Why Not Bipartisan Support for the Minimum Wage?

Over at the Boston Review, Mike Konczal outlines seven bipartisan reasons for raising the minimum wage. Number five is that it is good conservative policy. Check out all seven reasons at BR:

Many of the people opposed to the minimum hike point to the prospect of job losses should the rate go up. However, an article at points out that Washington State, the state with the highest minimum wage, has had solid job growth since linking its minimum wage to the cost-of-living in 1998.

When Washington residents voted in 1998 to raise the state’s minimum wage and link it to the cost of living, opponents warned the measure would be a job-killer. The prediction hasn’t been borne out.

In the 15 years that followed, the state’s minimum wage climbed to $9.32 — the highest in the country. Meanwhile job growth continued at an average 0.8 percent annual pace, 0.3 percentage point above the national rate. Payrolls at Washington’s restaurants and bars, portrayed as particularly vulnerable to higher wage costs, expanded by 21 percent. Poverty has trailed the U.S. level for at least seven years.

As the Bloomberg article points out, there is disagreement about the impact that a minimum wage hike will have. I think this quote from Konczal in his Boston Review article cuts through much of the posturing on the minimum wage:

Many have claimed that raising the minimum wage will lead to significant job loss. The phrase “that’s Economics 101” is thrown around often in this argument, usually to shut down debate. It refers to the abstract, perfect, frictionless model of supply and demand. In this model, if the price of labor goes up—possibly because a floor has been set on the least amount a worker can be paid—the amount of employment goes down. Full stop.

But a wave of research since the 1990s finds little impact on employment due to a higher minimum wage, and some findings suggest that states with higher minimum wages see no negative employment effects at all.

In the world of economics beyond introductory supply and demand, you can find an explanation for why small changes in the minimum wage have little effect on employment.

It is time to graduate from Economics 101 and to focus on real-world economics. It is also time for Congress to act.

Categories: Blog

1 reply »

  1. Then why does not the not-very-partisan CBO agree? Because many economists know that raising the minimum wage does cause job losses at the margins. Especially in the high unemployment population (young people in economically depressed areas).

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