It’s getting harder and harder to argue that economists oppose a higher minimum wage. Certainly many do. But seven Nobel prize-winning economists and eight former presidents of the American Economic Association have signed a new letter, released today, urging Congress to raise the federal minimum from its current level of $7.25 an hour to $10.10 by 2016.
Says the letter: “At a time when persistent high unemployment is putting enormous downward pressure on wages, such a minimum-wage increase would provide a much-needed boost to the earnings of low-wage workers.”
Addressing the concern that employers would lay off their least-productive workers rather than raise their pay, the letter says, “the weight of evidence now show[s] that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market.” It goes on to say that “a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front.”
This isn’t the final word, of course. Those opposed to raising the minimum wage will argue that many of the signatories to the new letter are more liberal than the average of the profession. The Nobel economists who signed are Kenneth Arrow, Peter Diamond, Eric Maskin, Thomas Schelling, Robert Solow, A. Michael Spence, and Joseph Stiglitz.
Responses were less clear-cut last year when the University of Chicago Booth School of Business’s Initiative on Global Markets surveyed a cross section of leading economists on a more modest increase in the minimum wage, to $9 an hour. Equal numbers agreed and disagreed with the statement that a $9 minimum wage “would make it noticeably harder for low-skilled workers to find employment.” Forty-two percent of them agreed, and only 8 percent disagreed, however, that the distortionary effects “are sufficiently small compared with the benefits to low-skilled workers who can find employment that this would be a desirable policy.”
The Employment Policies Institute, which is supported by employers in low-wage industries, isn’t taking this lying down. It continues to argue that minimum-wage hikes eliminate jobs for low-skilled and entry-level employees. The institute took out a full-page ad (PDF) today in the New York Times featuring someone holding a cardboard sign saying, “I don’t need a raise I need a job.” It simultaneously released an analysis saying that a $10.10 floor would cost “at least 360,000 jobs—and as many as 1,084,000 jobs.”
The Employment Policies Institute also implied that any economists who reject the job-killing effect of a higher minimum wage are partisan, saying, “Nonpartisan economists have agreed on this consensus for decades, and the laws of economics haven’t changed.”