The response that economists are trained to give is that raising wages will always eliminate jobs. However, when economists actually try to extract data that might prove that contention, they arrive at a variety of conclusions: some predict jobs are actually created, some predict jobs are lost, and some see no effect. One suspects that if one works at it one can always find data to support whatever conclusion one wishes to reach. The problem seems to be too complicated for economists to figure out. That is fortunate because the definition of a minimum wage is, in fact, too important to be left in the hands of the economists.
President Obama proposed raising the minimum wage to $9 per hour over a few years from its current value of $7.25. Let’s put this proposal in perspective and evaluate it in light of other countries’ experiences.
An article in The Economist provides this data from the OECD:
If raising the minimum wage is such a job killer, why do other countries seem to do quite well with a value much larger relative to their median income? Japan has a minimum wage equal, relative to median, to that of the United States at 0.38 (2011). The OECD data indicate that only the Czech Republic at 0.35 and perhaps Mexico for whom data is not provided have a lower value. France is not the country most generous to its lowest wage workers; that honor goes to Turkey at 0.71. It also has a relatively healthy economy.
Usually the United States and the other English-speaking countries follow similar logic when it comes to social and economic positions. In this case, the United States is a definite outlier: Australia, 0.54; Canada, 0.45; Ireland, 0.48; New Zealand, 0.59; United Kingdom, 0.47.
If there are economic laws, they seem to behave differently in the United States.
This source provides added insight.
If the current value for the minimum wage is projected back in time in current dollars, one determines that the value of the minimum wage was actually highest in the1960s at the equivalent of about $10 per hour. There were a lot of problems in the 1960s, but it is difficult to recall a too-high minimum wage being one of them.
An article in Bloomberg Businessweek by Karen E. Klein and Nick Leiber provides additional background.
A number of states have already raised their own minimum wage above that set by the federal government.
The states of Washington and Oregon are already at the value proposed by Obama. They seem to have escaped economic calamity.
The authors indicate that there is now significant support from within the business community for raising the minimum wage.
"That includes dozens of business groups and networks composed primarily of small business owners such as the Main Street Alliance, the National Latino Farmers & Ranchers Trade Association, and the Greater New York Chamber of Commerce. ‘Our women [business owners] who pay a living wage have an advantage over their larger counterparts who don’t,’ says Margot Dorfman, chief executive officer of the U.S. Women’s Chamber of Commerce, an organization with 500,000 members, three-quarters of whom are small business owners. ‘Whether Obama’s proposal is high enough or the time frame is fast enough is the question’."
The traditional view persists.
In spite of what these spokespersons might be saying, business owners have essentially decided the matter already. Most are already paying a higher wage than the federal minimum because they find it a more efficient way to run their businesses; they attract better workers and suffer less employee turnover. This owner states the case nicely.
The responses to a proposed rise in the minimum wage are predictable. Those who worry about the health of society are in favor; those who worry about the income of employers are opposed. Economics is not the issue. One’s view of society is what is being disputed, with politics being the vehicle for waging the argument.