Monday, August 21, 2006

Election Years Rock!

Like, everything is possible in an election year. And hey, I'm not knocking it - minimum wage need a hike. At least this article mentions the legislature as an integral part of this whole law-making business.

The local news teaser I just say featured a bright-eyed woman saying "hear how the Governor rasied the minimum wage at 11!" He can do that by himself! That guy is a freakin' phenom. A super hero of the highest order - able to enact laws in a single, legislatureless bound.

I'm in no way saying a minimum wage hike isn't worth the good PR for Schwarzenegger. That's because a good deal is still a good deal, even when it isn't the perfect deal (I'm sure the Chamber folks disagree with my "good deal" usage, but that's no surprise).

Still, media soundbites and summaries are interesting things - especially during an election year. Of course, when isn't it an election year? Wonder what Phil will have to say . . . .


jvgordon said...

While I agree that this was a deft political move for both the Governator and Nunez (and Villagairosa by extension), the minimum wage did not need to be increased.

Let's assume that the purpose of a minimum wage hike is to help the poor (as opposed to higher paid union members, who may get raises relative to the minimum wage). The economics literature is unclear about whether minimum wage hikes are actually bad for the poor and by how much (i.e. by reducing the number of minimum wage jobs). However, what is clear is that the minimum wage is quite bad at helping poor people. Most people who get the minimum wage are secondary or tertiary earners in their household (e.g. teenagers with their first job), so the minimum wage isn't well targeted to bringing up the income of the poor. And because federal government benefits are means-tested and penalize working income by reducing benefits, families with one or two minimum wage earners will actually have to subsist on less income (including benefits) than they would prior to the wage hike. Lastly, empirical evidence shows a correlation between an increase in the number of high school dropouts and an increase in the minimum wage, because some of the teenagers with minimum wage jobs would rather work at the higher wage level than go to school.

On the other hand, we do know what helps the poor, and it is not minimum wage hikes, it's negative income tax systems like the Earned Income Tax Credit or sales tax rebates for low income people. If the goal was really to help the poor, those are the kinds of policies we should be adopting, not minimum wage hikes. Minimum wage hikes are inefficient at helping lower income people and in some cases bad for the poor.

Anonymous said...

What's Villaraigosa got to do with this?

Anonymous said...

I know you meant to put "possibly" before this statement: "because some of the teenagers with minimum wage jobs would rather work at the higher wage level than go to school."

What did we learn in stats? That's right, correlation does not equal causation.

jvgordon said...

Kerri, you are right that I should have prefaced that statement with something like "presumably." My remarks are at best a plausible theory as to why that correlation exists, but there may be other theories that better explain the data.

BTW, you can download a paper on the correlation between high school dropout rates and wage increases here: