When, in the first State of the Union speech of his second term, Barack Obama suggested raising the federal minimum wage nearly two dollars, it sparked a firestorm of controversy. Lionized by leftists as a solution to rampant poverty, those on the right criticized the policy as an economic inhibitor. As a question of worker rights, the popular minimum wage is quite easy defend. Closer inspection of the economic data used in its defense, however, demonstrates that the policy has negative effects for the entire economy, with the harm exacerbated for the low-skilled unemployed in poverty that the policy was originally supposed to help. Although according to the Bureau of Labor Statistics only about 5. However, while the issue has enjoyed bipartisan support among the masses, politicians have increasingly taken party-line positions on the topic. Madland, who supports both raising the minimum wage and indexing it to inflation to preserve its real value, said that as the parties have become more homogenous, the previously economic issue has become a political one. Madland argues that the minimum wage not only boosts the incomes of workers but also has little effect on unemployment. In response to the contentions of House Speaker John Boehner—who claimed raising the minimum wage would cost lower-income workers their jobs—Madland points out that workers on higher wages tend to work harder and stay on their job longer. The benefits are not limited exclusively to the worker here, either; with lower turnover, employers cut their labor costs. Furthermore, Madland points to a series of articles written by Arindrajit Dube, a professor at the University of Massachusetts, Amherst and Michael Reich, a professor at the University of California, Berkeley, among others, that indicate minimum wage increases do not reduce employment in these states. Reich et al. The policy has spillover effects far beyond the immediate effect on employment. According to Mark Wilson, a former deputy assistant secretary of the U. He points out that companies forced to raise labor costs minimize costs elsewhere, causing effects an employee feels indirectly over time. Because such costs are implicit and indirect, consumers have a harder time seeing the costs of the minimum wage than the plainly evident benefits—a situation Wilson analogizes to current tax law. Wilson cedes that job losses are rare, but asserts that workers would see their policy benefits remanded to the company through reduced benefits and smaller raises in the future. Since the workers paid minimum wage are typically low-skilled employees with few alternatives, the long-term job security comes at the cost of a decrease in lifetime earnings. Additionally, Wilson notes, a lack of change in the employment of low-skilled workers means that the policy does little for the unemployed. Madland clarifies that teenagers make up a minority of those seeking minimum wage jobs, meaning the effect of the policy is to increase barrier to employment for the individuals who need labor the most. Minimum wage advocates like Madland point out that there are groups disproportionately affected by the minimum wage like African Americans and women who stand to gain even as their employers lose. Two-thirds of workers on the minimum wage, he says, are women, with both discrimination and historical job gendering playing a part. Ultimately, when it comes to advancing the welfare of the worst-off workers, there is little argument against raising wages. However, raising wages creates unforeseen and often difficult-to-see indirect effects in the marketplace that illuminate the harsh economic consequences of such a policy. Read the statement here. Photo Credit: Reuters. Next Chile's Bizarre Presidential Election. About The Author. Related Posts. Search for:.
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