Back when I studied economics, we “proved” in class that a minimum wage causes unemployment. But that proof depends on assuming a perfectly competitive market. Big low-wage employers like Wal-Mart have substantial market power; they can deliberately under-staff operations to force down wages. In that case, a minimum wage increase can actually create jobs–if it can be enforced. . . . → Read More: Increasing the Minimum Wage Can Actually Create Jobs–If It’s Enforced
It was the perfect “natural experiment:” in April 1992, New Jersey’s minimum-wage was scheduled to rise from $4.25 an hour to $5.05, while neighboring Pennsylvania’s minimum wage remained unchanged. Princeton economists David Card and Alan Krueger surveyed over 400 fast food outlets in both states, before and after the increase, in order to test the conventional economic wisdom that minimum wages cause unemployment. What did they find? No apparent effect on employment. None. Zip. Economic hell broke loose… . . . → Read More: The Economics Anti-Textbook: A Critical Thinker’s Guide to Microeconomics, by Rod Hill and Tony Myatt
My son is a low-wage worker, a short-order cook. President Obama just called for an increase in the federal minimum wage from $7.25 to $9.00 an hour. Yet he made no effort to save the “temporary stimulus” 2% payroll tax cut, which expired at the end of 2012. That will cost workers like my son about a week’s gross pay over a year—not insignificant when you’re barely scraping by. So what’s better for low-wage workers: an increase in the minimum wage or a decrease in payroll taxes? . . . → Read More: Raise the Minimum Wage or Cut Low-Wage Taxes?