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Monday, February 18, 2013

Paul Krugman: Raise That Wage

Raising the minimum wage is the right thing to do:

Raise That Wage, by Paul Krugman, Commentary, NY Times: President Obama laid out a number of good ideas in his State of the Union address. Unfortunately, almost all of them would require spending money — and given Republican control of the House of Representatives, it’s hard to imagine that happening.
One major proposal, however, wouldn’t involve budget outlays: the president’s call for a rise in the minimum wage ... with subsequent increases in line with inflation. The question we need to ask is: Would this be good policy? And the answer, perhaps surprisingly, is a clear yes. ...
First of all,... increases in the minimum wage have consistently fallen behind inflation, so that in real terms the minimum wage is substantially lower than it was in the 1960s. Meanwhile, worker productivity has doubled. Isn’t it time for a raise?
Now, you might argue that even if the current minimum wage seems low, raising it would cost jobs. But there’s evidence on that question... And while there are dissenters, as there always are, the great preponderance of the evidence from these natural experiments points to little if any negative effect of minimum wage increases on employment. ...
Finally, it’s important to understand how the minimum wage interacts with other policies aimed at helping lower-paid workers, in particular the earned-income tax credit.... The tax credit ... is also good policy. But it has a well-known defect: Some of its benefits end up flowing not to workers but to employers, in the form of lower wages. And guess what? An increase in the minimum wage helps correct this defect. It turns out that the tax credit and the minimum wage aren’t competing policies, they’re complementary policies that work best in tandem.
So Mr. Obama’s wage proposal is good economics. It’s also good politics: a wage increase is supported by an overwhelming majority of voters.... Yet G.O.P. leaders in Congress are opposed to any rise. Why? They say that they’re concerned about the people who might lose their jobs, never mind the evidence that this won’t actually happen. But this isn’t credible.
For today’s Republican leaders clearly feel disdain for low-wage workers...: “takers,” members of the contemptible 47 percent who, as Mitt Romney said to nods of approval, won’t take responsibility for their own lives. ...
The good news is that not many Americans share that disdain; just about everyone except Republican men believes that the lowest-paid workers deserve a raise. And they’re right. We should raise the minimum wage, now.

    Posted by on Monday, February 18, 2013 at 12:34 AM in Economics, Income Distribution | Permalink  Comments (55)

          


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