The Minimum Wage, Again
Greg Mankiw once again hammers at the minimum wage. He's not alone in his view that the minimum wage is worthless, many conservatives agree with him, but the analysis is shallow, based more on theory than fact. As I mentioned in a previous post, there is strong evidence that raising the minimum wage has little effect on unemployment, at least at the levels proposed. (Obviously if one raised the minimum wage to $20 an hour, there would be a serious shock to the system and unemployment would soar.)
My problem with the classic economic analysis of the minimum wage is that it completely ignores bargaining power. The basic assumption, and republican mantra, is that people deserve what they get. To an economist with complete faith in the free market, if someone is paid $5.25 an hour, that must be all they are worth; likewise, if a CEO earns $100 million a year, he must be worth that much, or the market wouldn't pay him. In both cases, this is wrong; simply because someone earns X, does not mean that they, de facto, deserve that much money. Does a bank robber earning $10 million a year deserve his money? A rhetorical question, but obviously the answer is obviously no.
Employers have significant bargaining power over their low wage workers, who have no safety net to take time off work, or look for a better job. People earning $10,900 a year work every day, because they have to do so; that income is below the poverty line. Workers in this country should be able to live out of poverty.
Corporate America is enjoying record profits. American CEOs earn sums incommensurate with their performance. The wages of the bottom quintile is at a low point in real terms. When conservatives begin arguing against the minimum wage, because it will hurt the poor, one should realize that they are offering a shallow argument.
My problem with the classic economic analysis of the minimum wage is that it completely ignores bargaining power. The basic assumption, and republican mantra, is that people deserve what they get. To an economist with complete faith in the free market, if someone is paid $5.25 an hour, that must be all they are worth; likewise, if a CEO earns $100 million a year, he must be worth that much, or the market wouldn't pay him. In both cases, this is wrong; simply because someone earns X, does not mean that they, de facto, deserve that much money. Does a bank robber earning $10 million a year deserve his money? A rhetorical question, but obviously the answer is obviously no.
Employers have significant bargaining power over their low wage workers, who have no safety net to take time off work, or look for a better job. People earning $10,900 a year work every day, because they have to do so; that income is below the poverty line. Workers in this country should be able to live out of poverty.
Corporate America is enjoying record profits. American CEOs earn sums incommensurate with their performance. The wages of the bottom quintile is at a low point in real terms. When conservatives begin arguing against the minimum wage, because it will hurt the poor, one should realize that they are offering a shallow argument.
posted by PWN at 9:33 AM
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