Republicans and the Minimum Wage
According to today's Wall Street Journal,
The minimum wage is, I admit, controversial among economists. But many economists, and surely most allied with the Republican party, take the view that Linda Gorman expressed so succinctly:
Breaking with its Republican leadership, the House Appropriations Committee approved a $2.10-an-hour increase in the minimum wage as part of a budget bill that adds $4 billion to President Bush's requests for domestic programs.
The 32-27 vote is certain to be challenged when the $596.5 billion measure comes to the House floor. But the seven Republican defections underscored the growing prominence of the wage issue going into the November elections.
Unfortunately, neither laudable intentions nor widespread support can alter one simple fact: although minimum wage laws can set wages, they cannot guarantee jobs. In reality, minimum wage laws place additional obstacles in the path of the most unskilled workers who are struggling to reach the lowest rungs of the economic ladder.Consistent with this assessment, here the abstract of a NBER study by David Neumark and Olena Nizalovaof on the long-run effects of the minimum wage:
Exposure to minimum wages at young ages may lead to longer-run effects. Among the possible adverse longer-run effects are decreased labor market experience and accumulation of tenure, lower current labor supply because of lower wages, and diminished training and skill acquisition. Beneficial longer-run effects could arise if minimum wages increase skill acquisition, or if short-term wage increases are long-lasting.
We estimate the longer-run effects of minimum wages by using information on the minimum wage history that workers have faced since potentially entering the labor market. The evidence indicates that even as individuals reach their late 20's, they work less and earn less the longer they were exposed to a higher minimum wage, especially as a teenager. The adverse longer-run effects of facing high minimum wages as a teenager are stronger for blacks. From a policy perspective, these longer-run effects of minimum wages are likely more significant than the contemporaneous effects of minimum wages on youths that are the focus of most research and policy debate.