The Minimum Wage

One of the most common misconceptions about the minimum wage is that it only benefits workers who earn it.  This past week my students got the same “quiz” that I give (in some form) every semester:

If you are earning $13/hour, and the minimum wage is raised from $9 to $12, does this hurt you, help you, or have no effect?  A majority says “no effect,’ and most of the rest say “hurt.”

Not so!  Why is anybody paid above minimum wage?  Because their employer wants them to keep working there.  If an assistant manager at a store gets 13/hour ($4 above minimum wage), this is viewed as prestige and as reason for them to stay and put up with the more awkward hours and stress than a $11/hour job.  If suddently every clerk is making $12, the assistant manager’s salary is going to have to go up to keep the job appealing.  (It probably won’t go up a full $3, but will go up substantially, my best guess would be at least $1.50.)

Eventually the effect wears out, but a good rule of thumb (which I learned is college) is that anyone making up to double the minimum wage is making more money than they would if the minimum wage were lower. 


It isn’t discussed until later in the semester but Minimum wages generally benefit the local economy, effectively transferring some money from the richest 1-5% who often don’t live in the local area and and spend a smaller fraction of their money locally to poorer folks who put the money right back into circulation.




The argument doesn’t go ad infinitum, of course.  But as this chart shows, minimum wage in the United States ties with Mexico for the lowest minimum wage as a fracion of either mean of median wage out of any country that has minimum wage laws.  (Brining it up around 50% – 75%, or to the $11 – 13 range would put us near the middle.  $15 would put is near, but not at, the top.)

To conclude, the first word in “enlightened self-interest” is enlightened.  When folks benefit from a polity it really, really helps politically if they know it!

A Really Excellent Series about Debt and Money

A friend who is an anthropology professor (not at Berklee) recommended this 10-part BBC series:  Promises, Promises: A History of Debt.  I listened to the entire thing and it’s absolutely fascinating!  I most enjoyed the first parts, which contained lots of historical information about the evolution of money thousands of year ago.  It taught me many things I’d never known before, such as how standardized money came about through the first primative states trying to find a way to standardize recompense to prevent blood feuds.  Highly recommended!