Towards A Good Samaritan World

Monday, November 27, 2006


Gary Becker writes about the minimum wage:

Controversy remains in the United States (and elsewhere) over the effects of the minimum wage mainly because past changes in the U.S. minimum wage have usually been too small to have large and easily detectable general effects on employment and unemployment. The effects of an increase to $7.25 per hour in the federal minimum wage that many Democrats in Congress are proposing would be large enough to be easily seen in the data. It would be a nice experiment from a strictly scientific point of view, for it would help resolve the controversy over whether the effects of large increases in the minimum wage would be clearly visible in data on employment, training, and some prices. Presumably, even the economists and others who are proposing this much higher minimum must believe that at some point a still higher minimum would cause too much harm. Otherwise, why not propose $10 or $15 per hour, or an even higher figure? I am confident that for this and other reasons, the actual immediate increase in the federal minimum wage is likely to be significantly lower than $2.10 per hour.

If Democrats raised the minimum wage enough actually to have a significant, measurable impact, then they could be punished when the impact turns out to be unemployment among teenagers and other low-skilled workers. They probably won't want to take that risk. Yet part of the Democrats' base wants to push for a "living wage" which would be even higher than $7.25, and which would be disastrous for many current low-wage workers who wouldn't be employable at the higher wage.

Republicans in Congress will be reluctant to see the minimum wage raised, and, if they can't stop it, will try to mitigate the increase. Republicans are probably still strong enough to reduce the minimum wage increase from something economically harmful to something economically irrelevant. You have to wonder how many centrist/sensible Democrats are secretly glad that Republicans still control almost half of the Congress.


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