Minimum wage

lowest wage which can be paid legally in a state for working

A minimum wage is the lowest hourly number, daily or monthly remuneration that employers may legally pay to workers.  Equivalently, it is the lowest wage at which workers may legally sell their labor.

The model for us rich guys should be Henry Ford. When Ford famously introduced the $5 day, which was twice the prevailing wage at the time, he didn't just increase the productivity of his factories, he converted exploited autoworkers who were poor into a thriving middle class who could now afford to buy the products that they made. Ford intuited what we now know is true... Raising wages increases demand, which increases hiring, which in turn increases wages and demand and profits, and that virtuous cycle of increasing prosperity is precisely what is missing from today's economic... ~Nick Hanauer


QuotesEdit

  • Nearly 50 years ago, George Stigler implored economists to be “outspoken and singularly agreed” that increases in the minimum wage reduce employment. The reasoning behind this prediction is simple and compelling. According to the model presented in nearly every introductory economics textbook, an increase in the minimum wage lowers the employment of minimum-wage workers. This logic has convinced most economists: polls show that more than 90 percent of professional economists agree with the prediction that a higher minimum wage reduces employment. Such a high degree of consensus is remarkable among a profession renowned for its bitter disagreements. But there is one problem: the evidence is not singularly agreed that increases in the minimum wage reduce employment. This book presents a new body of evidence showing that recent minimum wage increases have not had the negative employment effects predicted by the textbook model. Some of the new evidence points toward a positive effect of the minimum wage on employment; most shows no effect at all. Moreover, a reanalysis of previous minimum wage studies finds little support for the prediction that minimum wages reduce employment. If accepted, our findings call into question the standard model of the labor market that has dominated economists’ thinking for the past half century.
    • David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage (1995), Ch. 1. Introduction and Overview
  • Women, teen-agers, Negroes and particularly Negro teen-agers, will be especially hard hit. I am convinced that the minimum-wage law is the most anti-Negro law on our statute books—in its effect not its intent. It is a tragic but undoubted legacy of the past—and one we must try to correct—that on the average Negroes have lower skills than whites. Similarly, teen-agers are less skilled than older workers. Both Negroes and teen-agers are only made worse off by discouraging employers from hiring them. On the-job training—the main route whereby the unskilled have become skilled—is thus denied them.
    • Milton Friedman, “Minimum-Wage Rates”, Newsweek, 26 September 1966, reprinted in An Economist's Protest: Columns in Political Economy (1972)
  • The model for us rich guys should be Henry Ford. When Ford famously introduced the $5 day, which was twice the prevailing wage at the time, he didn't just increase the productivity of his factories, he converted exploited autoworkers who were poor into a thriving middle class who could now afford to buy the products that they made. Ford intuited what we now know is true, that an economy is best understood as an ecosystem and characterized by the same kinds of feedback loops you find in a natural ecosystem, a feedback loop between customers and businesses. Raising wages increases demand, which increases hiring, which in turn increases wages and demand and profits, and that virtuous cycle of increasing prosperity is precisely what is missing from today's economic...
  • June 19, 2013, Bloomberg published an article I wrote called "The Capitalist’s Case for a $15 Minimum Wage." The good people at Forbes magazine, among my biggest admirers, called it "Nick Hanauer's near-insane proposal." And yet, just 350 days after that article was published, Seattle's Mayor Ed Murray signed into law an ordinance raising the minimum wage in Seattle to 15 dollars an hour, more than double what the prevailing federal $7.25 rate is. How did this happen, reasonable people might ask. It happened because a group of us reminded the middle class that they are the source of growth and prosperity in capitalist economies. We reminded them that when workers have more money, businesses have more customers, and need more employees. We reminded them that when businesses pay workers a living wage, taxpayers are relieved of the burden of funding the poverty programs like food stamps and medical assistance and rent assistance that those workers need. We reminded them that low-wage workers make terrible taxpayers, and that when you raise the minimum wage for all businesses, all businesses benefit yet all can compete.
  • I know that most people think that the $15 minimum wage is this insane, risky economic experiment. We disagree. We believe that the $15 minimum wage in Seattle is actually the continuation of a logical economic policy. It is allowing our city to kick your city's ass. Because, you see, Washington state already has the highest minimum wage of any state in the nation. We pay all workers $9.32, which is almost 30 percent more than the federal minimum of 7.25, but crucially, 427 percent more than the federal tipped minimum of 2.13. If trickle-down thinkers were right, then Washington state should have massive unemployment. Seattle should be sliding into the ocean. And yet, Seattle is the fastest-growing big city in the country. Washington state is generating small business jobs at a higher rate than any other major state in the nation. The restaurant business in Seattle? Booming. Why? Because the fundamental law of capitalism is, when workers have more money, businesses have more customers and need more workers. When restaurants pay restaurant workers enough so that even they can afford to eat in restaurants, that's not bad for the restaurant business. That's good for it, despite what some restaurateurs may tell you.
  • Neoliberal economic assumption number one is that the market is an efficient equilibrium system, which basically means that if one thing in the economy, like wages, goes up, another thing in the economy, like jobs, must go down. So for example, in Seattle, where I live, when in 2014 we passed our nation's first 15 dollar minimum wage, the neoliberals freaked out over their precious equilibrium. "If you raise the price of labor," they warned, "businesses will purchase less of it. Thousands of low-wage workers will lose their jobs. The restaurants will close." Except ... they didn't. The unemployment rate fell dramatically. The restaurant business in Seattle boomed. Why? Because there is no equilibrium. Because raising wages doesn't kill jobs, it creates them; because, for instance, when restaurant owners are suddenly required to pay restaurant workers enough so that now even they can afford to eat in restaurants, it doesn't shrink the restaurant business, it grows it, obviously.
  • Over the last 30 years, in the USA alone, the top one percent has grown 21 trillion dollars richer while the bottom 50 percent have grown 900 billion dollars poorer, a pattern of widening inequality that has largely repeated itself across the world. And yet, as middle class families struggle to get by on wages that have not budged in about 40 years, neoliberal economists continue to warn that the only reasonable response to the painful dislocations of austerity and globalization is even more austerity and globalization.
  • I... use my money to build narratives and to pass laws that will require all the other rich people to pay taxes and pay their workers better. And so, for example, the 15-dollar minimum wage that we cooked up has now affected 30 million workers. So that works better.
  • What could be crueler than denying someone just starting out in life the chance to work, to learn skills, and to open new horizons?
    The disastrous results of minimum wage laws are used by enemies of the free market to discredit the free market.
    Minimum wage laws help no one. They harm the economy, they spread poverty, and they kill dreams.
    Minimum wage laws are cruel, and they are a fraud on the poor and the disadvantaged. They must be abolished.
  • Even though most studies show that unemployment tends to increase as minimum wages are imposed or increased, those few studies that seem to indicate otherwise have been hailed in some quarters as having “refuted” this “myth.” However, one common problem with some research on the employment effects of minimum wage laws is that surveys of employers before and after a minimum wage increase can survey only those particular businesses which survived in both periods. Given the high rates of business failures in many industries, the results for the surviving businesses may be completely different from the results for the industry as a whole. Using such research methods, you could interview people who have played Russian roulette and “prove” from their experiences that it is a harmless activity, since those for whom it was not harmless are unlikely to be around to be interviewed. Thus you would have “refuted” the “myth” that Russian roulette is dangerous.
    • Thomas Sowell, Basic Economics, 4th ed. (2010), Ch. 10 Controlled Labor Market
  • The minimum wage provisions of the Fair Labor Standards act of 1938 have been repealed by inflation. Many voices are now taking up the cry for a higher minimum, say, of 60 to 75 cents per hour.
    Economists have not been very outspoken on this type of legislation. It is my fundamental thesis that they can and should be outspoken, and singularly agreed. The popular objective of minimum wage legislation-the elimination of extreme poverty-is not seriously debatable. The important questions are rather (1) Does such legislation diminish poverty? (2) Are there efficient alternatives? The answers are, if I am not mistaken, unusually definite for questions of economic policy. If this is so, these answers should be given.
    • George Stigler, "The Economics of Minimum Wage Legislation", The American Economic Review, Vol. 36, No. 3 (Jun., 1946)

See alsoEdit

External linksEdit

Wikipedia has an article about: