Living Wage

Thank you, Con. I'll look forward to a robust rebuttal.Arguments concerning the minimum wage should be based on real world evidenceThe arguments for and against raising the minimum wage are simple.On the side opposing minimum wage increases, you have a simple, supply-and-demand argument straight out of Intro to Economics: Raise the price of anything, and get less of it. Artificially raise the cost of labor, the argument goes, and employers will be forced to hire fewer workers - harming employment - and/or raise their prices - harming consumers, including low-wage workers. On the other side, favoring increases to the minimum wage, are reams of actual, objective evidence - discussed in detail below - that show comprehensively that raising the minimum wage has no discernible effect on employment, little to no impact on prices, and dramatically raises the standard of living for the working poor.So why the disconnect between the textbooks and the real world? The simple answer is that the Econ 101 view is based on a radically simplified model of human behavior, casting all people into the role of homo economicus, the perfectly rational wealth maximizer, a species which does not exist outside of Austrian economics and Ayn Rand novels. This homunculus is the perfectly-round-sphere-in-a-vacuum of social science - a model which removes any inconvenient perturbations of behavior in order to make a basic conceptual point. Economics doesn't work that way in the real world, because people don't work that way in the real world. As always, the true economist - the social scientist who wishes to obtain genuine insight into the way the world really works - must always look first and foremost to the factual evidence. When Austrian economic theory predicts a different response than the real world produces, the theory must yield to the facts.The minimum wage does not harm the employmentThe nearly universal consensus of economists is that modest increases to the minimum wage do not have an ill effect on employment. The conservative Economist magazine, while acknowledging that "[s]cepticism about the merits of minimum wages remains this newspaper’s starting-point," has acknowledged that because "real labour markets are not perfectly competitive...[a] minimum wage, providing it is not set too high, could thus boost pay with no ill effects on jobs." [1] The article lists a proposed US minimum wage of $10.10 as one of its examples.Since the 1990s, researchers investigating real-world minimum wage increases have concluded that they have little to no effect on employment. Why not? How do employers compensate for the extra labor expense? The research generally suggests four factors are most significant: reductions in labor turnover (an unsurprising benefit of raising wages); improvements in organizational efficiency (people do better work when they are paid better); reductions in wages of higher earners (wage compression, which reduces income inequality); and small price increases (which are negligible and widely distributed to rich and poor alike). [2] Indeed, the experiences of retailers like Costco or Quiktrip that invest heavily in their employees find that the investment pays of - the benefits of employee loyalty and productivity allow these businesses to keep prices low and profits high even while keeping employees paid fairly. [3]All told, "two decades of rigorous economic research have found that raising the minimum wage does not result in job loss." [4] Indeed, economists argue that because the minimum wage has not effected unemployment, it should be raised even higher in order to capture more marginal benefit. [5]The minimum wage raises the standard of living and improves the economy for allAll economists to have studied the question empirically, including economists who oppose raising the minimum wage, have concluded that raising the minimum wage does effectively reduce and alleviate poverty. [6] An increase in the minimum wage to $10.10 would raise nearly 5 million people out of poverty. [7]This has substantial benefits, and not just for those families no longer subsisting. For one thing, people earning a higher wage are less likely to need government assistance - an increase in the minimum wage to $10.10 would save taxpayers $4.6 billion each year on food stamps. [8] Right now, the U.S. taxpayer is subsidizing the poverty wages paid by large minimum wage retailers. A minimum wage increase requires the private sector to pay its workers fairly instead of expecting taxpayers to make up the gap.Finally, people with higher wages have more money to spend - helping absorb the cost of any minor price increases, and generally increasing the amount of economic activity. Raising the minimum wage to $10.10 would generate a $32.6 billion increase in GDP, creating more than 140,000 new net jobs to support the increased commercial activity. [9]ConclusionThe arguments against raising the minimum wage are based on a simplistic and unrealistic model. Here in reality, we have decades of rigorous research and objective data sufficient to demonstrate to any unbiased person - including many conservative economists who have changed their minds in the face of the undeniable evidence [1] - that reasonable minimum wage hikes do not harm employment. [2] Furthermore, both proponents and opponents of the minimum wage acknowledge that it is an effective anti-poverty mechanism. [6] I therefore stand in favor of a reasonable minimum wage increase to at least $10/hr in the United States.[1] http://www.economist.com...[2] http://www.cepr.net...[3] https://hbr.org...[4] http://www.raisetheminimumwage.com...[5] http://www.businessinsider.com...[6] http://www.washingtonpost.com...[7] http://www.cbsnews.com...[8] http://www.epi.org...[9] http://www.epi.org...