analysis does not prove that increasing the minimum wage will boost employment growth over what it otherwise would have been. But it is clear that the prediction that an increase in the minimum wage will result in adverse employment outcomes has not been validated. In fact, this analysis suggests that small employers may benefit from a higher minimum wage because of positive effects on worker retention and productivity and savings on recruitment and training costs.

As for who earns the minimum, R. Neal notes in the comments on today's NIT post that " 46.7% percent of minimum wage earners are 25 or older" and, citing info from the Bureau of Labor Statistics, adds the following:

Number of minimum wage workers in...

Management/professional: 72,000
Sales/office: 240,000
Production/transportation: 128,000

Only 8.6% of hourly workers work in food prep/serving.

18.9% of hourly workers are in management/professional jobs, 22.7% work in sales/office.

But you are partially correct in that 60.1% of hourly food prep/serving workers make minimum wage.

The point being that just because you and your friends don't know anybody making minimum wage does not mean there aren't people making minimum wage. And they are not all restaurant workers."

Plainly and clearly, from the models and effects of states which have already increased the minimum rates, Congress needs to catch up to the rest of the nation.

All that said, I've often noted the problem with the minimum is that it federally mandates the lowest wages possible. As the examples of so many other states now shows, a higher beginning rate of pay benefts both the employer and employee and obviously aids economic growth rather than damage it.


  1. Good stuff, Joe P. Thanks for breaking it down.

  2. Anonymous4:06 PM

    if the government gave us a raise at the rate they give themselves, no one would be complaining. RR

  3. OXYMORON1:21 PM

    I watched the PBS presentation on the Supreme Court last night and I suggest strongly that anyone wanting a longer view of the minimum wage debate catch the Feb. 7 presentation. will take you to the page and offer you more information.

    The presentation underscores what I have believed for quite a while; Conservatives are no such thing. They are merely well heeled political anachronisms who see Ameica's greatest days in the form of Monopolistic Corportations and labor as free to choose the narrowing choices the aforementioned creates for them.

    Some of the Courts views from the Early Twentieth Century can put the knee jerk responses of the Rebublicans and their Federalist Society appointees opposition to the minimum wage into perfect perspective.