Winnipeg Free Press - ONLINE EDITION

How the U.S. could set a minimum wage

  • Print

Not surprisingly, the nonpartisan analysts at the U.S. Congressional Budget Office have found that President Barack Obama’s proposal to raise the minimum wage would have costs as well as benefits. Increasing the minimum from its current level, $7.25 an hour, to $10.10 by the second half of 2016, as the president advocates, would lift 900,000 individuals out of poverty — while reducing total employment by about 500,000 workers. This finding is perfectly consistent with both economic theory and the empirical literature.

Equally unsurprisingly, Democrats and Republicans immediately turned the CBO report into more fodder for their long-running dispute over increasing the minimum wage — which the former tout as a panacea for economic inequality and the latter demonize as a job-killer. The prospect of an election-year legislative compromise on this issue, never bright, now seems fainter than ever.

That’s doubly unfortunate, since the CBO report is best read as a gentle argument in favour of a middle path on the minimum wage. Of course, the necessary precondition for seeing it in those terms is the ability to recognize that both sides in the age-old minimum-wage debate have valid points: A decent society would neither price entry-level workers out of jobs nor leave them completely without leverage in the labour market. The real issue is not so much whether to have a minimum wage, or even how much it should be, but how best to set it.

Our current procedure goes something like this: At irregular intervals, Washington politicians, and their allied lobbyists, stage a huge battle over arbitrarily selected numbers.

A much better procedure would consist of three steps: First, link the minimum wage to an appropriate benchmark. We have suggested a minimum wage high enough to pay a full-time worker an average income equal to two-thirds of the poverty line for a family of four, or roughly the average level of the past 55 years. At present that would be $8 an hour — a 75-cent raise over the minimum.

Second, provide for automatic, modest annual increases, based on an appropriate inflation factor.

Third, augment the earned-income tax credit, a cash supplement to wages that works like a negative income tax. It has been gradually replacing the federal minimum wage as a poverty-fighter in recent years but remains too small for certain workers, such as childless single adults.

Our proposal has all the poverty-fighting advantages that proponents of a $10.10 minimum claim for their idea — with the sole exception that it raises the minimum less rapidly than they would like. It also has additional, compensating advantages: It would remove future minimum wage increases from political contention and it would have less dampening effect on employment. We’d say it’s more politically feasible, too, if we had any confidence that either Republicans or Democrats were actually interested in a practical solution.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Key of Bart - Take It Easy

View more like this

Photo Store Gallery

  • A pelican comes in for a landing Wednesday afternoon on the Red River at Lockport, Manitoba - Standup photo- June 27, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • Marc Gallant/Winnipeg Free Press. Local- Peregrine Falcon Recovery Project. Baby peregrine falcons. 21 days old. Three baby falcons. Born on ledge on roof of Radisson hotel on Portage Avenue. Project Coordinator Tracy Maconachie said that these are third generation falcons to call the hotel home. Maconachie banded the legs of the birds for future identification as seen on this adult bird swooping just metres above. June 16, 2004.

View More Gallery Photos

Poll

Should Winnipeg control growth to deal with climate change?

View Results

Ads by Google