Sick Transit

Stephen Bainbridge (via Jim Lindgren) presents an argument I’ve heard before against raising the minimum wage:

Among workers over 25, only two percent - 2%! - earned the minimum wage. Sympathy for the working poor thus ought not to be a driver of minimum wage debates.

What that misses, of course, is that most employers–even minimum-wage employers–give periodic raises. A retail worker making $6 (or for that matter, $5.50 or even $5.16) an hour won’t be counted in those statistics.

Raising the minimum wage, however, would still cause an increase in those workers’ wages. Obviously, those who are making less than the new minimum would have to get raises. But any employer large enough to have formal pay grades would also have to raise the next couple of pay grades above minimum to maintain a reasonable structure.

The usual core argument against the minimum wage is that it will cause some jobs to be lost (or at least, not created) because their marginal value is less than the new minimum. However, that’s true of every tax (direct or indirect) on employment: payroll taxes, corporate income taxes, etc. The question is whether the benefits of this tax outweigh the costs.

It stands to reason that the individuals most affected by any reductions in employment would be those already ‘on the line’, i.e. at minimum wage. According to Bainbridge, these are primarily teenagers and early twenty-somethings (many of them undoubtedly students), working part-time. So, by Bainbridge’s analysis, the downside of raising the minimum wage will primarily affect young part-time workers, whereas the upside will accrue to full-time-working adults.

In other words, his data actually supports a minimum wage increase.

(That’s a slight over-simplification, of course, since I haven’t actually compared quantitative estimates. But I don’t think it leaves much room for the claim that the minimum wage is irrelevant to the welfare of the working poor.)