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8/25/2003 06:01:00 PM | Brad Plumer Minimum wage hikes: For anyone who's interested, Nathan Newman has been all over the miminum wage issue lately. Here's his original post that lays out the case for increasing the minimum wage. He argues that over-reliance on the Earned Income Tax Credit to support low-wage workers leads to a distortion of both the labor market and production. Max Sawicky disagrees with Newman's analysis, but in the end he thinks that "the minimum wage ought to be raised and indexed to inflation" and that "refundable tax credits ought to be expanded." Now Newman's back again, suggesting that any Democratic candidate who advocates an $8/hr minimum wage will reap the benefits at the polls-- not only because an overwhelming majority (around 80%) of Americans support the increase, but also because such a platform would increase turnout among poorer voters. He claims he'll be back soon to argue why this policy will increase employment (and presumably, why it won't affect inflation). Update: Here's Newman's argument on how raising the minimum wage actually increases employment. I haven't gone through it very carefully, but it seems reasonable to me. The big concern is with point #3-- that a minimum wage hike across the board will preclude the existence of cheap labor alternatives. But this seems to ignore international labor alternatives (cf. the big outsourcing trend lately), as well as illegal immigrant labor. I'm not sure what effect that will have, taken altogether, on employment. Though I do like Newman's closing line: "as long as the evidence [on the effect on the labor market] is ambiguous, I go with raising the minimum wage, since the obvious empirical benefits for the workers effected are clear while the supposed downside is unproven and disputed theoretically." perma link |
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