Saturday, February 16, 2013

Why $9?

Since the State of the Union address, the minimum wage has heated up again as a political issue.  You can read my previous posts on the topic by clicking here.  (Unfortunately, some of the links in these old posts are now dead.)

There is one question I would like to see some reporter ask Alan Krueger, the president's chief economist: How did they decide that $9 per hour is the right level?  Why not $10 or $12 or $15 or $20?  Presumably, the president's economic team must believe that the adverse employment effects become sufficiently large at some point that further increases are undesirable.  But what calculations led them to decide that $9 strikes the right balance?