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thinkahol *

Employment and the Minimum Wage-Evidence from Recent State Labor Market Trends | Econom... - 0 views

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    Congress, a number of states, and even some cities will raise or consider raising minimum wages this year. Meanwhile, the economy is suffering what may prove to be the fourth consecutive year of a geographically widespread labor market slump, with most states facing uncertain economic situations. In this environment, the minimum wage becomes more important than ever, as a weaker labor market is unlikely to provide low-wage workers the bargaining power required to negotiate fair wages for their labor.

    Despite the necessity of a minimum wage that allows low-wage workers to meet basic needs, there is still strong opposition to minimum wage increases, especially from those who don't view the weak labor market as an imperative to raise minimum wages, but rather as a reason to oppose them. In particular, opponents of state-level minimum wage increases claim that these increases are the cause of weak labor markets, especially in the form of high unemployment rates.

    That argument, however, rests on the simplistic observation that some of the states with high minimum wages also have high unemployment rates. Without more examination, this observation is as useful in understanding state job markets as noting that joblessness has been on the rise in New York since the last time the Yankees won the World Series. It might be true, but it doesn't mean one is causing the other.
thinkahol *

Employment and the Minimum Wage-Evidence from Recent State Labor Market Trends - 0 views

  • Employers have power to set wages because workers incur substantial personal cost during unemployment.
  • Employers exercise that power by paying their employees less than what they would earn in a truly competitive market.
  • By paying lower wages, employers may cause higher turnover and incur higher costs to recruit, train, and supervise their workers.
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