Minimum Wage

Thanks, CON. In this round, I will present my case. I'll rebut CON's in the next round. I. Consumption The minimum wage is a boon to the U.S. economy because it would increase consumption. Carroll et al., 2013, found that the marginal propensity to consume is far greater for lower- and middle-income households than it is for high income households (1). In reference to raising the minimum wage to $10,10, the CBO finds that "[t]he increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO"s estimate. However, those earnings would not go only to low-income families, because many low-wage workers are not members of low-income families. Just 19 percent of the $31 billion would accrue to families with earnings below the poverty threshold, whereas 29 percent would accrue to families earning more than three times the poverty threshold, CBO estimates" (2). Wage pressures would build not only for minimum wage workers, but for many more workers, all of whom are likely to consume with those dollars, thus stimulating economic activity. Aaronson and French found that an increase to $9 an hour would boost real G.D.P. by .3 percentage points and boosts household spending by $48 billion (3). Further, Aaronson et al, 2011, found that a MW causes “household income rises on average by about $250 per quarter and spending by roughly $700 per quarter for households with minimum wage workers” (4). II. Efficiency Wage Hypothesis The efficiency wage hypothesis "states that workers' productivities depend positively on their wages" (5). A literature review by Wolfers and Zilinsky, 2015 (6) finds a myriad of real-world evidence for this theory that higher wages tend to induce workers to work harder, which benefits businesses, who are able to produce more and thus sell more. Yellen, 1984, found that higher wages led to "reduced shirking by employees due to a higher cost of job loss; lower turnover; an improvement in the average quality of job applicants and improved morale" (7). Holzer, 1990, arrived at a similar conclusion: "high-wage firms can sometimes offset more than half of their higher wage costs through improved productivity and lower hiring and turnover cost" (8). There's evidence that workers with less income security also have poorer on-job performance. The World Bank's 2015 Development Report found "The constant, day-to-day hard choices associated with poverty in effect tax an individual"s bandwidth, or mental resources. This cognitive tax, in turn, can lead to economic decisions that perpetuate poverty" (9). Higher wages also increase labor supply, attracting better and more productive workers. Rossi et al., 2013, found that "offering higher wages attracts individuals with higher previous earnings, and who have both higher IQ and more desirable personality traits, as measured by the Big 5 personality and public service motivation tests" (10). Higher wages also reduce labor turnover, reducing the cost of training and hiring new workers and thus saving businesses money. Reich et al., 2003, in a study of the San Francisco airport, found that higher wages reduced labor turnover by 34%, thus saving the airport $6.6 million per year (11). Reich et al., 2007, found that a San Francisco wage floor policy reduced labor turnover from 95% in the mid-2000s to 18.7%--a 763 basis point decline (12). Fisher et al., 2006, used data from 500 retailers to find that higher wages improve customer service and customer satisfaction (13). Capelli and Chauvin, 1991, found that higher wages improved employee discipline (14). Zhang et al., 2013, found that in Canadian firms higher wages resulted in reduced employee absenteeism (15). Finally, Georgiadis, 2008, find that, because higher-wage workers tend to require less supervision than low-skilled workers, "higher wage costs were more than offset by lower monitoring costs" (16). Therefore, there a myriad of ways that raising the minimum wage would actually save businesses money through greater efficiency, offsetting cost increases. III. Income Inequality The U.S. is plagued with the worst income inequality since 1928 (17), and research by Saez, 2013, shows that it has been increasing steadily since the 1970s (18). This coincided with widespread deregulation and tax cuts under Ronald Reagan and his attacks on labor unions (19), and a nearly doubling of productivity over the past thirty years, but flat wages for most workers, adjusted for inflation (20), and falling real wages for minimum wage workers, whose wages aren't adjusted for inflation (21). For instance, the minimum wage from 1979 to 2012 fell 21 percent (22). This is undesirable not only on a moral basis because people are paid not what they're due or what their skill set lends itself to, but because these people are placed on a lower rung of the economic ladder as their starting place, based on characteristics outside of their own control--e.g., their family's socioeconomic status--and thus are denied equality of opportunity. This is especially true because income inequality is self-reinforcing. Children born into poor families disportionately likely to stay poor. Greenstone et al., 2013, find that poor children in the lowest income quintile are more than ten times more likely to stay there than they are to reach the highest quintile as an adult (23). Nobel Laureate Joe Stiglitz adds the following: "There are four major reasons inequality is squelching our recovery. The most immediate is that our middle class is too weak to support the consumer spending that has historically driven our economic growth...Second, the hollowing out of the middle class since the 1970s, in a phenomenon interrupted only briefly in the 1990s, means that they are unable to invest in their future, by educating themselves and their children and by starting or improving businesses..Third, the weakness of the middle class is holding back tax receipts, especially because those at the top are so adroit in avoiding taxes and in getting Washington to give them tax breaks...Fourth, inequality is associated with more frequent and more severe boom-and-bust cycles that make our economy more volatile and vulnerable" (24). Now, how does the minimum wage tie to this? Simple: it's contributed to the widening disparity in income distribution which dates by to the 1970s because it's declined in real terms. Autor et al., 2014, estimate that 30 to 50% of the growth in income inequality from 1979 to 1989 can be attributed to the falling real value of the minimum wage, and they note a still significant contribution from 1979 to 2012 (25). Note that the authors admit that these estimates are conservative, and there"s a body of literature attributing as much as 85% to 110% of the rise in inequality to the falling real value of the minimum wage. Mishel, 2013, adds: “A higher minimum wage wouldf help address growing inequality, particularly as it affects lower-wage women...For workers overall more than half (57.0 percent) of the increase in the 50/50 wage gap [between median-wage workers and workers at the 10th percentile in wages] from 1979 to 2009 was accounted for by the erosion of the minimum wage” (26). IV. The MW does not kill jobs A canard that my adversary will raise is that MW results in layoffs. Obviously that falls short in light of the evidence I presented earlier in this round, but the claim is without strong empirical backing. In fact, John Schmitt, 2013, conducted a literature review and found that the minimum wage has "no discernible effect on employment" (27). Much of this is because, per Krugman, minimum wage jobs exist in industries which are non-exportable (28). Let's explore some of the relevant literature. Card and Krueger, 1994, looked at the 1992 rise in New Jersey’s minimum wage and found no evidence of negative employment effects (29). In fact, they found, after comparing evidence from stores in eastern Pennsylvania where the MW remained constant or to stores that were already paying near wages near the MW, that the minimum wage actually worked to increase employment. Dube et al., 2010, replicated the findings of Car and Krueger and found no negative employment effects after adjusting for spatial heterogeneity (30). Next, a meta-analysis by Doucouliagos and T. D. Stanley, 2009, looked at 64 minimum wage studies from 1972 to 2007, and found that, after adjusting for public selection bias, that the evidence is clear that the minimum wage has no effect on employment (31). Belman and Wolfson conducted a similar meta study on literature revealed since 2000 and, using 27 studies, found no statistically significant negative employment effects (32). Now, how far could we go? Michael Reich, economist at U.C. Berkeley, finds that, “Our data show that an increase up to $13 an hour has no measurable effect on employment" (33). Of note is that we don't know the extent to which we could actually raise this wage because the existing literature is limited to current wage increases, though it goes without saying that some level would have deleterious impacts. This resolution, however, only forces for me to argue that some MW ought to exist, so that there exists some level at which we wouldn't incur these negative employment effects affirms this resolution. V. PovertyThe MW also alleviates poverty. The CBO found that raising the MW to $10.10 would lift 900,000 people from poverty (2). Dube (2013) finds that a 39% increase in the MW would immediately lift 4.6 million from poverty, and over time would lift 6.8 million people (34)(35). The problem is that we in fact subsidize these people, and thus the corporatons, like Walmart, which can continue to pay starvation wages. Algretto et al. (2013) estimates these payments at $7 billion a year for just fast-food workers (36), so raising the MW would reduce welfare spending, which could then be spent elsewhere.Sourceshttp://www.debate.org...