Pethokoukis

The key number in Obama’s minimum wage plan isn’t $9, it’s 2014

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I realize Big Government is no longer fired or tired but is, in fact, wired. Got it. Yet it’s still true that work is better than welfare, yes? Can we agree on this? So again, let’s keep in mind the likely economic impact of raising the minimum wage: Fewer jobs for low-skill workers and teenagers. AEI’s Michael Strain:

1. Economists David Neumark and William Wascher, after conducting an exhaustive literature review, conclude that “among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries.” The weight of the evidence suggests that increasing the minimum wage decreases employment, especially for lower-skilled workers.

2. Economists Joseph Sabia and Richard Burkhauser find that a small minority of workers who would benefit from a minimum wage increase — around ten percent — live in poor households. … In other words, the workers who will benefit from an increase are secondary and tertiary earners — think more of teenagers with summer jobs, of spouses earning some income on the side, or of elderly grandparents earning some retirement income, and less of primary breadwinners. In fact, Professors Sabia and Burkhauser find that around two-thirds of minimum wage workers live in households with incomes more than twice the poverty line.

Now, the Obama White House has Google access. They must know the data. So what explains the OWH push to raise the minimum wage? I think Greg Valliere of Potomac Research nails it:

It’s a time-tested Washington ploy – make a proposal that has no chance of enactment, simply to frame the public debate and, of course, the polls. That pretty much describes President Obama’s call to raise the minimum wage, which has virtually no chance of passage in the House. We caught some flak yesterday by claiming Obama was simply playing to public opinion with his extensive laundry list, but the tactic worked – polls since the State of the Union address showed voters support his initiatives. Make no mistake, the Democrats are intensely focused on recapturing the House in 2014; that drives everything.

5 thoughts on “The key number in Obama’s minimum wage plan isn’t $9, it’s 2014

  1. Neumark /Wascher, who apparently thought that they wrote the bible on Minimum Wages in 2008, respond to the recent Allegretto/Dube “spatial heterogeneity” studies questioning that work in an NBER paper.

    Even if there are small Neumark/Wascher disemployment effects due to small increases in the minimum wage, they are outweighed by the earnings effects.

  2. Why the lack of awareness on the most negative effects…..When small business employers are forced to pay untrained ,entry level workers more it comes from the paychecks of the full time adult jobs. The middle managers , senior clerks and other staff must make a bit less!!!!,( the actual head of household jobs retail does generate) In small business our labor costs are 2 to 3 times that of our big chain competitors and the increase puts us all at an even greater disadvantage than we are already at…
    Destroying actual adult jobs to make entry level workers earn more even hurts them as they later rise up the economic ladder by lowering the wages of the higher paying jobs or at least making less of those jobs available.

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