Old blog readers know we’ve discussed this issue before, but I figured it helpful to reframe the general issues of this debate and cross-post something from our Facebook page.

There’s substantial data out there showing both positive and negative effects of higher minimum wages. Here are some things to think about:

-Outside of issues regarding whether the government has a right to set a price floor for wages, the debate usually comes down to its effect on higher wages vs lowered employment.
-Just like in our sweatshop episode, the answer can depend on this: how many workers is it ok to displace in order to improve the lives of the still-employed?
-Most studies show the effect of modest increases in the minimum wage. Any employment effects may be minimal at this point because the resulting wage is close to the market level anyway. Also, these modest increases won’t effectively get these workers out of poverty.
-Adjusting the minimum wage upward to a “living wage” will have much more adverse effects on employment. Expanding the Earned Income Tax Credit has shown to be a lot more effective in helping out these workers, and with fewer effects on employment.
-Increasing the price of labor will make capital relatively cheaper. Rather than hiring workers in the future, will companies instead invest more on replacing them with machines?
-Overall, I think people are emotionally drawn to the minimum wage as a way to redistribute wealth from managers/supervisors/CEOs to the guys on the bottom. Regardless of intentions, mandating a minimum wage doesn’t do this without perverse effects.

Inspired by this NPR Morning Edition segment today.

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