In New Hampshire, a bill to raise the minimum wage has passed the House and moves on to the Senate.  As the House debate heated up, there were a number of articles written pro and con.  I’ve saved a handful that seemed to be useful.

Minimum Wage should be $0.00

This first article was cited by conservatives arguing against the minimum wage, primarily because it was the New York Times making the argument.  Shockingly (considering the source) The Times asserts that the minimum wage should be zero.

As a matter of fact, I happen to agree, although perhaps not for the same reasons that this solution was proposed.  Much of  today’s “labor regulation” (that is, business regulations related to employment) is to force compliance with minimum wage laws.  If there were no minimum wage*, it could possibly free up a large amount of resources, both in terms of reduced cost to business and reduced expenses for government.

Instead of a minimum on wage, the New York Times article proposes an alternative of expanded tax credits.  This would also distort the market.  It would have the effect of subsidizing products created by low wage workers at the expense of everything else.

We could debate (and I’m not sure which side I would be on) whether the it is more fair, reasonable or efficient to burden the employer or the taxpayer with the subsidies that low wage workers are due.  I also anticipate that, on the slim chance that the minimum wage were replaced with tax credits, the current tracking and enforcement of wage and hour rules would still be deemed necessary for tracking the credits.

But actually eliminating the minimum wage is not really a part of the discussion.  For the foreseeable future, the political argument will only talk about raising or (possibly) lowering the minimum wage level.  In any case, this is an old article and I’m quite sure the New York Times no longer advocates for $0.00 minimum wage.

Benefit or Detriment?

The most recent pronouncement was the CBO report (as reported by local New Hampshire media).  The official Federal Government report was considered a coup by many opposing the minimum wage hike because CBO analyses are often optimistic, based on the assumptions that they are required to use.  It was a surprise to see it come out as mixed.  And it is still mixed – and will be used to support both sides of the argument.

Without question, an employee who remains in a job after a minimum wage is implemented will see a raise, and thus benefit from the increase.   But how many will remain in their jobs, and how many will be priced out of employment?  Answering this question, and deciding how to weight the two sides of this equation, becomes the crux of any attempt at an unbiased analysis.  While the CBO report carries a lot of weight, it is far from gospel.  It has it’s own assumptions and so its conclusions need to be evaluated in terms of all the data that is out there.

Unfortunately, I am not finding the link a this moment, but I was reading a study that tried to analyze job loss and the lack thereof in more detail.  This study found that the effect on employment varied, in a way that makes sense.

  • The study found no loss of jobs for college graduates.
  • There was a weak increase in unemployment for high school graduates.
  • The relationship between loss of jobs and higher minimum wage was even stronger for the lowest skilled workers.

This essay describes the argument, essentially that a higher minimum wage hurts those who you would think you are most trying to help.   The counter argument is presented here.

This second article, the pro-raise article, contains a quote that I found typifies the argument for the minimum wage.   The author asserts, “[W]hat [conservatives opposed to minimum wage hikes are] missing is that most jobs are created by middle class consumers buying what businesses large and small are selling; growth comes from the middle out, not the top down.”  This kind of economic pseudo-science is dangerous, probably even more so that it appears.  It is roughly a Keynesian take on the economy, but the more you try to apply rigor to the words (e.g. “growth comes from the middle out”), the less it means.  More on this in a future article.

Soft assertions using this kind of folk analogies to economic theory are often accompanied by references to actual academic studies.   Usually not directly, but rather in the form of a “studies show” kind of reference (much like I used a couple of paragraphs up, right?).  In trying to nail down which studies, and what they actually show, I came across this study that seems to back up a lot of the claims in the current discussion.

I do have an issue with the methodology, but that also is better addressed as a separate essay.   Until that is written, consider this one as a counter argument.

Cui bono?

The last category of articles I’ll discuss asks a question; Is it possible that proponents of a minimum wage increase are seeking to help groups other than the “working poor” that they claim to feel for?

This article suggests several such interests, including Unions and Big Business.

In addition to the arguments presented there, I’ve read a series of articles/editorials that imply that a meaningful number of union contracts include ties to the minimum wage in the negotiated wage scale.   That is, a contract may specify an automatic wage based on increases in the minimum.  This is another area where the evidence was discussed, without citing the actual data.  I did some of my own research.

First, I reviewed some of the public employee contracts in New Hampshire, which are publicly available.  I focused on these because, in New Hampshire in particular and in the U.S. in general, public sector unions make up the bulk of the union membership.   They also represent most of the “political clout” that can be seen as issues such as minimum wage are pushed.  While my review was hardly complete or systematic, I was unable to find any such references.   In fact, they might be illegal under State law, which requires legislative body approval of contract cost items.

Secondly, as I looked at a range of articles, I found references retail and service industries.   This makes sense.  Where union contracts cover industries with workers at or near the minimum wage, it makes sense (or may even be required) to factor in minimum wage changes during a contract period.

I hope you enjoy this list of light reading suggestions.

*I’ve noticed a misconception in a number of articles.   In the past, New Hampshire had raised the minimum wage above the national level.   In time, the Federal wage caught up with, and the surpassed the State minimum.  In the previous legislative session, the language setting the higher minimum language was removed.   This led several pundits to write (as a criticism of the Republican-led legislature) that NH eliminated the minimum wage.   This isn’t true.   Specifically, current New Hampshire law reads that the State minimum is the same as the Federal minimum, explicitly setting a State minimum wage.  There are states that do not have a minimum wage.   However, the Federal minimum always applies.