Minimum Wage Laws Harm the Poor

PRO: It seems to me that my opponent is still confusing the issue. The question of whether an increase in the minimum wage would help the poor is very different from the question of whether or not the poor would be better off if there were no minimum wage in the first place. My opponent appears to be arguing an issue that is not the topic of this debate.Getting rid of minimum wage laws, is the same as reducing the minimum wage from $7.25/hr to $0/hr. My opponent concedes that an increase in the minimum wage could help the poor when he writes:PRO: My opponent greatly exaggerates the benefits, but essentially, he is correct that an increase in the minimum could help the poor. It seems logical that, if an increase of the minimum wage benefits the poor, then a decrease in the minimum wage will harm the poor. This implies that the minimum wage laws that set the minimum wage at $7.25 rather than $0 do NOT harm the poor. I am not aware of any studies that are done on repealing the minimum wage laws in the USA. And my opponent has not given us any calculations about what would happen if the minimum wage laws were abolished. The best data we have is from the CBO. My opponent agrees with this when he writes:PRO: The CBO report is NOT reliable, it is just the best source we have. Even though my opponent thinks that the CBO report is not reliable, it is the most reliable source we have. And the CBO report projects a decrease in the number of people in poverty when the minimum wage is raised.---PRO: Aside from this false premise though, my opponent"s numbers are seriously flawed. First, his math is wrong, because he calculates the increase in income before accounting for a decrease in employment. Even using my opponent"s numbers, the total gain should come out to $25 million per hour, not $26 million. (Because 500,000 should be subtracted from 15.5 million before it is multiplied by two. 15.5-.5= 15 15*2=30 30-5=25) Also, the $30 million number does not account for inflation. According to studies I have cited previously, every 10% increase in the minimum wage leads to an approximately 4% increase in price level. Increasing the minimum wage from $7.25 to $10.10 per hour is a $2.85 or 39.3% increase which will lead to a roughly 15.7% increase in price level. This means that the real benefit to poor workers, even using my opponent"s numbers is only $21.075 million per hour.My opponent is nitpicking here. I wrote "Of course this is just a rough calculation,..." I was just using ball-park figures to make a point: The increase of income for poor family because of the increase of the minimum wage is much larger than the decrease in income from decreased unemployment. The 500,000 people who lose a job earning $10 or less, will still earn at least $2/hr after they lose their job because of government assistance. So going from $10 to $2 is the same as increasing their salary with $2 and then cutting $10. It is fair enough to include inflation in the calculations. My opponent claims that a 10% increase in the minimum wage will lead to a 4% inflation, and he cites [1] for this. An earlier and free version of [1] is [2]. On page 29 the author writes:"Despite the different methodologies, data periods and data sources, most studies reviewed above found that a 10% US minimum wage increase raises food prices by no more than 4% and overall prices by no more than 0.4%."So the overall inflation is 0.4%, not 4%. If we do a rough calculation, we may neglect such a small inflation.My opponent also got the math wrong. If a 10% increase in minimum wage leads to a 4% inflation, then two increases of 10% will lead to 2 increases of 4% in inflation. So if the minimum wage is multiplied by a factor 1.1^n then the minimum wage is multiplied by 1.04^n. If the minimum wage is increased by 39.3%, then the minimum wage increases by a factor 1.393. Solving 1.1^n=1.393 yields n=log(1.393)/log(1.1)= 3.4777. Then prices are increased by a factor 1.04^3.4777=1.1461.This means, that we have a 14.61% inflation, not 15.7% as my opponent claims. But since the inflation is really only 0.4%if the minimum wage is increased to 10%, the actual inflation after raising the minimum wage to $10.10 is 1.4%.(1.004^3.4777=1.014).PRO: But the real problem with my opponent"s argument is not mathematical errors, but that his numbers are wrong. My opponent says "Let's assume that the people with the 10% lowest wages will have their wages increased by $2/hr on average." The problem is that there is no reason to make this assumption. Barely more than 1% of workers earn the federal minimum wage. There is no evidence to suggest that the number of workers earning close to the minimum wage would bring the total number anywhere near 10%. The CBO report is NOT reliable, it is just the best source we have. While the CBO report does estimate that approximately 10.7% of workers work for less than $10.10 per hour, it fails to account for raises that would have occurred if the minimum wage had not been raised. (The CBO report actually acknowledges this flaw in a note on page 24) This is a very significant flaw to the CBO"s estimates, as TWO THIRDS OF MINIMUM WAGE WORKERS RECEIVE A WAGE WITHIN ONE YEAR. [1] (This is because most minimum wage jobs are learning wage positions)I could not find that note on page 24. But in any case, if the minimum wage would be increased, people earning minimum wage still get wage increases. A person with some experience always will earn slightly more than someone who just entered the job. If the minimum wage is increased, it will also affect the people who earn a wage that is close to the minimum.Poverty in the USAPRO: The subject of poverty rates, that my opponent references are misleading. This is because "poverty" in the United States is defined by an arbitrarily chosen "poverty line", which includes many people who are not very poor. 80% of people below this poverty line have air conditioning. The average "poor" person in the United States has more living space than the average European. Not the average poor European, the AVERAGE European. The point is that there is a large range in wealth among the people described as "poor". [2] Minimum wage laws have the effect of aiding the wealthier (higher skilled) poor, but hurting the truly poor, who have very few marketable skills.Sure, Americans have more living space than in Europe because it is less densely populated than Europe. That does not mean that the Americans with the lowest wages are better of than their European counterparts. More important than space is access to health care. Generally, poor people in Europe have better access to health care than poor people in the USA.In fact, using absolute measures, there is more poverty in the USA than many western European countries.Anyway, this is not so relevant for our debate. If we are discussing poor people in the USA, we will go by the commonly used standard of poverty in the USA. I do not think that this is misleading at all. (Obviously, when we are talking about poor people in the USA we do not mean people dying of starvation. However, there are people in the USA with food insecurity though.)CONCLUSIONA decrease in the minimum wage will have the following effects:1. wages will go down for poor people (with jobs)2. the unemployment will decrease for poor peopleHowever, the overall effect is that the total income for poor people will increase on average, becausethe increase in employment cannot make up for the loss in wages. In particular, getting rid of minimum wage(reducing the minimum wage to $0/hr) will HARM the poor.This conclusion is based on simple calculations, and is confirmed by the CBO report. [3]As I have shown, more refined calculations will not change this conclusion. [1] http://ideas.repec.org...;[2] http://www.le.ac.uk...[3]http://cbo.gov...