Economic Policy Institute (US) on Minimum Wage
In a joint statement issued on Wednesday, October 11, five Nobel Prize winners and over 650 other economists endorsed a statement urging a raise in the minimum wage. The statement asserts that a modest raise in the minimum wage (in the range of a $1.00 to $2.50 per hour), with future increases indexed to protect the workers’ purchasing power, “can significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed.”
http://www.epi.org/content.cfm/minwagestmt2006
Second, Securing the Wage Floor—a new analysis by EPI’s EARN Director Michael Ettlinger—examines the effect and various approaches to indexing and counters the arguments most commonly made against it.
Next, in an EPI Snapshot, economic analyst Liana Fox examines the six states with ballot initiatives and finds that, if all of these measures pass, then more than 1.5 million workers would receive raises, with 652,000 children of these workers directly benefiting. Counting the 22 states plus the District of Columbia that already have minimum wages above the federal rate, 70% of the U.S. workforce will live in a state with a higher-than-federal level if voters approve all the proposals.
Finally, EPI’s new Briefing Paper, Minimum Wage Trends—Understanding Past and Contemporary Research, also by Fox, examines the methods and findings of the major research that has been done on the effects of minimum wage raises. Where it was once accepted almost unquestioningly that raising the minimum wage was bad for jobs, better methods and the data derived from more recent experience have led many experts to conclude that any negative effects of a minimum wage raise are negligible and outweighed by the benefits to the workers affected.
Two points:
1) The link between those who are in poverty and those who are paid minumum wage is tenuous at best. The typical minimum-wage worker is a student living at home.
2) The *short-run* effects of a minimum wage increase on employment are – as far as we can tell – insignificant. But the long-run effects are not.
My reading of the literature is that an increase in the minimum wage will do approximately nothing to improve the welfare of those who are in poverty. For example, Card and Krueger conclude that in the US context,
“The minimum wage is a blunt instrument for reducing overall poverty, however, because many minimum-wage earners are not in poverty and because many of those in poverty are not connected to the labor market. We calculate that the 90-cent increase in the minimum wage between 1989 and 1991 transferred roughly $5.5 billion to low-wage workers…. an amount that is smaller than most other federal antipoverty programs, and that can have only limited effects on the overall income distribution.”