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One more thought about the minimum wage

Posted by: Michael Mandel on December 01

Just one more follow-up to my discussion with Robin Hanson about whether there is a consensus among economists about the minimum wage.

Yesterday Greg Mankiw wrote a note about a new survey of economists by Robert Whaples. According to Mankiw, Whaples finds that

One issue that fails to generate consensus is the minimum wage: 37.7 percent want it increased, while 46.8 percent want it eliminated.


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Reader Comments

Robin Hanson

December 2, 2006 08:49 AM

I know economists who favor a minimum wage because they think it will increase total income to low wage workers, even if it reduces their employment. I know of none who favor a minimum wage because they think it will increase employment.

Mike Mandel

December 4, 2006 08:52 AM

Fair enough.

Joe Cushing

December 4, 2006 01:16 PM

I thought there was a consensus. In school they teach you that minimum wages are no good because they raise unemployment.

I think the minimum is more complicated than that. The same economists that dis the minimum wage say that when I company lays people off because they have found a more efficient way of doing business, unemployment is not effected because the remaining employed people have more money. The spend it and this puts the unemployed back to work. At least that's what I remember. Why does it matter if the employer became more efficient voluntarily or if they were forced to?


December 6, 2006 10:49 AM

The piece Mankiw was referencing was in The Economists Voice (Stiglitz magazine), and I agree that there isn't an overwhelming "consensus" (what is the deffinition of that?), However there is a solid majority that think it shouldn't be increased.

46.8% eliminated, 1.3% decreased, 14.3% left alone with 5.2% saying it should be increased by 50 cents, 15.6% $1, and 16.9% more than $1. By this data (there could be a selection bias in it) there does appear a solid plurality on elimination.

Also regards David Neumark his October paper on minimum wages The Economic Effects of Minimum Wages (reguarding Missouri ballot initiative) says "for the United States, the preponderance of evidence points to disemployment effects from a higher minimum wage."

I still think your initial point is good, the other side should be heard, however the other side appears to be in the minority.


December 10, 2006 11:41 PM

Which is more important: a full time job or a higher minimum wage? I believe most Americans would rather work for some other employer on their terms than have the US Government decide what's the minimum you can make is on your terms.

When is our society going to teach a "wealth consciousness?"

I’m surprised Americans aren't relocating to South America or Mexico where the purchasing power is about 10X what it is here


December 22, 2006 05:12 AM

As it is, minimum wage jobs pay too little for most workers to live a comfortable lifestyle. Eliminating the minimum wage would benefit employers, giving them cheaper labor, and would benefit the economy as a whole (free market competition always finds the most efficient prices), but would lower the wages paid to poor workers. Keeping the minimum wage forces workers to cooperate (unionizing them in a sense) and giving them more money as a whole.

I think it's important to treat minimum wage workers equitably, but not at the expense of their employers, who provide jobs and foster economic growth. It might make sense to tie the minimum wage in specific industries to some other cooperation-inducing regulation in the industries in which they work, thereby preserving the growth of the economy, and leaving business owners where they were before (possibly even a little ahead if cooperation is induced in the industry to a greater extent than that to which it is induced in the labor market by the existing minimum wage).

The drawback of this proposal is that it would raise prices for consumers. However, if we are concerned with equity, perhaps we should raise prices for wealthy consumers (by targeting the appropriate industries) to provide more money for the poor workers.

Brandon W

December 22, 2006 10:26 AM

I think Korei raises an interesting point about minimum wage and unions. Part of the reason for the decline of unions has been due to laws that dealt with issues that made them necessary in the first place. So, sort of the point here is, do businesses want minimum wage laws or do they want unions? Which is better (or worse) for them in the long run?


February 16, 2007 02:56 PM

I say: let them raise the minimum wage. A very small percentage of workers will have their wages increased, and an increase in pay can increase the need for technological breakthroughs in a country. Also, I am a firm believer that unless forced, most people will not strive for a better standard of living. Unemployment is one such force.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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