Wednesday, May 1, 2013

What Economists Think About Raising the Minimum Wage



What Economists Think About Raising the Minimum Wage

By: Terry Richard

To examine whether highly educated economists would support raising the minimum wage, 38 experts were questioned by the Chicago School of Business to see what their thoughts were. For each question, the economists could either strongly agree, agree, decide they are uncertain, disagree, strongly disagree, or have no opinion on the issue.

The first question dealt with whether raising the minimum wage would make it more difficult for low-skilled workers to find jobs. The question specifically asked, “Raising the federal minimum wage to $9 per hour would make it noticeably harder for low-skilled workers to find employment.” Here are the results of what the economists had to say.


As you can see, zero economists had strong opinions on the issue. A third of the economists agreed, while a third disagreed. In addition to this, a quarter of the economists remained undecided on the issue.

A private study twenty years by Alan Krueger and David Card used a natural experiment to test how employment would be effected by changing the minimum wage. Their study revealed that employment was not reduced. Other studies’ performed revealed minimal changes in employment, but most were generally mixed results.

Another question on the survey of economists dealt with the risks to low-skilled workers by raising the minimum wage. The question specifically asked, “The distortionary costs of raising the federal minimum wage to $9 per hour and indexing it to inflation are sufficiently small compared with the benefits to low-skilled workers who can find employment that this would be a desirable policy."


From this question, we can see that almost half of the economists asked agreed that the marginal benefit exceeded the marginal cost. When evaluating any economic question, the first thing that should be considered is whether the marginal benefits exceed the marginal costs. Almost half of these highly educated and experienced economists agreed that it did, while a third of these economists decided that they were uncertain on their position. Only a slim 11% argued that the costs of raising the minimum wage are not worth the risk.

However clear the results may have been, we need to bear in mind that this was a small sample of economists strictly. These economists cannot represent the general opinion of economists around the world. The purpose for the survey was likely to evaluate the opinions of people who study this for a living. To get better results, people who this would be affecting should be surveyed if the research wants to better evaluate whether or not the benefits outweigh the costs. However, the results of these elite economists allows for a better representation of what scholars believe regarding the issue.

In contrast to the idea of raising the minimum wage, an idea to offer earned income tax credit to low-skilled workers has been brought up. This policy is supported by Professor Christina Romer, as well. Minimum wage is a sensitive topic to many people, but this is an issue that our government will likely be discussing soon. Inflation is a growing problem in our country, and more ways to compensate for this are becoming in effect.


 
Rampell, Catherine. "What Economists Think About Raising the Minimum Wage - NYTimes.com." The Economy and the Economics of Everyday Life - Economix Blog - NYTimes.com. 4 March 2013. Web. 1 May 2013. <http://economix.blogs.nytimes.com/2013/03/04/what-economists-think-about-raising-the-minimum-wage/?ref=economics>.

"IGM Economic Experts Panel  IGM Forum." IGM Forum | Initiative on Global Markets. 22 Apr. 2013. Web. 1 May 2013.
<http://www.igmchicago.org/igm-economic-experts-panel>.

 

6 comments:

  1. It isn’t surprising that the economist had such different ideas when it came to the affects of minimum wage. There is no concrete evidence in history that exemplifies either side, and even if there were the times are different now. Certainly minimum wage requirements are a sensitive subject that will have to be addressed in the near future by government officials, and it will be interested to see what position they hold on the issue.

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  2. Minimum wage is definitely an issue that will take more time than it's worth to straighten out. I recently read an article online stating that even if we were to raise the minimum wage to $9 nationally, the people that would live off of minimum would barely change. They'd still make a yearly income that translates below poverty levels.

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  3. Raising minimum wage is not as promising as it seems. By raising minimum wage we are ultimately creating inflation. If the wage was increased we might see a difference at first but everyone would just start to earn more. Demand would stay the same and supply would have an increase in price to the knowledge that people are making more. No difference would really be seen at all. Like Shelby said, the income that they would be making still translates below poverty levels.

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  4. Economist are never agreeing with each other it seems like that no one can get any where because no one wants to give in. We watch a video in class just like where the president wouldn't take a deal and it caused a lot of other problems as well. This is the biggest problem with the economist, this needs to stop otherwise we won't get any where.

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  5. Raising wages is always a good thing right? Well maybe not so much in this case. The lack of evidence supporting that raising minimum wage would make a difference in both the short and long term makes it seem as if it is only a catalyst for inflation. However arguments can be made that over a brief period of time that it could be beneficial to a point. Currently though it is a much disputed issue that has no clear answer at this point.

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  6. I don't think it would be an intelligent decision to raise the minimum wage to $9.00 or even higher. It could hurt the economy for multiple reasons. Though it would benefit lower class people in the short-run, it would hurt business even more. Small businesses would be forced to layoff workers, which would raise the unemployment level and therefore eliminate more people to pay taxes and hurt spending. Small business would not be the only ones hurt, large corporations would also most likely have to layoff people as well. It would hurt the overall health of the economy and lower GDP. Though it seems like an intelligent idea in the short-run to help those making little money to buy more and raise the overall standard of living, it would hurt the economy in the long run.

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