minimum wage

[rushmc 23]

Had a little more time this AM.....


July 25, 2006

Raising the Minimum Wage Hurts Vulnerable Workers' Job Prospects Without Reducing Poverty
by James Sherk


When the government changes the law, individuals respond to those changes. Because of this, the true effects of a law often differ radically from its authors’ intentions. For example, Congress created welfare to help the poor in times of need, but instead it created a cycle of dependence trapping low-income Americans in poverty.



Similarly, raising the minimum wage brings with it unintended consequences that run counter to lawmakers’ aim of helping the working poor. Like anything else, when the price of labor rises, businesses buy less of it. The role of the minimum wage in raising unemployment is well known and well documented.[1] But even worse, recent research has shown that higher minimum wages reduce teenage education levels and decrease workers’ long-term earnings. Studies also show that the minimum wage does not reduce poverty. As always, Members of Congress should look beyond their good intentions and consider the full effects of proposed policies. If they do, they will reject raising the minimum wage.



Minimum Wages Reduce School Enrollment

Contrary to the rhetoric of those who favor raising the minimum wage, most people affected by the minimum wage are actually young workers. Individuals between the ages of 16 and 24 accounted for 53 percent of all minimum wage-earners in 2005.[2] When the minimum wage rises, it increases the incomes of teenagers with minimum-wage jobs, making entering the workforce more attractive. This, in turn, can be expected to cause some students to spend less time in school and more time working. While the overall number of minimum-wage jobs might decrease, if employers prefer to hire teenagers to low-skilled adults, the number of teenagers enrolled in school would drop.



Recent research has confirmed exactly this effect. David Neumark, professor of economics at Michigan State University, and William Wascher, a researcher with the Federal Reserve, found that minimum wage hikes decrease the proportion of teenagers enrolled in school.[3] In states which allow students to drop out of school before they are 18, a 10 percent increase in the minimum wage caused teenage school enrollment to drop by two percent. In states which require students to stay in school until they are 18, raising the minimum wage had no effect. In sum, when students have the option, higher minimum wages motivate some to leave school and start working.



Another recent paper confirms this conclusion. Duncan Chaplin of the Urban Institute, Mark Turner of John Hopkins University, and Andreas Pape of Michigan State University examined teenagers’ continuation ratios—the proportion of a school’s students in any year who either graduate or progress to the next grade level.[4] They found that higher minimum wages decreased continuation ratios and led teenagers to drop out of school. Again, this result was present only in states where teenagers could drop out of school at younger ages.



Workers need skills and education to get ahead in the economy, and workers without a high school diploma face difficult career prospects. Raising the minimum wage actually motivates teenagers to make choices that may push them into poverty later in life.



Long-Term Effects of Minimum Wages

The fact that minimum wages reduce educational attainment suggests examining their long-term effects. In a recent study, Neumark and Olena Nizalova, of Michigan State University, examined the incomes of adults who had been teenagers when minimum wages rose in their states.[5] They found that minimum wage hikes reduced both the probability of holding a job and the incomes of workers exposed to them over a decade later. They also found that this negative effect is larger for African-Americans than for whites, perhaps because more African-Americans hold jobs that pay near the minimum wage.



Raising the minimum wage has these negative long-term effects because it alters the choices that people make today in ways that have long-term consequences. It induces some students to drop out of school, reducing their long-term employability. By raising unemployment and eliminating entry-level jobs, minimum wage hikes also eliminate opportunities for workers to gain valuable experience and skills that prepare them for future jobs. These unintended consequences severely hamper low-income workers’ future job and earning prospects.



Minimum Wage Increases Do Not Reduce Poverty

For all the negative unintended effects of the minimum wage, it is perhaps not surprising that the minimum wage does not reduce poverty.[6] Neumark and Wascher found that minimum wage hikes increased the probability that poor families escaped poverty but also increased the probability that previously non-poor families fell below the poverty line. Overall, poverty rates did not change. Neumark and Wascher conclude that raising minimum wages does not reduce poverty:



On balance, we find no compelling evidence supporting the view that minimum wages help in the fight against poverty. Rather, because not only the wage gains but also the disemployment effects of minimum wage increases are concentrated among low-income families, the various tradeoffs created by minimum wage increases more closely resemble income redistribution among low-income families than income redistribution from high- to low-income families.[7]



On balance, then, the minimum wage leaves low-income Americans no better off in the short term and far worse off in the long term.



Conclusion

Due to unintended effects, a law can achieve the opposite of its supporters’ intentions. The minimum wage is such a law. It is intended to reduce poverty, but it does not. Instead it encourages teenagers to drop out of school and reduces low-income workers’ future job prospects and earnings. Good intentions are not enough. Congress should not pass a destructive minimum wage hike that will harm the most vulnerable American workers.

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[dreamdancer 0]

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James Sherk

works for...

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The Heritage Foundation is an American conservative-leaning think tank based in Washington, D.C.

In the 1980s and early 1990s, the Heritage Foundation was a key architect and advocate of the "Reagan Doctrine", under which the United States government supported anti-Communist resistance movements in such places as Afghanistan, Angola, Cambodia and Nicaragua and generally supported global anti-communism during the Cold War. Heritage foreign policy analysts also provided policy guidance to these rebel forces and to dissidents in Eastern bloc nations and Soviet republics.

The foundation was instrumental in advancing President Ronald Reagan's belief that the former Soviet Union was an "evil empire" and that its defeat, not its mere containment, was a realistic foreign policy objective. Heritage also played a key role in building support for Reagan's plans to build an orbital ballistic missile shield, known as the "Strategic Defense Initiative", or more popularly, "Star Wars."

Since the end of the Cold War, Heritage has continued to be an active voice in foreign affairs and has been broadly supportive of President George W. Bush's foreign policies. Speaking at the Heritage Foundation in November 2007, Bush predicted that fifty years from then a future U.S. President would return to the Heritage Foundation and say, "Thank God that generation that wrote the first chapter in the 21st century understood the power of freedom to bring the peace we want."

http://en.wikipedia.org/wiki/Heritage_Foundation

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[rushmc 23]

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Quote

James Sherk

works for...

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The Heritage Foundation is an American conservative-leaning think tank based in Washington, D.C.

In the 1980s and early 1990s, the Heritage Foundation was a key architect and advocate of the "Reagan Doctrine", under which the United States government supported anti-Communist resistance movements in such places as Afghanistan, Angola, Cambodia and Nicaragua and generally supported global anti-communism during the Cold War. Heritage foreign policy analysts also provided policy guidance to these rebel forces and to dissidents in Eastern bloc nations and Soviet republics.

The foundation was instrumental in advancing President Ronald Reagan's belief that the former Soviet Union was an "evil empire" and that its defeat, not its mere containment, was a realistic foreign policy objective. Heritage also played a key role in building support for Reagan's plans to build an orbital ballistic missile shield, known as the "Strategic Defense Initiative", or more popularly, "Star Wars."

Since the end of the Cold War, Heritage has continued to be an active voice in foreign affairs and has been broadly supportive of President George W. Bush's foreign policies. Speaking at the Heritage Foundation in November 2007, Bush predicted that fifty years from then a future U.S. President would return to the Heritage Foundation and say, "Thank God that generation that wrote the first chapter in the 21st century understood the power of freedom to bring the peace we want."

http://en.wikipedia.org/wiki/Heritage_Foundation

Yes he does. Everybody works for somebody for the most part. Does not change his research.

The other link?

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[jerryzflies 0]

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As it has before, an increase in the minumum wage would put more out of work and therfore MORE on the government programs

nope, increasing the minimum wage doesn't increase unemployment (tell me when you think it has)

Every time manditory increases in the min wage have been implimented, thats when.

now proven wrong. next!

Ok, "every time" was a bit much. but, saying you have proven you point with one very weak example is just a much an exageration.

Florida, 4th most populous state in the USA, going contrary to the governor's (Bush) prediction and the Chamber of Commerce's prediction (and YOUR prediction) is NOT a weak example.

If you can't fix it with a hammer, the problem's electrical.

[jerryzflies 0]

Nice OPINION piece there from the right wing. Sucks that Florida proved them wrong.

If you can't fix it with a hammer, the problem's electrical.

[dreamdancer 0]

and another very strong example...

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Since the introduction of a national minimum wage in the UK in 1999, its effects on employment were subject to extensive research and observation by the Low Pay Commission. The Low Pay Commission found that, rather than make employees redundant, employers have reduced their rate of hiring, reduced staff hours, increased prices, and have found ways to cause current workers to be more productive (especially service companies). Neither trade unions nor employer organizations contest the minimum wage, although the latter had especially done so heavily until 1999.

http://en.wikipedia.org/wiki/Minimum_wage

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[rushmc 23]

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Nice OPINION piece there from the right wing. Sucks that Florida proved them wrong.

1 outa ? is proof?

You voted Obama....... right?

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[rushmc 23]

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and another very strong example...

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Since the introduction of a national minimum wage in the UK in 1999, its effects on employment were subject to extensive research and observation by the Low Pay Commission. The Low Pay Commission found that, rather than make employees redundant, employers have reduced their rate of hiring, reduced staff hours, increased prices, and have found ways to cause current workers to be more productive (especially service companies). Neither trade unions nor employer organizations contest the minimum wage, although the latter had especially done so heavily until 1999.

http://en.wikipedia.org/wiki/Minimum_wage

The UK is not the US and wiki is way worse than any site ever quoted here. So keep using it

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[dreamdancer 0]

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The other link?

both your other links only give excerpts and neither addresses my points - the first of which is that regardless of marginal employment effects the result is less paid out through government benefits (because people are earning more). this will also result in a tax boost (as people spend their 'extra' money)

do you understand the concept of the velocity of money?

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The velocity of money is the average frequency with which a unit of money is spent in a specific period of time. Velocity associates the amount of economic activity associated with a given money supply. When the period is understood, the velocity may be present as a pure number; otherwise it should be given as a pure number over time. In the equation of exchange, velocity of money is one of the key variables determining inflation.

http://en.wikipedia.org/wiki/Velocity_of_money

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[rushmc 23]

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The other link?

both your other links only give excerpts and neither addresses my points - the first of which is that regardless of marginal employment effects the result is less paid out through government benefits (because people are earning more). this will also result in a tax boost (as people spend their 'extra' money)

do you understand the concept of the velocity of money?

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The velocity of money is the average frequency with which a unit of money is spent in a specific period of time. Velocity associates the amount of economic activity associated with a given money supply. When the period is understood, the velocity may be present as a pure number; otherwise it should be given as a pure number over time. In the equation of exchange, velocity of money is one of the key variables determining inflation.

http://en.wikipedia.org/wiki/Velocity_of_money

I will never go to a wiki link again uless it is for a definition. It is a junk site at best. YOU CAN do better.

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[rushmc 23]

I guess this is kind of a definition though....

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[dreamdancer 0]

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The UK is not the US.

i didn't mention either country with my op (the whole world is not the us)

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[rushmc 23]

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The UK is not the US.

i didn't mention either country with my op (the whole world is not the us)

This is the first line of your post I responded to.

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Since the introduction of a national minimum wage in the UK in ......

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[dreamdancer 0]

this is my opening post:

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the new 'new deal' should obviously include a substantial increase in the minimum wage (at least doubling it). this will have the benefit of fewer workers drawing government benefits, reducing the demand for migrant labour and increasing the velocity of money (helping fight deflation)

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[rushmc 23]

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this is my opening post:

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the new 'new deal' should obviously include a substantial increase in the minimum wage (at least doubling it). this will have the benefit of fewer workers drawing government benefits, reducing the demand for migrant labour and increasing the velocity of money (helping fight deflation)

Well that is really nice. I responded to the post I referenced. YOU brought the UK in with that post. YOU have referenced more than once. I am only concerned with the affects on the US. IF YOU want to speak to the US or the UK please be consistant. I would not respond to you if YOU spoke only to the UK as I dont care how those in the UK handle thier polictics

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[kbordson 8]

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I would not respond to you if YOU spoke only to the UK as I dont care how those in the UK handle thier polictics

Agreed.

If a different country chooses to raise their minimum wage, I have no opinion on what that country might choose to do.

If you were honestly discussing raising the minimum wage over there, have fun.

[rushmc 23]

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I would not respond to you if YOU spoke only to the UK as I dont care how those in the UK handle thier polictics

Agreed.

If a different country chooses to raise their minimum wage, I have no opinion on what that country might choose to do.

If you were honestly discussing raising the minimum wage over there, have fun.

Not me, I get enough of a pain just thinking of US issues.

I am amazed out how many out siders care about internal US politics.....

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[kbordson 8]

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Agreed.

Not me, I get enough of a pain just thinking of US issues.

I am amazed out how many out siders care about internal US politics.....

[rushmc 23]

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Agreed.

Not me, I get enough of a pain just thinking of US issues.

I am amazed out how many out siders care about internal US politics.....

Sorry. I was agreeing WITH you but directing my further comments to Mr. Dreamer



I know

I was agreeing with you!

Dam internet

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[dreamdancer 0]

so neither of you understand the concept of the velocity of money

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[dreamdancer 0]

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If, for example, in a very small economy, a farmer and a mechanic, with just $50 between them, buy goods and services from each other in just three transactions over the course of a year

Mechanic buys $40 of corn from farmer.
Farmer spends $50 on tractor repair.
Mechanic spends $10 on barn cats from farmer
then $100 changed hands in course of a year, even though there is only $50 in this little economy. That $100 level is possible because each dollar was spent an average of twice a year, which is to say that the velocity was 2 / yr.

http://en.wikipedia.org/wiki/Velocity_of_money

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[kbordson 8]

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so neither of you understand the concept of the velocity of money

Maybe the velocity of money is different over there. km/hr v. mph differences.

And I still stand by the fact that OVER HERE, Bush DID in fact raise the minimum wage over the past three years. And the fact that it isn't all sunshine and roses and bunny rabbits. Not directly correlating cause and effect, just stating that your comments regarding raising the minimum wage will be so wonderful might not be entirely truthful and may in fact further hurt businesses.

[dreamdancer 0]

at the moment nearly every economy in the world is trying to boost their money supply to fend off deflation - whatever the rate in an individual country increasing the minimum wage will increase the velocity of money (and therefore boost the money supply). why? - because they are the most likeliest economic group to quickly spend their income.

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[kbordson 8]

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at the moment nearly every economy in the world is trying to boost their money supply to fend off deflation - whatever the rate in an individual country increasing the minimum wage will increase the velocity of money (and therefore boost the money supply). why? - because they are the most likeliest economic group to quickly spend their income.

Not saying that all will... but in many cases, buying chinese imports from Walmart does not help the American infrastructure.

Raising the minimum wage may just further raise the cost of US production without an actual rise in US production of resources.

[dreamdancer 0]

you're right - it may all go to china

...but it might not

(and if it does all go to china isn't there the chance that it will swirl around there and then come back to the originating country a little later)

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding