Tuesday, October 19, 2004

More nuance than you'll want to follow


For the sake of argument, let's assume Republicans / Conservatives / Libertarians are correct when they assert that a minimum wage law tends to penalize all or part of the exact population it is intended to serve. That argument, which is not currently stated clearly as much today as it was in the 1980's, would be based on the logic as follows:

1) There is a free labor market that is functioning by the rules of classical economics of supply and demand.

2) A minumum wage bill would "artificially" establish a wage rate above the "market rate" for some employees.

3) This artificial rate set by the minimum wage law would move the equilibrium point (the intersection of the suppy and demand curves).

4) Given typical supply / demand curves, the resulting rate of employment would result in fewer hours of labor for employees and therefore a smaller number of hours or no employment for some employees.

Of course there's quite a bit more that could be said on this topic. For example, if the argument above were in fact the key sticking point, it would seem that by govt. subsidizing the employer to pay the difference between the "market wage" and minimum wage would remove the whole of the above objection. This approach would in fact probably push the equilibrium point of low wage labor use in the opposite direction, e. g., one of a larger quantity use, not a smaller one. (Ok, I know the libertarians still aren't going to be happy with a tax payer subsidy to individuals.)

Caveats (I'm sure that there are a huge number of these)

1) Of course, the labor market in the US and throughout the world is not one big market. Rather it is a huge number of small markets based on communities, and their unique supply and demand curves. Does it make sense to localise the minimum wage with a cost of living index? I think I'd be against this, but it's worth considering.

2) How does having a large employment of illegals affect this? If they (illegals) are under the radar, and the supply is relatively large in the US, it would seem to blunt drastically the ability of minimum wage law to accomplish salutory effects.

3) What if, as described above in which the gap is made up by government funding, the employee is required to keep running "due balance", which would be collectable when or if the employee becomes a higher wager earner or wins the lottery, etc. I know I'm way out here, but why not brainstorm.

4) This is one posting where I would enjoy, more than others, comments.

Copyright © 2004 New Progressive Institute Inc. All rights reserved.
Compassionate Conservatism in Action
GOP to low-income Americans: Quit your whining
by Paul Waldman, Editor-in-Chief 10.18.04
Many people noticed that President Bush refused to say in the last debate that he opposes an increase in the minimum wage, offering some vague words about a proposal by Senator Mitch McConnell that Bush has never done anything to support and has never come to a vote. The proposal would have increased the minimum wage only if states could opt out, making for no increase at all.
Bush quickly changed the subject – as on a number of issues, he prefers that his actual position remain hidden, since most Americans don’t share it (if you’re among the lucky few who knows that when Bush says he favors a "culture of life" he means Roe v. Wade should be outlawed and all abortions made illegal, you’ve earned your decoder ring). According to a Pew Research Center poll in January, eight out of ten Americans believe that increasing the minimum wage should be either a "top priority" or "important but a lower priority" for the government Similar numbers in other polls – between two-thirds and four-fifths of Americans – support increasing the minimum wage, about as close to a consensus on a public issue as we have. No wonder Bush didn’t want to talk about it.
On Friday night, Bill Moyers' PBS program Now interviewed Penny Katick, a single mother in Nevada with three kids who works as a waitress, rising at 5 am each day to work full time for around $13,000 a year, well below the poverty line. They also interviewed Lorraine Hunt, the Republican Lieutenant Governor of Nevada, who had this to say about the prospect of raising the minimum wage:
"The minimum wage was originally intended for entry-level people. It's important to try to keep - to have a basic minimum wage. It's not meant to raise a family. It was never intended - when I hear statements like, 'How can I raise a family of four on minimum wage?' that's an inaccurate statement, it would be disingenuous. You're not supposed to raise a family on minimum wage.
I don't want to baby anybody, and I've mentored a lot of young women. I say, 'Don't whine to me, I'll help you but, you know, get out there. My parents went through the Depression and they had it a lot worse than you do. Don't whine, be tenacious, be strong, and there are people that will be out there to help you help yourself.' And that's exactly what the Republican Party does, they want to help people help themselves."
Lorraine Hunt may be shockingly candid in her contempt for people who "whine" about working hard for little money, but her position and the position of President Bush and the Republican Party are exactly the same.
According to the Economic Policy Institute, 7.4 million American workers make less than $7 per hour, the level to which many would like to see the minimum wage raised. "Of these workers, 72% are adults and 60.9% are women. Close to half (44.0%) work full time and another third (33.3%) work between 20 and 34 hours per week. Almost one-third (31%) of the workers who would benefit from an increase to $7.00 are parents of children under age 18, including 682,000 single parents."
Penny Katick's 18-year-old daughter Heather has decided that, given the economic struggles of her family and the prospects open to her, after she graduates high school she'll join the Army. There's a good chance she'll be heading to Iraq, where she may well give her life for the war George Bush so fervently wanted.
It's people like Heather Katick, who get the least from our country - they go to the worst schools, they have the fewest opportunities - who pay the price for the grand designs of the men and women now working so hard to hold on to their jobs.
President Bush likes to show his "compassion" by telling of how many parents he's hugged and cried with, after he sent their sons and daughters off to die. But he will never lie in bed at night wondering whether his children are safe, never open his door to find a man in a dress uniform standing on his porch, knowing that that soldier is there to tell him that Jenna or Barbara Bush is dead.
Nor will he have to worry that his children – or anyone in his family – will have to support a family on $5.15 an hour. That’s for whiners.

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