Weekend Economists Struck By Stars, Moons, Meteors February 15-18, 2013

[Demeter]

14. How High Could the Minimum Wage Go?

http://truth-out.org/news/item/14574-how-high-could-the-minimum-wage-go

A 70 percent boost - to $12.30/hour - would help millions of workers, without killing jobs.

The minimum wage needs a jolt—not just the usual fine-tuning—if it’s ever going to serve as a living wage. Annual full-time earnings at today’s $7.25 federal minimum wage are about $15,000 per year. This doesn’t come anywhere near providing a decent living standard by any reasonable definition, for any household, least of all households with children. But among the seventeen states that either have active campaigns to raise their minimum wage or have raised them already this year, none have suggested raising the wage floor by more than 20%.

How high can the minimum wage go? As it turns out, a lot higher. Economists typically examine whether current minimum-wage laws hike pay rates up too high and cause employers to shed workers from their payrolls in response. But the current stockpile of economic research on minimum wages suggests that past increases have not caused any notable job losses. In other words, minimum wages in the United States have yet to be set too high. In fact, if we use past experience as a guide, businesses should be able to adjust to a jump in the minimum wage as great as 70%. That would push the federal minimum wage up to $12.30. In states with average living costs, full-time earnings at $12.30 per hour can cover the basic needs of the typical low-income working household (assuming both adults in two-adult households are employed).

Why is such a large increase possible? It’s because minimum-wage hikes—particularly those in the 20-to-30% range adopted in the United States—impose very modest cost increases on businesses. This is true even for the low-wage, labor-intensive restaurant industry. And because these cost increases are so modest, affected businesses have a variety of options for adjusting to their higher labor costs that are less drastic than laying off workers....

MORE SWEET REASON TO BE IGNORED BY THE 1%