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Thursday, June 22, 2006

At a Minimum

Gene Sperling tries to convince president Bush that increasing the minimum wage would help worker's and improve his political standing:

Bush Should Call Kennedy on the Minimum Wage, by Gene Sperling, Commentary, Bloomberg: Memo to President Bush:

I know you don't often take advice from former Clinton administration economic officials... Nonetheless, Mr. President, you would help both working Americans and your own political interests if you picked up the phone and told Senator Edward Kennedy that he should take another shot at trying to raise the minimum wage to $7.25 an hour.

Yes, his amendment to do that failed yesterday... Nonetheless, I believe that with your support he could get the seven votes that would provide him with the 60 needed to pass Senate procedural hurdles.

Before anyone on your team starts raising red flags, let me make clear that I get your concerns. ... a minimum wage is a form of price control... And yes, when raised too high, it can come at the expense of jobs for minority youths. So why should a conservative Republican president seek a Bush-Kennedy bill? Let me give you three reasons.

Dignity for American Workers: First, on the issue of price controls, we have to acknowledge that ignoring the lopsided bargaining power that can exist in labor markets and the workplace risks offending core American values. We don't allow an employer to condition a job on sex from a single mother of three, even if she would take the deal to keep food on her table.

While offering a low wage may not be as despicable as sexual harassment, most Americans would agree that economic dignity should also limit how little that employer can pay that same woman -- even if she was desperate enough to accept $3 an hour...

A Raise for 15 Million Americans: Second, raising the minimum wage isn't only about helping teenagers in their summer jobs. Of Americans who now make the federal minimum wage of $5.15 an hour, 35 percent are sole breadwinners and the typical minimum-wage worker brings in half of total family income.

And while 7.3 million would directly get a raise, the Economic Policy Institute estimates that an additional 8 million would likely get an indirect bump up -- meaning a raise for 15 million Americans. ...

A Reasonable Bill: Finally, as to the fear that higher minimum wage would crimp labor markets... The claims by opponents that minimum wage increases cost jobs look weaker and weaker over time. No one has yet rebutted convincingly David Card and Alan Krueger's study that compared fast-food jobs on the border of New Jersey and Pennsylvania, and found no decrease in lower-wage jobs after New Jersey raised its state minimum wage.

Rather, the Economic Policy Institute, Fiscal Policy Institute, and Center for American Progress have all found that states that raised minimum wages above the federal level have had just as good, if not better, employment and small business performance than states that haven't.

Heading Off Democrats: The truth is Mr. President, I'd be surprised if your political advisers wouldn't support this advice. After all, there is real hope in Democratic circles that ... minimum-wage referendums in November will increase turnout among Democrats and progressive independents. ...

Update: Greg Mankiw complains that Gene Sperling only looks at "a single controversial study that finds no adverse side effects," then presents only one side himself in rebuttal. Brad DeLong adds evidence that counters Mankiw's.

    Posted by on Thursday, June 22, 2006 at 01:11 AM in Economics, Policy, Politics | Permalink  TrackBack (0)  Comments (37)


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