A Minimal Minimum-Wage Hike

Dec 10 2013 @ 2:40pm

That’s what Richard Posner supports:

There is much talk about increasing the minimum wage to $10 or $13 an hour. It seems both imprudent and unnecessary to consider such steep, sudden jumps. I would favor increasing the federal minimum wage by 20 percent, to $8.70 an hour. That would yield a minimum-wage worker an annual income (assuming he or she worked 2000 hours per year) of $17,400—still very modest; but if he disemployment effect proves to be slight, as I would guess it would be, a further increase could be considered. At the very least, the 20 percent increase would yield valuable information on the elasticity of unemployment to changes in the minimum wage.

Becker also worries about raising the minimum wage too high:

Valuable perspective comes from the French experience, for the French minimum wage of almost $13 an hour has been one of the highest in the developed world. It is no coincidence that the unemployment rate of French youth is over 25%, and it is said to be over 40% for young Moslem males. A study by Abowd, et al, “Minimum Wages and Employment in France and the United States”, 2009 shows that even before the financial crisis hit, the high French minimum wage was appreciably impacting the employment of young French men and women. They did not find much affect of the much lower American minimum on employment, although others have shown that even the relatively low American minimum wage prices some teenagers out of the labor market since they do not add enough value to employers.

Recent Dish on the minimum wage here.