Thursday, July 30, 2015

Winner And Losers


Your impressive catalog of analyses of the likely consequences of the raising the minimum wage deserves praise. There's no question that such a policy will produce winners and losers. The widely quoted CBO analysis  (next to last in your list) see the tradeoff in these terms

Increasing the minimum wage would have two principal effects on low-wage workers. Most of them would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold. But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly.

So, if  the CBO analysis is right, poverty for some (I believe the specific figure is about 900,000), would improve, and worsen for others.

The larger problem is the arbitrariness of how the latest effort (a 1$5 minimum for fast food workers) rewards those winners and losers. This may be gratifying politics for the left, but it is poor public policy. As our favorite newspaper points out today in the Upshot section:

A wage increase applying to such a narrow segment of the economy is bound to have unintended consequences...

Some of the problems with a narrow minimum wage are obvious. It doesn’t do much to raise incomes for workers who don’t work at fast-food chains. And it imposes higher costs on some businesses than others ...

The rule could cause business owners to change their business models to avoid the higher minimum wage....

Economists call these changes “distortions,” and they cause two kinds of problems. One, fewer workers get a raise as a result of the minimum wage. Two, it encourages businesses to do things that customers may not prefer...

I would prefer a universal increase in the minimum wage, as you know. I think it would do much more good than harm. I am skeptical of the current piecemeal approach


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