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Minimum wage

Minimum wage
A minimum wage is the lowest hourly, daily or monthly wage that employers may legally pay to employees or workers. Equivalently, it is the lowest wage at which workers may sell their labor. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about the benefits and drawbacks of a minimum wage. Supporters of the minimum wage say that it prevents the exploitation of workers. Opponents say that if it is high enough to be effective, it destroys jobs, particularly for workers with very low productivity due to inexperience or handicap. They also argue that it causes inflation.[1] public. Despite decades of experience and economic research, debates about the costs and benefits of minimum wages continue even today.[2] The classic exposition of the minimum wage’s shortcomings in reducing poverty was provided by George Stigler in 1946: • Employment may fall more than in proportion to the wage increase, thereby reducing overall earnings; • As uncovered sectors of the economy absorb workers released from the covered sectors, the decrease in wages in the uncovered sectors may exceed the increase in wages in the covered ones; • The impact of the minimum wage on family income distribution may be negative unless the fewer but better jobs are allocated to members of needy families rather than to, for example, teenagers from families not in poverty; • The legal restriction that employers cannot pay less than a legislated wage is equivalent to the legal restriction that workers cannot work at all in the protected sector unless they can find employers willing to hire them at that wage.[3] Direct empirical studies indicate, however, that antipoverty effects in the U.S. would be quite modest even if unemployment effects were zero. Very few low wage workers come from families in poverty. Those primarily affected by minimum wage laws are teenagers and low skilled adult females who work part time, and any wage rate effects on their income is strictly proportional to the hours of work they are offered. So if market outcomes for low-skilled families are to be supplanted in a socially satisfactory way, factors other than wage rates must also be considered. Employment opportunities and the factors that limit labor market participation must be considered as well.[3] Economist Thomas Sowell has argued that regardless of custom or law, the real minimum wage is always zero, and zero is what some people would receive if they fail to find jobs when they try to enter the workforce, or they lose the jobs they already have.[4]

Background
Minimum wages were first proposed as a way to control the proliferation of sweat shops in manufacturing industries. The sweat shops employed large numbers of women and young workers, paying them what were considered to be substandard wages. The sweatshop owners were thought to have unfair bargaining power over their workers, and a minimum wage was proposed as a means to make them pay "fairly." Over time, the focus changed to helping people, especially families, become more self sufficient. Today, minimum wage laws cover workers in most lowpaid fields of employment.[2] The minimum wage has a strong social appeal, rooted in concern about the ability of markets to provide income equity for the least able members of the work force. An obvious solution to this concern is to redefine the wage structure politically to achieve a socially preferable distribution of income. Thus, minimum wage laws have usually been judged against the criterion of reducing poverty.[3] Though the goals of the minimum wage are widely accepted as right and proper, there is great disagreement as to whether it is effective in attaining its goals. From the time of their introduction, minimum wage laws have been highly controversial politically, and have received much less support from economists than from the general

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Minimum wage
"If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces, the quantity of unskilled workers employed will fall. The minimum wage will price the services of the least productive (and therefore lowestwage) workers out of the market. ... The direct results of minimum wage legislation are clearly mixed. Some workers, most likely those whose previous wages were closest to the minimum, will enjoy higher wages. Other, particularly those with the lowest prelegislation wage rates, will be unable to find work. They will be pushed into the ranks of the unemployed or out of the labor force."[9] It illustrates the point with a supply and demand diagram similar to the one below.

Minimum wage law
First enacted in Australia and New Zealand in the late nineteenth century,[5] there is now legislation regarding minimum wage fixing in more than 90% of countries.[6] Minimum wage laws vary greatly across many different jurisdictions, not only in setting a particular amount of money (e.g. US$6.50 per hour under U.S. Federal law, $8.55 in the U.S. state of Washington,[7] and £5.73 (for those aged 22+) in the United Kingdom), but also in terms of which pay period (e.g. Russia and China set monthly minimums) or the scope of coverage. Some jurisdictions allow employers to count tips given to their workers as credit towards the minimum wage level.

Informal minimum wages
Sometimes a minimum wage exists without a law. Custom and extra-legal pressures from governments or labor unions can produce a de facto minimum wage. So can international public opinion, by pressuring multinational companies to pay Third World workers wages usually found in more industrialized countries. The latter situation in Southeast Asia and Latin America has been publicized in recent years, but it existed with companies in West Africa in the middle of the twentieth century.[4]

Economics of the minimum wage
Simple supply and demand
A mainstream economics analysis of supply and demand implies that by mandating a price floor above the equilibrium wage, minimum wage laws should cause unemployment. This is because a greater number of workers are willing to work at the higher wage while a smaller numbers of jobs will be available at the higher wage. Companies can be more selective in those whom they employ thus the least skilled and inexperienced will typically be excluded. According to the model shown in nearly all introductory textbooks on economics, increasing the minimum wage decreases the employment of minimum-wage workers.[8] One such textbook says: It is assumed that workers are willing to labor for more hours if paid a higher wage. Economists graph this relationship with the wage on the vertical axis and the quantity (hours) of labor supplied on the horizontal axis. Since higher wages increase the quantity supplied, the supply of labor curve is upward sloping, and is shown as a line moving up and to the right.[10] A firm’s cost is a function of the wage rate. It is assumed that the higher the wage, the fewer hours an employer will demand of an employee. This is because, as the wage rate rises, it becomes more expensive for firms to hire workers and so firms hire fewer workers (or hire them for fewer hours). The demand of labor curve is therefore shown as a line moving down and to the right.[10]

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Combining the demand and supply curves for labor allows us to examine the effect of the minimum wage. We will start by assuming that the supply and demand curves for labor will not change as a result of raising the minimum wage. This assumption has been questioned. If no minimum wage is in place, workers and employers will continue to adjust the quantity of labor supplied according to price until the quantity of labor demanded is equal to the quantity of labor supplied, reaching equilibrium price, where the supply and demand curves intersect. Minimum wage behaves as a classical price floor on labor. Standard theory says that, if set above the equilibrium price, more labor will be willing to be provided by workers than will be demanded by employers, creating a surplus of labor i.e. unemployment.[10] In other words, the simplest and most basic economics says this about commodities like labor (and wheat, for example): Artificially raising the price of the commodity tends to cause the supply of it to increase and the demand for it to lessen. The result is a surplus of the commodity. When there is a wheat surplus, the government buys it. Since the government doesn’t hire surplus labor, the labor surplus takes the form of unemployment, which tends to be higher with minimum wage laws than without them.[4] So the basic theory says that raising the minimum wage helps workers whose wages are raised, and hurts people who are not hired (or lose their jobs) because companies cut back on employment. But the situation is much more complicated than the basic theory can account for.

Minimum wage

Standard theory criticism
Gary Fields, Professor of Labor Economics and Economics at Cornell University, argues that the standard "textbook model" for the minimum wage is "ambiguous", and that the standard theoretical arguments incorrectly measure only a one-sector market. Fields says a two-sector market, where "the self-employed, service workers, and farm workers are typically excluded from minimum-wage coverage… [and with] one sector with minimum-wage coverage and the other without it [and possible mobility between the two]," is the basis for better analysis. Through this model, Fields shows the typical theoretical argument to be ambiguous and says "the predictions derived from the textbook model definitely do not carry over to the two-sector case. Therefore, since a noncovered sector exists nearly everywhere, the predictions of the textbook model simply cannot be relied on."[12] An alternate view of the labor market has low-wage labor markets characterized as monopsonistic competition wherein buyers (employers) have significantly more market power than do sellers (workers). This monopsony could be a result of intentional collusion between employers, or naturalistic factors such as segmented markets, information costs, imperfect mobility and the ’personal’ element of labor markets. In such a case the diagram above would not yield the quantity of labor clearing and the wage rate. This is because while the upward sloping aggregate labor supply would remain unchanged, instead of using the downward labor demand curve shown in the diagram above, monopsonistic employers would use a steeper downward sloping curve corresponding to marginal expenditures to yield the intersection with the supply curve resulting in a wage rate lower than would be the case under competition. Also, the amount of labor sold would also be lower than the competitive optimal allocation. Such a case is a type of market failure and results in workers being paid less than their marginal value. Under the monopsonistic assumption, an appropriately set minimum wage could increase both wages and employment, with the optimal level being equal to the marginal productivity of labor.[13] This view emphasizes the role of minimum wages as a market regulation policy akin to

Complicating factors
One complicating factor is possible monopsony in the labor market, whereby the individual employer has some market power in determining wages paid. Thus it is at least theoretically possible that the minimum wage may boost employment. Though single employer market power is unlikely to exist in most labor markets in the sense of the traditional ’company town,’ asymmetric information, imperfect mobility, and the ’personal’ element of the labor transaction give some degree of wage-setting power to most firms.[11]

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antitrust policies, as opposed to an illusory "free lunch" for low-wage workers. Another reason minimum wage may not affect employment in certain industries is that the demand for the product the employees produce is highly inelastic;[14] For example, if management is forced to increase wages, management can pass on the increase in wage to consumers in the form of higher prices. Since demand for the product is highly inelastic, consumers continue to buy the product at the higher price and so the manager is not forced to lay off workers. Three other possible reasons minimum wages do not affect employment were suggested by Alan Blinder: higher wages may reduce turnover, and hence training costs; raising the minimum wage may "render moot" the potential problem of recruiting workers at a higher wage than current workers; and minimum wage workers might represent such a small proportion of a business’s cost that the increase is too small to matter. He admits that he does not know if these are correct, but argues that "the list demonstrates that one can accept the new empirical findings and still be a card-carrying economist."[15] Arguments FOR Minimum Wage Laws Supporters of the minimum wage claim it has these effects: • Helps small businesses as well as big businesses.[17] • Increases the standard of living for the poorest and most vulnerable class in society and raises average.[18] • Motivates and encourages employee to work harder. (Contrast with welfare transfer payments.)[19] • Does not have budget consequence on government. "Neither taxes nor public sector borrowing requirements rise." (Contrast with negative income taxes such as the EITC.)[19] • Minimum wage is administratively simple; workers only need to report violations of wages less than minimum, minimizing a need for a large enforcement agency.[19] • Stimulates consumption,

Minimum wage
Arguments AGAINST Minimum Wage Laws Opponents of the minimum wage claim it has these effects: • Excludes low cost competitors from labour markets, hampers firms in reducing wage costs during trade downturns (etc.), generates various industrial-economic inefficiencies as well as unemployment, poverty, and price rises, and generally dysfunctions as basically a special form of politicaleconomic protectionism – the labour market equivalent or analogue of such things as tariff barriers to low cost imports.[22] • Hurts small business more than large business. [23] • Lowers competitiveness among businesses[24] • Reduces quantity demanded of workers. This may manifest itself through a reduction in the number of hours worked by individuals, or through a reduction in the number of jobs.[25][26] • Reduces profit margins of business owners employing minimum wage workers, thus encouraging a move to businesses that do

Debate over consequences
Various groups have great ideological, political, financial, and emotional investments in issues surrounding minimum wage laws. For example, agencies that administer the laws have a vested interest in showing that "their" laws do not create unemployment. So do labor unions, whose members’ jobs are protected by minimum wage laws. The presence of these powerful groups and factors means that the debate on the issue is not always based on dispassionate analysis. Not only that, but it is extraordinarily difficult to separate the effects of minimum wage from all the other variables that affect employment.[4] On the other side of the issue, low-wage employers such as restaurants finance the Employment Policies Institute, which has released numerous studies opposing the minimum wage.[16] The following table summarizes the arguments for and against minimum wage laws:

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by putting more money in the hands of lowincome people who spend their entire paychecks.[18] Increases the work ethic of those who earn very little, as employers demand more return from the higher cost of hiring these employees.[18] Decreases the cost of government social welfare programs by increasing incomes for the lowest-paid.[18] Does not have a substantial effect on unemployment compared to most other economic factors [20], and so does not put any extra pressure on welfare systems. A study of U.S. states showed that businesses’ annual and average payrolls grow faster and employment grew at a faster rate in states with a minimum wage.[21] The study showed a correlation, but did not claim to not employ low-skill workers.[27] • Businesses try to compensate for the decrease in profit by simply raising the prices of the goods being sold thus causing inflation and increasing the costs of goods and services produced.
[28][29]

Minimum wage
black workers from the labor market. By preventing black workers from selling their labor for less than white workers, the black workers were prevented from competing for jobs held by whites.[33] • Businesses spend less on training their employees.[31] • Is less effective than the Earned Income Tax Credit at targeting the truly needy, and is more damaging to businesses.[31] • Increase in unemployment.[34] • Decreases human capital by encouraging people to enter the job market instead of pursuing further education.[31] • Hurts the least employable by making them unemployable, in effect pricing them out of the market.[32] • Causes outsourcing and loss of domestic manfucturing jobs to other countries.[35] Today, the International Labour Organization (ILO)[6] and the OECD[20] do not consider that the minimum wage can be directly linked to unemployment in countries which have suffered job losses. Although strongly opposed by both the business community and the Conservative Party when introduced in 1999, the minimum wage introduced in the UK is no longer controversial and the Conservatives reversed their opposition in 2000.[36] A review of its effects found no discernible impact on employment levels.[37] Since the introduction of a national minimum wage in the UK in 1999, its effects on employment were subject to extensive research and observation by the Low Pay Commission. prove causation.

•

•

•

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• Increases prices for customers of employers of minimum wage workers, which would pass through to the general price level,[30] which disproportionately affects the prices that poor people pay for goods and services.[31] • Does not improve the situation of those in poverty. "Will have only negative effects on the distribution of economic justice. Minimum-wage legislation, by its very nature, benefits some at the expense of the least experienced, least productive, and poorest workers."[32] • Is a limit on the freedom of both employers and employees, and can result in the exclusion of certain groups from the labor force. For example, during the apartheid era in South Africa, white trade unions lobbied for the introduction of minimum wage laws so as to exclude

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The Low Pay Commission found that, rather than make employees redundant, employers have reduced their rate of hiring, reduced staff hours, increased prices, and have found ways to cause current workers to be more productive (especially service companies).[38] Neither trade unions nor employer organizations contest the minimum wage, although the latter had especially done so heavily until 1999.

Minimum wage
to over 3 percent. In contrast to the simple supply/demand figure above, it was commonly found that teenagers withdrew from the labor force in response to the minimum wage, which produced the possibility of equal reductions in the supply as well as the demand for labor at a higher minimum wage and hence no impact on the unemployment rate. Using a variety of specifications of the employment and unemployment equations (using ordinary least squares vs. generalized least squares regression procedures, and linear vs. logarithmic specifications), they found that a 10 percent increase in the minimum wage caused a 1 percent decrease in teenage employment, and no change in the teenage unemployment rate. The study also found a small, but statistically significant, increase in unemployment for adults aged 20–24.[40] Wellington (1991) updated Brown et al.’s research with data through 1986 to provide new estimates encompassing a period when the real (i.e., inflation-adjusted) value of the minimum wage was declining, due to the fact that it had not increased since 1981. She found that a 10% increase in the minimum wage decreased teenage employment by 0.6 percentage points, with no effect on either the teen or young adult unemployment rates.[41] Some research suggests that the unemployment effects of small minimum wage increases are dominated by other factors. [8] In Florida, where voters approved an increase in 2004, a follow-up comprehensive study confirms a strong economy with increased employment above previous years in Florida and better than in the U.S. as a whole.[9]

Empirical studies
Economists disagree as to the measurable impact of minimum wages in the ’real world’. This disagreement usually takes the form of competing empirical tests of the elasticities of demand and supply in labor markets and the degree to which markets differ from the efficiency that models of perfect competition predict. Economists have done empirical studies on numerous aspects of the minimum wage, prominently including:[2] • Employment effects, the most frequently studied aspect • Effects on the distribution of wages and earnings among low-paid and higher-paid workers • Effects on the distribution of incomes among low-income and higher-income families • Effects on the skills of workers through job training and the deferring of work to acquire education • Effects on prices and profits Until the mid-1990s, a strong consensus existed among economists, both conservative and liberal, that the minimum wage reduced employment, especially among younger and lowskill workers.[8] In addition to the basic supply-demand intuition, there were a number of empirical studies that supported this view. For example, Gramlich (1976) found that many of the benefits went to higher income families, and in particular that teenagers were made worse off by the unemployment associated with the minimum wage.[39] Brown et al. (1983) note that time series studies to that point had found that for a 10 percent increase in the minimum wage, there was a decrease in teenage employment of 1-3 percent. However, for the effect on the teenage unemployment rate, the studies exhibited wider variation in their estimates, from zero

Card and Krueger
In 1992, the minimum wage in New Jersey increased from $4.25 to $5.05 per hour (an 18.8% increase) while the adjacent state of Pennsylvania remained at $4.25. David Card and Alan Krueger gathered information on fast food restaurants in New Jersey and eastern Pennsylvania in an attempt to see what effect this increase had on employment within New Jersey. Basic economic theory would have implied that relative employment should have decreased in New Jersey. Card and Krueger surveyed employers before the April 1992 New Jersey increase, and again in November-December 1992, asking managers for data on the full-time equivalent staff level

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of their restaurants both times.[42] Based on the employers’ responses, the authors concluded that the increase in the minimum wage increased employment in the New Jersey restaurants.[43] Card and Krueger expanded on this initial article in their 1995 book Myth and Measurement: The New Economics of the Minimum Wage (ISBN 0-691-04823-1). They argued the negative employment effects of minimum wage laws to be minimal if not non-existent. For example, they look at the 1992 increase in New Jersey’s minimum wage, the 1988 rise in California’s minimum wage, and the 1990-91 increases in the federal minimum wage. In addition to their own findings, they reanalyzed earlier studies with updated data, generally finding that the older results of a negative employment effect did not hold up in the larger datasets. Critics, however, argue that their research was flawed.[44] Subsequent attempts to verify the claims requested payroll cards from employers to verify employment, and found that the minimum wage increases were followed by decreases in employment. On the other hand, an assessment of data collected and analyzed by David Neumark and William Wascher did not initially contradict the Card/ Krueger results,[45] but in a later edited version they found that the same general sample set did increase unemployment. The 18.8% wage hike resulted in "[statistically] insignificant—although almost always negative" employment effects.[46] Another possible explanation for why the current minimum wage laws may not affect unemployment in the United States is that the minimum wage is set close to the equilibrium point for low and unskilled workers. Thus in the absence of the minimum wage law unskilled workers would be paid approximately the same amount. However, an increase above this equilibrium point could likely bring about increased unemployment for the low and unskilled workers.[10]

Minimum wage
critical of Card and Krueger’s work. They note that it conflicts with other studies done on minimum wage laws within the United States over the past 50 years.[51] According to the JEC analysis, minimum wage laws have been shown to cause large amounts of unemployment, especially among low-income, unskilled, black, and teenaged populations, as well as cause a host of other mal-effects, such as higher turnover, less training, and fewer fringe benefits. According to economists Donald Deere (Texas A&M), Kevin Murphy (University of Chicago), and Finis Weltch (Texas A&M), Card and Krueger’s conclusions are contradicted by "common sense and past research". They conclude that:[52] “ Each of the four studies examines a ” different piece of the minimum wage/ employment relationship. Three of them consider a single state, and two of them look at only a handful of firms in one industry. From these isolated findings Card and Krueger paint a big picture wherein increased minimum wages do not decrease, and may increase, employment. Our view is that there is something wrong with this picture. Artificial increases in the price of unskilled laborers inevitably lead to their reduced employment; the conventional wisdom remains intact.

Nobel laureate James M. Buchanan famously responded to the study in the Wall Street Journal: ...no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimum scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.[53] Alan Krueger responded in The Washington Post:[54]

Reaction to Card and Krueger
Some leading economists such as Greg Mankiw do not accept the Card/Krueger results,[47] while others, like Nobel laureates Paul Krugman[48] and Joseph Stiglitz do accept them,[49][50] In 1995, the Republican Staff of the Joint Economic Committee of the United States Congress published a study

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More was at stake here than the minimum wage -- the methodology of public policy analysis was also at issue. Some economists, such as James Buchanan, have simply rejected the notion that their view of economic theory possibly could be proved wrong by data. Paul Krugman, moreover, states that Card and Krueger "found no evidence that minimum wage increases in the range that the United States has experiences led to job losses. Their work has been attacked because it seems to contradict Econ 101 and because it was ideologically disturbing to many. Yet it has stood up very well to repeated challenges, and new cases confirming its results keep coming in."[55]

Minimum wage
A partial summary of the scorecard is presented below:

Statistical Meta-analyses
Several researchers have conducted statistical meta-analyses of the employment effects of the minimum wage. Card and Krueger analyzed 14 earlier time-series studies and concluded that there was clear evidence of publication bias because the later studies, which had more data and lower standard errors, did not show the expected increase in t-statistic (almost all the studies had a t of about two, just above the level of statistical significance at the .05 level.[57] Though a serious methodological indictment, opponents of the minimum wage virtually ignored this issue; as Thomas C. Leonard noted, "The silence is fairly deafening."[58] More recently, T.D. Stanley has criticized their methodology, suggesting that their results could signify either publication bias or the absence of an effect. Using a different methodology, however, he concludes that there is statistically significant evidence of publication bias and that correction of this bias shows no relationship between the minimum wage and unemployment.[59] In 2008, Hristos Doucouliagos and T.D. Stanley conduct a similar meta-analysis of 64 U.S. studies on disemployment effects and concluded that Card and Krueger’s initial claim of publication bias is still correct. Moreover, they concluded, "Once this publication selection is corrected, little or no evidence of a negative association between minimum wages and employment remains."[60]

Neumark and Wascher Literature Review
In a 2008 book, David Neumark and William L. Wascher described their analysis of over 300 studies on the minimum wage.[2] The studies, taken from many countries and spanning many viewpoints, covered a period of over 50 years, primarily from the 1990s onward. According to the authors, a large majority of the studies show negative effects for the minimum wage; those showing positive effects are few, questionable, and disproportionately discussed. Based on the extensive published evidence they considered, Neumark and Wascher conclude that the minimum wage is not good social policy. They emphasize three especially salient conclusions: First, while acknowledging outliers like Card and Kreuger, they found that studies since the early 1990s have strongly pointed to a "reduction in employment opportunities for low-skilled and directly affected workers." Second, they found some evidence that the minimum wage is harmful to poverty-stricken families, and "virtually no evidence" that it helps them. Third, they found that the minimum wage lowers adult wages of young workers who encounter it, by reducing their ultimate level of education. They summarized their findings in a "scorecard," showing the effects they considered, a summary of the evidence they found, and their evaluations of the strength of their conclusions based on that evidence.

Surveys of economists
Until the 1990s, economists generally agreed that raising the minimum wage reduced employment. This consensus was weakened when some well-publicized empirical studies showed the opposite, but others consistently confirmed the original view. Today’s consensus, if one exists, is that increasing the minimum wage has, at worst, minor negative effects.[61] According to a 1978 article in the American Economic Review, 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among lowskilled workers.[62] A 2000 survey by Dan Fuller and Doris Geide-Stevenson reports that of a sample of

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Neumark and Wascher’s Minimum Wage Scorecard[56] Effects Summary of Evidence Considered Employment The minimum wage reduces employment of low-skilled workers. Strength of Conclusions

Minimum wage

The preponderance of evidence clearly shows negative effects, especially when one looks at the most convincing evidence. A few studies find positive or no effect.

Wage The minimum wage increases the Unambiguous for workers covered by the distribution wages of covered workers. Moder- minimum wage. Conflicting evidence for ate effect on higher-skilled workthose at higher levels. ers with slightly higher wages. Income No compelling evidence that the distribution minimum wage helps low-income families. Some evidence that it harms them. Training Clear conclusion that the effects of the minimum wage range from none to negative, with no evidence of positive effects.

Some evidence of negative effects, Unclear whether evidence is stronger for some evidence of no effect. No negative effects or no effect. convincing evidence of positive effect. Most evidence points to negative effects. Negative effects of exposure to minimum wages when young on wages and earnings in late twenties. The minimum wage increases prices of goods and services produced with low-wage labor. Unambiguous for the U.S.; less clear for Canada. Strong evidence, but from only one study.

Schooling Longer-run earnings

Prices and profits

Clear conclusions.

308 American Economic Association economists, 45.6% fully agreed with the statement, "a minimum wage increases unemployment among young and unskilled workers", 27.9% agreed with provisos, and 26.5% disagreed. The authors of this study also reweighted data from a 1990 sample to show that at that time 62.4% of academic economists agreed with the statement above, while 19.5% agreed with provisos and 17.5% disagreed. They state that the reduction on consensus on this question is "likely" due to the Card and Krueger research and subsequent debate.[63] A similar survey in 2006 by Robert Whaples polled PhD members of the American Economic Association. Whaples found that 37.7% of respondents supported an increase in the minimum wage, 14.3% wanted it kept at the current level, 1.3% wanted it decreased, and 46.8% wanted it completely eliminated.[64] Surveys of labor economists have found a sharp split on the minimum wage. Fuchs et

al. (1998) polled labor economists at the top 40 research universities in the United States on a variety of questions in the summer of 1996. Their 65 respondents split exactly 50-50 when asked if the minimum wage should be increased. They argued that the different policy views were not related to views on whether raising the minimum wage would reduce teen employment (the median economist said there would be a reduction of 1%), but on value differences such as income redistribution.[65] Klein and Dompe conclude, on the basis of previous surveys, "the average level of support for the minimum wage is somewhat higher among labor economists than among AEA members."[66] In 2007, Daniel B. Klein and Stewart Dompe conducted a non-anonymous survey of supporters of the minimum wage who had signed the "Raise the Minimum Wage" statement published by the Economic Policy Institute. They found that a majority signed on the grounds that it transferred income from employers to workers, or equalized

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bargaining power between them in the labor market. In addition, a majority considered disemployment to be a moderate potential drawback to the increase they supported.[67]

Minimum wage
per lifetime to create an amount of wealth equal to or greater than the amount we create at the present time in 1,600 hours per year or 40,000 to 50,000 hours in a working life, we must all be able to obtain a real income equal to or higher than our current salaries in exchange for a greatly reduced quantity of work... Neither is it true any longer that the more each individual works, the better off everyone will be. The present crisis has stimulated technological change of an unprecedented scale and speed: `the micro chip revolution’. The object and indeed the effect of this revolution has been to make rapidly increasing savings in labour, in the industrial, administrative and service sectors. Increasing production is secured in these sectors by decreasing amounts of labour. As a result, the social process of production no longer needs everyone to work in it on a full-time basis. The work ethic ceases to be viable in such a situation and workbased society is thrown into crisis[69]. A basic income is often proposed in the form of a citizen’s dividend (a transfer) or (a guarantee). A basic income less than the social minimum is referred to as a partial basic income. A worldwide basic income, typically including income redistribution between nations, is known as a global basic income. The proposal is a specific form of guaranteed minimum income, which is normally conditional and subject to a means test In 1968 James Tobin, Paul Samuelson, John Kenneth Galbraith and another 1,200 economists in signed a document calling for the US Congress to introduce in that year a system of income guarantees and supplements. Both Tobin and Samuelson have also come out against the minimum wage.[70] In the 1972 presidential campaign, Senator George McGovern called for a ’demogrant’ that was very similar to a basic income.[71] Mike Gravel, a former candidate for the Democratic nomination for President of the United States and a candidate for the 2008 Libertarian nomination for the President of the United States, advocates a tax rebate paid in a monthly check from the government to all citizens.

Alternatives
Negative income tax
Some critics of the minimum wage argue that a negative income tax or refundable tax credit (such as the earned income tax credit in the United States) would work better than a minimum wage, as it would benefit a broader population of low wage earners, not cause any unemployment, and distribute the cost widely rather than concentrating it on employers of low wage workers. A negative income tax or refundable tax credit based on a broad tax base, they argue, would also be more economically efficient, as the minimum wage imposes a high marginal tax on employers, causing high deadweight loss. The ability of the earned income tax credit to deliver a larger monetary benefit to poor workers at a lower cost to society was recently documented in a report by the Congressional Budget Office.[68]

Basic income
Some economists and others have proposed as an alternative to a minimum wage, a so called basic income, a system of social security, that periodically provides each citizen with a sum of money that is sufficient to live on. Except for citizenship, a basic income is entirely unconditional. Furthermore, there is no means test; the richest as well as the poorest citizens would receive it. One of the main arguments for a basic income was articulated by the French Economist and Philosopher André Gorz: The connection between more and better has been broken; our needs for many products and services are already more than adequately met, and many of our as-yet- unsatisfied needs will be met not by producing more, but by producing differently, producing other things, or even producing less. This is especially true as regards our needs for air, water, space, silence, beauty, time and human contact... From the point where it takes only 1,000 hours per year or 20,000 to 30,000 hours

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Winners of the Nobel Prize in Economics that fully support a basic income include Herbert Simon, Friedrich Hayek,[72] James Meade, Robert Solow, Milton Friedman,[73] Jan Tinbergen and James Tobin. In later years, Basic Income Studies: How it could be organised, Different Sugestionshave made a lot serious, fully financed proposals for a basic income.

Minimum wage
http://www.amazon.com/BasicEconomics-3rd-Ed-Economy/dp/ 0465002609. Minimum Wage Laws are covered on pages 210-221. The full text of an essentially identical section from a previous edition can be found at page 163 HERE [5] American Academy of Political and Social Science. "The Cost of Living." Philadelphia, 1913. [6] ^ ILO 2006: Minimum wages policy (PDF) [7] Washington State Department of Labor and Industries, "Washington’s minimum wage to increase to $8.55 Jan. 1," news release September 30, 2008, http://www.lni.wa.gov/news/2008/ pr080930a.asp, consulted 29 December 2008. [8] ^ David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage, Princeton University Press, 1995, pp. 1, 6-7. [9] Gwartney, James D.; Richard L. Stroup. Economics: Private and Public Choice. New York: Harcourt Brace Jovanovich. pp. 559–562. ISBN 0-15-518880-1. [10] ^ Ehrenberg, R. and Smith, R. "Modern labor economics: theory and public policy", HarperCollins, 1994, 5th ed. [11] William M. Boal and Michael R. Ransom, "Monopsony in the Labor Market", Journal of Economic Literature, V.35, March, pgs.86-112 [1] [12] Gary Fields, "The Unemployment Effects of Minimum Wages," International Journal of Manpower, Vol. 15, issue 2 (1994), pp. 74-81. [13] Manning, Alan (2003). Monopsony in motion: Imperfect Competition in Labor Markets. Princeton, NJ: Princeton University Press. ISBN 0691113122. [14] Gillespie, Andrew (2007). Foundations of Economics. Oxford University Press. pp. 240. [15] Alan S. Blinder, "The $5.15 Question," The New York Times, 23 May 1996, p. A29. [16] Harry Bernstein, "Troubling Facts on Employment," Los Angeles Times, September 15, 1992, p. D3; Eric Engquist, "Health Bill Fight Nears Showdown," Crain’s New York Business, May 15, 2006, p. 1. [17] Minimum Wage and Its Effects on Small Business

Collective bargaining
Sweden is an example of a developed nation where there is no minimum wage that is required by legislation. Instead, minimum wage standards in different sectors are set by collective bargaining.

See also
• Basic income • List of minimum wages by country • Labor market • Labour law • Living wage • Maximum wage • Guaranteed minimum income • Positive rights • List of U.S. minimum wages • List of minimum wages in Canada • Garcia v. San Antonio Metropolitan Transit Authority • Nickel and Dimed • Scratch Beginnings • Wage slave

References
[1] Black, John (2003-09-18). Oxford Dictionary of Economics. Oxford University Press, USA. pp. 300. http://www.amazon.com/DictionaryEconomics-Oxford-Paperback-Reference/ dp/0198607679. [2] ^ Neumark, David; William L. Wascher (2008). Minimum Wages. Cambridge, Massachusetts: The MIT Press. ISBN 978-0-262-14102-4. http://mitpress.mit.edu/catalog/item/ default.asp?ttype=2&tid=11659. [3] ^ Eatwell, John, Ed.; Murray Milgate, Peter Newman (1987). The New Palgrave: A Dictionary of Economics. London: The Macmillan Press Limited. pp. 476–478. ISBN 0-333-37235-2. [4] ^ Sowell, Thomas (2007-04-02). Basic Economics (3rd Edition): A Common Sense Guide to the Economy. New York: Basic Books. ISBN 0-465-00260-9.

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From Wikipedia, the free encyclopedia

Minimum wage

[18] ^ http://www.epi.org/content.cfm/ Little or No Impact on Employment?". issueguides_minwage Real Value of the http://ideas.repec.org/p/cep/cepdps/ Minimum Wage dp0781.html. [19] ^ Richard B. Freeman (1994). Minimum [38] Low Pay Commission (2005). National Wages – Again!. International Journal of Minimum Wage - Low Pay Commission Manpower. Report 2005 [20] ^ OECD (2006): OECD Employment [39] Edward M. Gramlich, "Impact of Outlook 2006 (read-only PDF) Minimum Wages on Other Wages, [21] Fiscal Policy Institute, "States with Employment, and Family Incomes," Minimum Wages Above the Federal Brookings Papers on Economic Activity, Level have had Faster Small Business Volume 1976, number 2, pp. 409-461.) and Retail Job Growth," March 30, 2006. [40] Charles Brown, Curtis Gilroy, and [22] Abbott, Lewis F. Statutory Minimum Andrew Kohen "Time Series Evidence on Wage Controls: A Critical Review of their the Effect of the Minimum Wage on Effects on Labour Markets, Employment, Youth Employment and Unemployment," and Incomes. ISR Publications, The Journal of Human Resources, Manchester UK, 2nd. edn. 2000. ISBN Volume 18, no. 1 (Winter 1983), pp. 3-31. 978-0-906321-22-5. [2] [41] Alison J. Wellington, "Effects of the [23] Wal-Mart Warms to the State - Mises Minimum Wage on the Employment Institute Status of Youths: An Update," Journal of [24] Wal-Mart’s Perverse Strategy on the Human Resources, Volume 26, no. 1 Minimum Wage (Winter 1991), pp. 27-46. [25] Tupy, Marian L. Minimum Interference, [42] David Card and Alan B. Krueger, National Review Online, May 14, 2004 "Minimum Wages and Employment: A [26] "The Wages of Politics". Wall Street Case Study of the Fast-Food Industry in Journal. http://www.opinionjournal.com/ New Jersey and Pennsylvania," American weekend/hottopic/?id=110009232. Economic Review, Volume 84, no. 4 [27] Offshoring High-Tech and Professional (September 1994), pp. 774-775. Jobs [43] p. 792. [28] Increasing the Mandated Minimum [44] "Myth and Measurement: The New Wage: Who Pays the Price? Economics of the Minimum Wage". Cato [29] Why Wal-Mart Matters - Mises Institute Institute. April 22, 2006. [30] Aaronson, D. and E. French, 2006. http://www.cato.org/pubs/journal/ Output Prices and the Minimum Wage. cj15n1-8.html. Employment Policies Institute. [45] http://www.epinet.org/briefingpapers/ [31] ^ A blunt instrument, The Economist, minimumw_bp_1996.pdf October 26, 2006 (English) [46] Neumark & Wascher, American [32] ^ (Cato) Economic Review, Volume 90 No. 5. [33] Williams, Walter (1989). South Africa’s [47] http://gregmankiw.blogspot.com/2006/ War Against Capitalism. New York: 11/minimum-wage-as-symbol.html, Praeger. ISBN 027593179X. consulted 12 January 2009. [34] Wilson, Lilla (1989-11-17). "How About a [48] Paul Krugman, The conscience of a Real Minimum Wage Increase?". New liberal (W.W. Norton & Co., 2007) York Times. http://query.nytimes.com/ [49] Joseph Stiglitz. Employment, social gst/ justice and societal well-being, fullpage.html?res=950DE2D6173DF934A25752C1A96F948260. International Labour Review, 141 (1-2), Retrieved on 2008-02-24. p. 9 - 29. [35] [3][4][5] [50] Economic Policy Institute. Hundreds of [36] "National Minimum Wage". Leading Economists Say: Raise the politics.co.uk. http://www.politics.co.uk/ Minimum Wage issue-briefs/economy/employment/ [51] U.S. Congress Joint Economic Committee national-minimum-wage/national"50 Years of Research on the Minimum minimum-wage-$366581.htm. Retrieved Wage" on 2007-12-29. [52] Sense and Nonsense on the Minimum [37] Metcalf, David (April 2007). "Why Has Wage the British National Minimum Wage Had

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From Wikipedia, the free encyclopedia
[53] "Minimum wage addendum". Wall Street Journal: pp. A20. 25-04-1996. [54] Alan Krueger, "Test Case for the Labor Market," The Washington Post, September 2, 1996, p. A23. [55] Paul Krugman, The Conscience of a Liberal, W.W. Norton, 2007, p. 261 [56] Neumark, David; William L. Wascher (2008). Minimum Wages. Cambridge, Massachusetts: The MIT Press. pp. 287. ISBN 978-0-262-14102-4. http://mitpress.mit.edu/catalog/item/ default.asp?ttype=2&tid=11659. [57] David Card and Alan B. Krueger, "Timeseries minimum-wage studies: a metaanalysis," American Economic Review 85: 238-243 (1995). [58] Thomas C. Leonard, "The Very Idea of Applying Economics: The Modern Minimum-Wage Controversy and its Antecedents," History of Political Economy 32 (1), p. 139 (2000). [59] T.D. Stanley, "Beyond Publication Bias, Journal of Economic Surveys, Vol. 19, no. 3 (2005), pp. 322-327. [60] Hristos Doucouliagos and T.D. Stanley, "Publication Bias in Minimum-Wage Research? A Meta-Regression Analysis," British Journal of Industrial Relations, 2008. [61] "A Blunt Instrument; The Minimum Wage," The Economist, October 28, 2006. [62] Kearl, J. R., et al., “A Confusion of Economists?” American Economic Review 69 (1979): 28–37. [63] Fuller, Dan; Geide-Stevenson, Doris (2003). "Consensus Among Economists: Revisited" (PDF). Journal of Economic Education 34 (4): 369–387. http://www.indiana.edu/~econed/ pdffiles/fall03/fuller.pdf. [64] Robert Whaples (2006) "Do Economists Agree on Anything? Yes!," The Economists’ Voice: Vol. 3 : Iss. 9, Article 1. [65] Victor R. Fuchs, Alan B. Krueger, and James M. Poterba, "Economists’ Views About Parameters, Values, and Policies: Survey Results in Labor and Public Economics," Journal of Economic Literature, Vol. 36, no. 3 (September 1998), pp. 1387-1425. [66] Klein, Daniel and Stewart Dompe. "Reasons for Supporting the Minimum Wage: Asking Signatories of the "Raise

Minimum wage
the Minimum Wage" Statement" (Jan 2007), p. 133. [67] Klein, Daniel and Stewart Dompe. "Reasons for Supporting the Minimum Wage: Asking Signatories of the "Raise the Minimum Wage" Statement" (Jan 2007). [6] [68] "Consequences of an increase in the minimum wage and expansions in the earned income tax credit." (PDF). Congressional Budget Office. http://www.cbo.gov/ftpdocs/77xx/ doc7721/01-09-MinimumWageEITC.pdf. Retrieved on 2008-07-25. [69] André Gorz, Critique of Economic Reason, Gallilé,1989 [70] Emerson Schmidt, "Union Power and the Public Interest", EP Dutton, 1980 as cited in [7] [71] White, Theodore H. The Making of the President 1972. Antheneum Publishers. 1973. pp. 17–20. ISBN 0689105533, pg. 127 [72] Hayek, Friedrich (1973). Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy. 2. Routledge. pp. 87. ISBN 071008403X. [73] Friedman, Milton; Rose Friedman (1990). Free to Choose: A Personal Statement. Harcourt. pp. 120–3. ISBN 0-15-633460-7.

External links
• Characteristics of Minimum Wage Workers: 2005 U.S. Department of Labor Bureau of Labor Statistics • Minimum Wage Issue Guide by the Economic Policy Institute • Basic Income Earth Network (BIEN) • Basic income for all-Philippe van Parijs, Boston Review • Guaranteed Basic Income Studies:How it could be organised, Different Sugesstions • Basic Income Studies: An International Journal of Basic Income Research • "Social minimum" in the Stanford Encyclopedia of Philosophy • EIROnline: Minimum wages in Europe • Low Pay Commission in the United Kingdom • UK Department of Trade and Industry The National Minimum Wage • U.S. Department of Labor statistics

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From Wikipedia, the free encyclopedia
• The Minimum Wage: Information, Opinion, Research • Average U.S. farm and non-farm wages compared to the minimum wage (1981 2004) • Impact of Proposed Minimum-Wage Increase on Low-income Families (PDF) Center for Economic and Policy Research (December 2005) • Center for Policy Alternatives – Minimum Wage Policy Model • Find It! By Topic: Wages: Minimum Wage U.S. Department of Labor

Minimum wage
• Wagenet - Australian Working Conditions • Economist Paul Krugman on Minimum Wage Regulation • Economist Philip Lewis - Centre for Labour Market Research - on the relationship between unemployment and minimum wages • Minimum Wage Research, Studies and Resources by The Heritage Foundation • Measuring the Full Impact of Minimum and Living Wage Laws from Dollars & Sense magazine

Retrieved from "http://en.wikipedia.org/wiki/Minimum_wage" Categories: Macroeconomics, Organizational studies and human resource management, Labour relations, Labour law, Employment law, Minimum wage, Socialism, Income distribution, Socioeconomics, Personal taxes, Income, Wealth, Employment compensation, Sociology, Labor economics, Employment This page was last modified on 13 May 2009, at 14:21 (UTC). All text is available under the terms of the GNU Free Documentation License. (See Copyrights for details.) Wikipedia® is a registered trademark of the Wikimedia Foundation, Inc., a U.S. registered 501(c)(3) taxdeductible nonprofit charity. Privacy policy About Wikipedia Disclaimers

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