Ring of Conservative Sites Ring of Conservative Sites
JOIN!

[ Prev | Skip Prev | Prev 5 | List |
Rand | Next 5 | Skip Next | Next ]

Thursday, January 19, 2006

Min Wage: NYT Econ Analysis Fails For More Reasons

An interesting point made by economist Alan Reynolds on the NYT Magazine article on minimum wage (see below) is that more workers will be forced to take below min wage jobs due to the increase. Why?

The NYT article focused on Santa Fe, New Mexico. Santa Fe's min wage is much higher than the national level, recently raised from $8 per hour to $8.50 and going to $9.50 next year. However, there are numerous businesses that are exempt from the law such as employers with less than $500,000 annual income, businesses with fewer than 25 employees and certain other specific jobs. The employer will certainly avoid growing his full-time staff beyond the 25-employee limit. He will find ways to maintain staffing levels by for instance using automatic cashiers or relocating outside of the city limits.

More important, the number of larger firms in Santa Fe will remain static in both number and size which will reduce the number of opportunities for workers to earn higher wages at larger businesses. Reduced opportunities at larger firms will mean that jobs will only be available at the smaller firms. This increase in the number of below min-wage jobs will mean greater labor competition for them. With the supply of such workers higher, employers cab keep those wages down. As well, consumers will pay more at the smaller stores than they would at larger stores and businesses since larger businesses have the "law of large numbers" that allows them to charge lower prices because of relatively lower costs.

These exemptions to the min wage law are common throughout the nation. Reynolds advises that per Section 12, Table 636: "Workers Paid Hourly Rates.":

[R]eveals that only 520,000 were paid the $5.15 federal minimum wage in 2004. That was merely four-tenths of one percent (0.4 percent) of total non-farm civilian employment -- far short of Gertner's 3 percent adventure in probability. Nearly three times as many U.S. workers (1,483,000) were paid less than the minimum wage. Among full-time workers, only 177,000 earned the $5.15 minimum wage in 2004, while 3.3 times as many (583,000) earned less than $5.15. As I mentioned, the words "or less" after $5.15 are there for a reason.

Whenever the minimum wage has been increased, the most obvious result was an increase in the number earning less than the minimum.

If we ignore the 45 percent of full-time U.S. employees who earn salaries rather than wages, it might almost be true that "around 3 percent" of those paid by the hour are actually paid $5.15 an hour or less. But that is only because 2 percent of those paid by the hour earn less than $5.15 an hour. And that raises an obvious question: How on earth is an increase in the minimum wage supposed to help the nearly 1.5 million people who are not earning that much in the first place?

Helping people is the least of the concerns of the NYT-elite do-gooders when they pursue policies without doing the necessary homework to ensure that the results will be as expected. However, their goal is really to feel good about themselves. Because if they were concerned with the results, they would take the time to analyze the consequences of their policies and the empirical data regarding the hardships caused by their policies. This rarely gets in the way.


0 Comments:

Post a Comment

<< Home

Ring of Conservative Sites Ring of Conservative Sites
JOIN!

[ Prev | Skip Prev | Prev 5 | List |
Rand | Next 5 | Skip Next | Next ]