Republicans Can't Win The Minimum Wage Fight

John Boehner

Photo: AP

President Obama’s proposal to raise the minimum wage to $9.00 per hour puts the Republicans between a rock and a hard place politically.Paul Krugman echoes the point that a big majority of the population supports a minimum wage increase, including a majority of Republicans

Yet the Republican leadership remains trapped because it opposes this increase as well as any alternative policy that might make the poor better off, such as increasing the Earned Income Tax Credit or endorsing a Guaranteed Minimum Income (points Matthew Yglesias makes in the link above).

As further evidence, the minimum wage increase Proposition B in Missouri in 2006 passed 76-24, probably helping Senator Claire McCaskill to her first Senate victory with under 50% of the vote.

Moreover, much recent research (via Think Progress) shows no “job killing” effects from raising the minimum wage. As originally shown by David Card and Alan Krueger, there was strong evidence of “publication bias” in the studies underlying the former economists’ consensus that the minimum wage reduced jobs.

That is, economics journals tended to prefer to publish studies with statistically significant results and not publish those showing no effect from the minimum wage. Researchers thus adjusted their statistical specifications until they achieved statistical significance, thereby generating a mass of studies that all barely reached statistical significance despite larger volumes of data which should have produced stronger results.

As the Schmitt paper emphasises, more recent studies of studies (“meta-analysis”) continues to support the conclusion that the purported job killing effect was a mirage.

As I have pointed out before, cross-national comparisons of the minimum wage and unemployment rates also do not support the view that the minimum wage is the job killer Republicans claim it is.

Indeed, as in my September 2011 post, nine OECD countries have higher minimum wages rates than the U.S. does on a purchasing power parity basis that adjusts for the cost of living, yet only two have higher unemployment rates (France and Ireland), while the U.K.’s unemployment rate is the same. The table below illustrates this and underscores the point that the minimum wage is a winner for the middle class.

Country   2011 Min Wage (PPP$)   Unemployment Rate % Dec. 2012                   Australia   9.54   5.4     Belgium   9.52   7.5     Canada   8.04   7.1     France   10.02   10.6     Ireland   10.81   14.7     Luxembourg   11.36   5.3     Netherlands   10.23   5.8     New Zealand   8.63   6.9 (Q4)   United Kingdom   8.53   7.8 (Oct 2012)   United States   7.25   7.8                               Source:               For 2011 real minimum wage at PPP, click on “statistics by theme,” then “labour,” then “Real hourly minimum wages,” then adjust the series to “In US$ PPP.” For unemployment, click on “statistics by theme,” then “general statistics,” then “key short-term indicators,” then “harmonized unemployment rates.”                                                                                                                                                    Read more posts on Middle Class Political Economist »

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