Winners and Losers of the Minimum Wage Hike

[FreakinDJ]

As if ADDING $1.6Billion into the economy that will be spent immediately is a bad thing.

Winners and Losers of the Minimum Wage Hike

by Lisa Scherzer
Thursday, July 23, 2009

Millions of American workers are about to get a federally-mandated raise, but the recession has left many wondering if and how the economy will benefit.

The raise, which will go into effect on July 24, represents the final wage hike in a three-step boost to the federal minimum wage increase passed by Congress two years ago. The minimum wage will rise 70 cents -- or about 11% -- to $7.25 per hour from $6.55. (Last summer, it went up 70 cents from $5.85.)

Whether Congress would have approved the wage hike had legislators known how dismal the economy would look two years later is an open question. But there's no doubt the timing is awkward.

"There's low inflation, high unemployment and this is when teens are looking for summer jobs," says Mike Gibbs, a professor of economics and human resources at the University of Chicago.

http://finance.yahoo.com/career-work/article/107389/winners-and-losers-of-the-minimum-wage-hike.html?mod=career-salary_negotiation

Time and time agai it has been proven "Trickle Down Economics" does not work, yet this Professor Gibbs is making an argument again the Federal Min Wage increase

on edit

Prof Gibbs coming from University of Chicago and advocating Trickle Down theory is the norm there

The nearly 120-year-old University of Chicago, once the academic home of free-market advocates such as Milton Friedman

[Deja Q]

1. Trickle down has failed. 30 years; it has NOT worked. It HAS been given ample time.

[FreakinDJ]

5. All "Trickle Down" has accomplished is the current economic crisis

[econoclast]

2. Not "adding 1.6 billion to the economy" just reshuffeling the existing deck

According to the National Bureau of Economic Research ( working paper 12663 ):

From the Abstract-

"We review the burgeoning literature on the employment effects of minimum wages - in the United States and other countries - that was spurred by the new minimum wage research beginning in the early 1990s. Our review indicates that there is a wide range of existing estimates and, accordingly, a lack of consensus about the overall effects on low-wage employment of an increase in the minimum wage. However, the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries. Two other important conclusions emerge from our review. First, we see very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups."


So it appears that at least in part the additional wages paid out to those receiving the higher minimum are coming from the wages lost by those whose jobs were terminated

[FreakinDJ]

4. Not True - Raising Minimum Wage is GOOD for the Economy

We all know how many RATpubliCON FreepTards are out there claiming "Raising the Minimum Wage in this time of Economic uncertaintee is bad for the economy"

Well that simply isn't true as proven time and time again

The Impact from Last Minimum Wage Increase Is Clear: 10 Million Workers Got A Raise, and There Is No Evidence that Jobs Were Lost. Since the last minimum wage increase was signed into law in 1996, the economy has created more than 10 million job, and the unemployment rate has fallen from 5.2 percent in September 1996 to 4.1 percent in February 2000. Labor market trends for workers most affected by the minimum wage increase -- including younger workers with lower educational levels and minorities -- also show no negative impact of the minimum wage on employment.

Economic Studies Find No Negative Effect of the Minimum Wage on Employment. Numerous careful economic studies, including ones by David Card and Alan Krueger of Princeton University, have found that increasing the minimum wage has no negative effect on employment. Recent research has even suggested that higher wages can increase employment, because they increase employers’ ability to attract, retain, and motive workers. And they benefit workers by increasing the reward to work.

Recent Increases in the Minimum Wage Have Helped Reduce the Welfare Caseload. By increasing the reward to work, a higher minimum wage attracts new workers into the workforce. An analysis by the Council of Economic Advisers showed that the minimum wage increase of 1996 and increased minimum wages in some states were responsible for 10 to 16 percent of the decline in welfare caseloads between 1996 and 1998.

http://clinton4.nara.gov/WH/New/html/20000308.html

History is a Real Bitch for some of these "Trickle Down / Free Trade" RATpubliCONs. Especially now that they have plunged the whole world into Economic Crisis with their policies

[beardown]

7. Myth economics

Thanks for giving us the chance to review yet another in the endless string of right wing economic myths. Tomorrow, we'll be discussing the Laffer curve.

If raising the minimum wage was killing off jobs, then why aren't the right wing hacks pointing out the horrible job losses that have been seen by the almost half of the states that have higher state minimum wages than the federal minimum wage? Because those states have NOT seen the job losses, although that normally doesn't stop the right wing from claiming it. Perhaps only the federal min wage impacts jobs, while state min wage, even when they are set higher than the fed min wage, have no impact.

How come the right wing hacks aren't pointing out the huge jobs losses in the years leading up to the 1990's when the value of the min wage in constant dollars was considerably higher than the 1990's and after? Because those years did NOT see the jobs losses.

Of course if you raise the min wage too much you'll see net jobs losses, but I think that we are well below that level. For each business that lays off a worker because they can't afford paying the higher min wage, there are many businesses that will hire workers due to the purchases from thousands of min wage workers who now have more money and are in the economic situation that will see them spending almost off of the additional wage hike, instead of investing it offshore.

The min wage gets the money into the economy and drives activity. The Reagan, and Bush tax cuts have taken billions out of the economic circle and led directly to a distribution of wealth not seen since 1929 and it's led to the exact same economic disaster. Just how many times do we have to hit ourselves in the head with a hammer before we decide it's a bad idea? Apparently, more than once for right wingers.

But stick with the right wing economic myths, it'll help take the attention away from the Reagan Depression that was caused by trying 28 years of right wing economics.

[FreakinDJ]

9. Great Post and Welcome to DU

The min wage gets the money into the economy and drives activity. The Reagan, and Bush tax cuts have taken billions out of the economic circle and led directly to a distribution of wealth not seen since 1929 and it's led to the exact same economic disaster.

Thats reality for you folks - pretty hard to deny what we have seen over and over again each and every time the Fed Min Wage is raised

[zbdent]

3. as I recall, when Congress raised the minimum wage in the 90s, Rush Limbaugh

was quoted as saying "Nobody works for minimum wage!" ... and, almost with the same breath, he claimed that it would bankrupt businesses which have workers making the minimum wage.

So, how would it bankrupt businesses where nobody is making the minimum wage?

Intellectual disconnect ... along the same lines as "liberals want to kill babies with abortion" while "encouraging welfare moms to have more babies"!

[fasttense]

6. Actually, if Obama's economic advisers knew what they were doing and really understood real

supply and demand, they would have gotten Obama to push through congress an even larger minimum wage increase, to about $10 an hour. If that had been done back in January or February, along with the stimulus plan and bank regulations, we wouldn't have to go through this coming depression.

[Warpy]

8. Busniness has never called for the repeal of any

minimum wage increase, although they all squeal like stuck pigs whenever one is threatened.

The reason is that every minimum wage increase results in increased business all the way up the line to the top. Give poor people more money and they will spend it all and spending is what drives the 70% of the economy represented by the consumer economy.

Money at the top is hoarded or worse, creates speculative bubbles. Money at the bottom is kept moving and does the work of keeping the economy vibrant.

I don't expect anybody at the Chicago School of Economics to grasp that simple fact and I won't believe this country has progressed until that institution is razed and the ground sown with plutonium to remain as a toxic memorial to the stupidest economic ideas ever devised.