A group of prominent economist including Robert Reich, Jeffrey Sachs, Joseph Stiglitz and Laura Tyson have sent a letter to Congressional leaders recommending a 35% increase in the minimum wage from $7.25 per hour to $9.80 per hour by 2014.
The group identifies the following benefits from a 35% increase in the minimum wage:
1. "This policy would directly provide higher wages for close to 20 million workers by 2014. Furthermore, another nearly 9 million workers whose wages are just above the new minimum would likely see a wage increase through “spillover” effects, as employers adjust their internal wage ladders."
2. "A minimum wage increase can also serve to stimulate the economy as low-wage workers spend their additional earnings potentially raising demand and job growth. Therefore, pursuing a higher minimum wage at this juncture will not only provide raises for low-wage workers but would provide some help on the jobs front as well."
And what about the costs of artificially raising the minimum wage for unskilled workers? Well, there apparently are none! Here's the only thing the letter says about costs:
"In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum wage workers, even during times of weakness in the labor market."
MP: Here are some important questions for the group of economists who apparently believe in a perfectly (or nearly) vertical demand curve for unskilled labor:
If a 35% increase in the government-mandated wage for unskilled workers can deliver such a huge stimulus to the economy by directly raising earnings for 29 million workers (almost 22% of payroll employment), and then creating a secondary stimulus through increases in both spending and jobs throughout the economy, why are you being so stingy? Why not advocate an even larger increase in the government-mandated minimum wage by 50 or 75% to create an even larger economic stimulus?