David Neumark, an economist who has devoted much of his career to research that is intended to show why the minimum wage is bad, was quoted in an NYT article as saying that the proposed minimum wage hike would reduce employment among the least skilled workers by 4 percent.
Okay, it's fun with numbers time. The minimum wage hike to $7.25 an hour will increase the wage for the those at the very bottom by 40.8 percent. Mr. Neumark believes that it will result in a 4 percent decline in employment, according to the article. That means that these least skilled workers will on average end up with 35.1 percent higher wages after the minimum wage hike than they do now (0.96*140.8 percent). That sounds like a pretty good deal for those at the bottom.
For more on this, Will Wilkinson and I had a long argument about the minimum wage yesterday's BloggingHeads. The Wilkinson rejoinder, as I understand it, is that while employment dislocation may not be so bad, businesses will compensate by lowering their air conditioning, or putting less food in the break room, or raising prices. Frankly, to give the country's 13 million lowest paid workers a 35.1% raise, I'll take a bit less AC. It's also worth remembering that pushing up the floor raises the house: Many businesses that now pay $7.25 will raise their wages in order to keep attracting better applicants. And as for our concerns over teenagers getting the money too, they're a) not the majority and it's b) never been clear to me why working teenagers, many of whom come from poorer families and are saving for college, deserve low pay.
In any case, as I was telling Will yesterday, if you raise the wage and enormous dislocation follows, or every business in California shuts off their AC, you can undo the legislation. I think the degraded bargaining position of American workers has rendered the demand for labor considerably less elastic than many conservatives believe, and so businesses will absorb this wage increase, as they've absorbed past increases, with relative ease. If that's wrong, we can walk it back. But cautiously erring on the side of American workers strikes me as perfectly prudent.
