The Politics of the Minimum Wage

 
Jim Lippard (The Lippard Blog) argues against raising the minimum wage in Minimum wage increase: how to make the poor poorer. The argument is an old one. Lippard quotes approvingly from a Wall Street Journal article,

Although some workers benefit -- those who were paid the old minimum wage but are worth the new one to the employers -- others are pushed into unemployment, the underground economy or crime:

Let's think about this for a minute. Is it true that countries with higher minimum wages have higher rates of unemployment and crime than the USA? That's the first question that would occur to a scientist who wanted to test a hypothesis.

We're having a similar debate in Canada. The troglodytes want to keep the poor from rising above their station by paying them as little as possible. Raising the minimum wage will hurt small business who, by implication, profit from exploiting the poor. Since this argument doesn't sit very well in a public forum, they resort to the same argument as Jim Lippard and his friends. Raising the minimum wage will actually harm the poor, according to them.

Isn't it amazing that there are very few poor people who support that argument? You'd think they'd be fighting tooth and nail to keep the minimum wage as low as possible so they won't lose their jobs and be forced into a life of crime!

Anyway, here's an answer from the Canadian left on the effect of raising the minimum wage [The Economics of the Minimum Wage].

The cry from business and the right that decent minimum wages come at the cost of jobs flies in the face of the simple empirical reality that countries with relatively high wage floors compared to the median do not necessarily have low rates of employment or high unemployment. The proportion of full-time workers with low wage jobs (less than two thirds of the median hourly wage) is 22% in Canada, but just 7% in Sweden and 9% in Denmark. In 2005, the employment rate (the proportion of the 15-65 age groups with jobs) was actually higher in both Denmark and Sweden than in Canada. And there is no relationship between the incidence of low wage jobs and low unemployment in OECD countries. (See 2006 OECD Employment Outlook p. 175) In short, the argument of the right that countries cannot have both a decent wage floor and high employment/low unemployment is simply wrong.

Makes sense to me. The evidence from other countries suggests that a decent wage is a good thing.