Tuesday, December 31, 2013

The New Republic: Noam Scheiber: 'Raising the Minimum Wage Isn't Just Good Politics: It's Good Economics'

Source:The New Republic- supporters for raising the minimum wage.

Source:The New Democrat

"The minimum-wage debate follows a predictable pattern any time it flares up in the media: Liberals say it’s a moral outrage that people can toil away at full-time jobs and still live in poverty. They nod at the overwhelming public support for raising the minimum wage as a way to shame reluctant politicians. Conservatives, for their part, insist that all the minimum-wage talk is just self-defeating do-gooder-ism: great for making Upper-West-Siders feel righteous, a lot less so for helping the people they claim to care about. In the real world, conservatives argue, raising the minimum wage costs jobs that the poor and young desperately need. At which point liberals mumble defensively and retreat to their original talking points, if they respond at all.

Monday’s New York Times piece on the renewed push for a minimum-wage increase is a handy case in point. The writers of the story—a nice, scoop-filled piece of reporting—talk about the issue’s potential to split Republican elites from the party’s voters, in classic wedge fashion. Intriguingly, they suggest it could goose turnout among young people and minorities, two Democratic-leaning groups that often vanish during midterm elections. And, of course, the story includes a de rigueur warning of doom and destruction from House Speaker John Boehner--“Why would we want to make it harder for small employers to hire people?”—which goes largely unanswered by anyone on the left.

Well, that’s no good. Yes, the politics of the issue sufficiently favor Democrats that they can ignore the GOP's economic argument—Republicans may resist, but that will only help Democrats on Election Day. But as White House adviser Dan Pfeiffer correctly points out to the Times, the hope isn’t just to retain a few Senate seats. It’s to improve people’s lives.

If they’re serious about doing that, Democrats can’t cede the intellectual fight. They have to expose the House GOP position for what it is—water-carrying for business, particularly the fast-food restaurateurs who are leading employers of minimum-wage workers and donate overwhelmingly to the GOP. Until that happens, Republicans will be able to hold out with a patina of respectability among mainstream journalists and commentators, who largely accept the GOP's job-killing claims.

When they engage at all on the job-market consequences of boosting the minimum wage, Democrats frequently cite a study by economists David Card and Alan Krueger1 from 1994, which looked at a (then) recent increase in New Jersey. After surveying over 400 similar restaurants in New Jersey and Pennsylvania, Card and Krueger found that the hike had no effect on jobs, contra the Cassandra-like freak-out from fast-food proprietors. 

The paper was regarded as ground-breaking and, for its troubles, immediately got labeled “controversial” by the mainstream media thanks in part to persistent grumbling on the right. But in fact what made the paper so innovative wasn’t the conclusion per se, which other studies had arrived at. (For that matter, even when you tallied together all the studies that found a negative impact on employment, the effect that was very small. Recent studies have affirmed this.) What made it innovative was the methodology, which so cleanly tested the proposition. By comparing restaurants in New Jersey with restaurants just across the Delaware River in Pennsylvania, Card and Krueger were basically able to compare like with like, with the exception of the minimum wage law whose effects they sought to isolate.2 It was about as close to a laboratory experiment as you get in economics (other than, uh, these guys).

Even more relevant to the current discussion, however, was the rationale for why moderately raising the minimum wage wouldn’t kill jobs, as most of us might expect. After all, it’s one thing to look at a bunch of businesses and notice that they’re not cutting back. But unless there’s a compelling explanation for why our intuition on this is wrong, it’s hard to consider the study definitive. Even a study as well-designed as Card and Krueger’s could be flukish, or corrupted by hidden forces that aren’t evident to the authors or readers. Who knows, maybe McDonald’s managers in New Jersey are just unusually altruistic (though having patronized several fine Garden State dining establishments, I consider this to be extremely unlikely).

The bottom line is that backing the numbers with sound logical arguments is an important insurance policy against flukish-ness, and Card and Krueger identify a few. The first is that employers simply pass along the higher wages to customers rather cutting back on workers. And because the cost-increase tends to be small, and because customers accept the fairness of raising the minimum wage, they don’t buy fewer hamburgers or pizzas than before. As it happens, Card and Krueger found solid evidence that this was going on, as have many others. 

Before any conservative starts hyperventilating, it’s worth pointing out that this isn’t true of all industries, or even all employers in industries where it regularly happens. (In fact, Card and Krueger were skeptical of this story in their New Jersey study, before warming to a version of it in a subsequent book.) But this does happen a fair amount, and often in very pronounced ways.3 And the phenomenon goes a long way toward explaining why minimum wage laws frequently have so little net effect on jobs: If, in response to a minimum wage hike, some employers add a few workers while others cut back a bit, then it makes sense that the overall effect might hover around zero.

None of which is to say I expect the average Democratic pol to start lecturing minimum-wage denialists about monopsony employers any time soon. But if enough of us in the trenches band together and retake the intellectual high-ground, victory is likely to come a lot sooner.

I say this because even if the political resonance of the minimum wage issue helps Democrats wildly exceed expectations in 2014, they’re unlikely to retake the House. And, unfortunately, House Republicans have repeatedly showed they can hold out against public opinion for long stretches of time. What even they can’t do, however, is hold out against both public opinion and the received Beltway wisdom, as last fall’s shutdown fight demonstrated. The way to force Republicans to cave when public opinion won’t do the trick is to deprive them of any pretension to seriousness." 

"Howard Dean, S.E. Cupp, Hilary Rosen & Kevin Madden debate raising the minimum wage." 

Source:CNN Crossfire.

From CNN

There are both good political as well as economic reasons for raising the minimum wage in America. If it is done right and I’m going to give you an example of why it make sense to raise the minimum wage in America.

Raising the minimum wage in America if it is done right, makes so much good sense that I can give you two good examples from both a political, but as well as an economic example and give you both of them from the Right even though I’m a Liberal Democrat.

The political example would be this: Imagine you are Joe or Mary taxpayer in America and you work very hard for a living just to pay your bills and raise your kids and you are a little angry about that and feel overtaxed, because here you are playing by the rules and doing everything you can to pay your own way. But you are also paying taxes to pay for people who don’t pay their own way because they are low-skilled. You probably feel like you have an extra burden to pay to go along with yourself and your family, even though you are not getting any extra money to pay for that burden.

As a result, low-skilled workers work low-skilled minimum wage jobs and have to collect public assistance in order to survive. Because these low-wage employers are able to pass their employee costs onto you. And have you make up the difference for these workers housing, groceries and health care. But you raise the minimum wage to ten, twelve dollars and hour with a break especially for small employers and you keep their public assistance benefits where they are now, now these low-skilled workers can pay more for their costs of living. And Joe and Mary Smith (or whoever) and many others won’t have to pay as much in taxes to make up the difference. 

The economic example is pretty simple: You want more people working and fewer people collecting Unemployment or Welfare Insurance, then working has to pay more than not working so people are incentivized to work for a living. And not collect public assistance checks for a living instead. You raise the minimum wage to ten or twelve dollars an hour with a thirty percent tax break for employers especially for small employers and you have employers pay their share of the public assistance costs with like a payroll tax.

And tell employers they can get all that money back if they instead just pay their low-wage employees those costs. Or train them so they can move up in their organization or a combination of both. Now employers won’t be able to pass their employees costs on to the backs of average Joe and Mary taxpayer (or whoever) and many others and you would be able to cut the middle class tax burden in this country. The politics for Democrats are very good here.

And this would be a very good way to get Democrats to the polls in 2014 and get organize labor to help them out. It is actually good politics for Republicans as well if they are truly interested in reaching out to the working class. And not just there to carry the water for the wealthy and corporate America. Because they could say they are in favor of this as well so we can cut the taxes for average workers. 

It’s not just the minimum wage, but every physically and mentally able adult in America should be incentivized not just to work, but to pay their own away. No physically or mentally able adult in America should be able to collect more from public assistance and not working, then working any full-time job. What you would make in a week working a full-time minimum wage job, should be more then what you would get from a Welfare check and not working at all. We should not just raise the minimum wage to a working wage, but subsidize the employment of low-income, low-skilled workers, to encourage as many Americans as possible to make it in America on their own. 

Small Ivey: “Erik, this is a fantastic idea – cut the taxes for employers if they pay their employees more. How about this – how about making salaries paid to employees a direct tax credit, such that employers could reduce their taxes to zero if they pay their employees the money that would have been going to taxes. This would get the money right into employees’ pockets instead of needing to send it up to Washington and then back to the employees through welfare checks. Would teenagers get the higher wages too, or just adults with kids at home to feed?”

Liberal Democrat

Liberal Democrat
Liberal Democracy