The Right Minimum Wage: $0.00
5th August 2015
The Federal minimum wage has been frozen at $3.35 an hour for six years. In some states, it now compares unfavorably even with welfare benefits available without working. It’s no wonder then that Edward Kennedy, the new chairman of the Senate Labor Committee, is being pressed by organized labor to battle for an increase.
No wonder, but still a mistake. Anyone working in America surely deserves a better living standard than can be managed on $3.35 an hour. But there’s a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage by a substantial amount would price working poor people out of the job market. A far better way to help them would be to subsidize their wages or – better yet – help them acquire the skills needed to earn more on their own.
An increase in the minimum wage to, say, $4.35 would restore the purchasing power of bottom-tier wages. It would also permit a minimum-wage breadwinner to earn almost enough to keep a family of three above the official poverty line. There are catches, however. It would increase employers’ incentives to evade the law, expanding the underground economy. More important, it would increase unemployment: Raise the legal minimum price of labor above the productivity of the least skilled workers and fewer will be hired.
As recently as 1987, the New York Times was on the right side of the minimum wage question.