23 April 2006

Is the minimum wage really $5.15?

If we raise the minimum wage to a "living wage," or about $11/hr here in Charlottesville, we have to worry that some employers will not be willing to pay that much and simply fire some staff and cut back production. But as Don Boudreaux notes, money isn't everything,

A worker's job quality surely matters to him. How many breaks is he allowed to take while at work? How readily does his employer forgive him for innocent mistakes? How willing is his employer to allow him to take a day off to sit with his sick child? How comfortable and safe is the workplace? These and countless other "non-price" features of a job are vitally important even though they don't show up in the wage figure.

If employers respond to this hike in the minimum wage not by hiring fewer low-skilled workers but instead by working their low-skilled workers harder, the quality of low-skilled jobs falls. Of course, these workers are now being paid a higher wage. But only those who focus exclusively on wages will conclude that this increase in the minimum wage definitely makes workers better off.

Many argue that empirical analysis show no significant increase in unemployment due to minimum wage laws. Is there any analysis of work quality? This would be pretty important, especially with respect to the current push by some UVa students to increase the wage earned by UVa employees, who will probably keep their jobs (at least initially) even after a wage hike.

1 comment:

Juan Carlos Bisso said...

That's very true. Imposing the minimum salary will induce UVa to modify those aspects that are not regulated (like quality at work).

I was reading the economic arguments of the supporters of the living wage (http://www.student.virginia.edu/~wasu/LWECON.doc) and have found that they assume that several other things will remain constant after imposing the $10.72. I'll scrutinize this in more detail and post something about it soon.