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  • Minnesota & Florida Raise the Minimum Wage

    Posted by Kevin Fleming on May 4th, 2005 (All posts by )

    My home state of Minnesota has raised the minimum wage, from $5.15 an hour to $6.15/hr. While chief sponsor of the bill Sen. Ellen Anderson, D-St. Paul said “$6.15 is still a barebones pay rate.“, she feels it shows that “[w]e support you. We believe everyone who works hard in our state should have the opportunity to succeed.”

    The article notes criticism by Republicans that this is merely a “feel-good” vote. A local business man complained, “it’s going to make a substantial impact to our cost of doing business. What we’ll have to do is pass that along to our customers. People can only afford to pay so much for your product. You’re going to price yourself out of business.”

    On May 2nd, Florida similarly increased the minimum wage to $6.15 per hour. Florida’s new minimum wage is indexed to inflation, so the state will readjust the minimum every fall. A a spokesman for the Florida Chamber of Commerce said that “such increases will result in higher prices for Floridians, which will hurt elderly people living on fixed incomes.” Apparently, the socialist group ACORN had pushed for the state’s minimum-wage law, which was enacted last year as a constitutional amendment.

    That’s the background.

    Asymmetrical Information had some interesting discussion on minimum wage in 2003, but little evidence was demonstrated against it.

    Tech Central Station has had several posts on the topic (here, here, and an interesting one on ACORN itself avoiding minimum wages for its own workers.)

    The Heritage Foundation reviewed this topic in 2001, and noted that

    A 1999 survey of small businesses by the Jerome Levy Economics Institute shows that raising the minimum wage to $6.00 per hour would cause more than 20 percent of small-business owners to reconsider their employment decisions.

    The Congressional Budget Office estimates the potential job losses associated with an increase in the minimum wage to $6.65 at roughly 200,000 to 600,000 jobs.

    So my question is: Is the minimum wage good for the poor (its intended recipients), or bad for them?

    I have read elsewhere that the next question ought to be: If raising the minimum wage to $6.15 per hour is good for the poor, why not increase it to $50 per hour? Why not $1000/hr?

     

    17 Responses to “Minnesota & Florida Raise the Minimum Wage”

    1. Jonathan Says:

      The minimum wage is bad for anyone whose hourly labor is worth less than the minimum wage. Minimum wages price such people out of jobs. Also, the people who work at minimum-wage jobs tend to be young people who are learning how to function in the work world. These people are generally going to be much better off working, and learning, at a lower wage than unemployed at a higher wage. Work experience is very important, and becomes harder to come by, for the marginal workers who need it most, as minimum wages are increased.

    2. Sandy P Says:

      So did IL.

      Elderly Floridians?

      Who drive Caddys and Lincolns?

      Golf?

      Pay no FL income tax?

      Draining SS??

      My heart bleeds.

      On the bright side, all the snowbirds get hit, including the Canucks.

    3. Sandy P Says:

      AND

      somewhere out there on the web is a partial list of the taxes and fees MN requires to start up/be in business.

    4. Jonathan Says:

      Sandy,

      The image of Floridians as geezers is somewhat out of date. The people who get hurt most by minimum-wage increases aren’t well-to-do older people but young people with marginal work histories and qualifications — i.e., immigrants, poor people and members of various minority groups. They don’t deserve to be punished so that college-educated middle-class activists can feel good about themselves.

    5. incognito Says:

      the more I read about MN, the more liberal it seems… doh, out of the frying pan, into the fire eh?

    6. Kevin Fleming Says:

      I have to agree that harm at the margins occurs by raising the minimum wage. Just one month ago, my 16 year old son, who has no skills to speak of (much as I love him, it is so), was hired at $8.15 per hour to dole out coffee in a stand-alone coffee drive-up business.

      He went from making $3 per hour more than ‘the minimum’ to just $2/hr more. I suspect that the lesser difference now puts pressure on his boss, who probably paid a bit more than average in order to attract a slightly less slackery teen. Now he has less to offer them. This small business owner (he has just two of these coffee islands) now sees wage pressure rising at the same time his coffee prices increased, and gas prices rose (he drives 55 miles between locations several times a day). While he might adjust to the commodity changes, a simultaneous wage increase might be the last straw.

      Do legislators really believe you can vote people wealthy?

    7. Shannon Love Says:

      The minimum wage has little effect when the effective freemarket wage floor is greater than the minimum wage. Surprisingly this is quite often the case, especially during good economic times. Much of the harm of minimum wage laws is disguised by this factor. The MW is usually raised during times of economic expansion so its negative effects are not noticeable until the next downturn by which time few would think to blame the minimum wage for slowed job creation.

    8. Richard Heddleson Says:

      Seems like a good means to move sub minimum wage workers out of your state to the one next door with the lower wage rate.

    9. Ken Says:

      I thought Florida was in the grip of the Reich Wingers. And they go and pull this stunt?

    10. Jonathan Says:

      Florida’s initiative system makes mischief like the minimum-wage hike possible. Anything can happen if you can just get it on the ballot. Thus FL came to have a subsidized “high-speed rail” boondoggle (mercifully repealed by a subsequent ballot initiative), and a badly designed feel-good law against mistreating pigs, whose unintended consequence was that more pigs were killed. Initiatives have a legitimate function, but they tend to be poor substitutes for legislation.

    11. Lex Says:

      One thing you can count on is that if a bunch of conservatives and libertarians take up the question of minimum wage increases, they will always talk about why it is a bad idea, wrongheaded, harmful, etc. The question will be asked, why not make it $60, or $600 an hour.

      As it happens, I agree with these assessments, and with the basic idea that you cannot “vote yourself wealthy.”

      But the more interesting question which ought to be asked more frequently is: Why is this policy always popular and why does it always pass easily, especially when times are good, and why is it always incremental, a dollar or so, not double or an order of magnitude? And why if we think the public should be trusted to vote and to make their own decisions about how and on what to spend their money, do we think they are consistently foolish and wrong on this issue?

      Here is a thought experiment. Assume arguendo that voters are not irrational about consistently wanting do this, but are in fact acting consistently with their own conception of their best interest and what policies will benefit them. What are they trying to achieve?

      I have some ideas on this.

    12. Jonathan Says:

      People tend to be systematically irrational in the sense that behavioral economists have long understood — i.e., you can often skew people’s choices between alternatives of equal value, or in favor of the alternative of lesser value, by varying the framing of the choice. Skilled politicians and other manipulators have long understood this. Also, many voters and prospective voters understand that their individual votes will have no influence on election outcomes, so they rationally don’t vote. And maybe some of the voters who do vote in favor of minimum-wage increases don’t think the increases will have any practical effect, but vote for them anyway because doing so makes them feel good (civic behavior as consumption). Finally, some of the advocates of minimum wages, e.g., labor unions, benefit from them directly because they suppress competition for their services. (Not to mention the numerous State employees who make their livings administering minimum wages.) Put these groups together and there’s probably a big enough coalition to pass minimum-wage hikes in many places, absent similarly well-organized opposition.

    13. Sandy P Says:

      Jonathan, I know who the MW hurts. However,

      –The image of Floridians as geezers is somewhat out of date. —

      Not in the section I visit.

      My parents just sold their winter trailer near Bradenton. You drive down I-75 in that neck of the woods some time.

      There is so much money down there it’s unreal. And the high Euro is allowing the Anglos to buy up Disney. South Miami I can understand, but there are still bag grandpas instead of bagboys.

    14. Kevin Fleming Says:

      Re: “Why is this policy always popular and why does it always pass easily…?”

      Good question. I have instead wondered why, if indeed even the CBO cited job loss resulting from a MW increase, that pushing for an increase isn’t considered unethical and anti-poor.

    15. Lex Says:

      I really need to work a full-sized post on this. But for now I will merely part the kimono a few millimeters and say that this very consistent support for this type of policy is not irrational or something foisted on deluded people by clever politicians. Rather, it is consistent with Director’s Law which holds that the American middle class supports public policy that benefits it at the expense of the rich and the poor. Furthermore, this is consistent with Mead’s depiction of Jacksonian America’s desire to protect the middle class folk community, if necessary at the expense of the poor. Middle class people quite possibly don’t want the kind of people who work in very low wage jobs to live in their state, or atleast near them, at all. The externalities of having such people around may outweigh any indirect benefit they get from “efficiency” or “equity”.

      Also, never under-estimate the ordinary American Joe or Jane’s distrust of the business community. They know darn well that these guys will rob them blind if given a chance. Part of the American distrust of authority, which libertarians like is directed against government. The same instinct, which libertarians do not like, is directed against businesses and bosses, which most people work for and know first-hand, and do not trust and want to keep on a short leash. Since businesses any bigger than a hot dog stand in this countyry exist in a symbiotic relationship with local and state government, and sometimes the Federal government, this generalized distrust is, in my view, well-founded.

      There is more, but I’ll have to work it all out some other time.

      I do not ever trust an explanation for consistent behavior over time by large groups of people that relies on the axiom “they are being duped” or “they fail to understand their own best interest”. No, they are resonding to incentives you have not fully grasped, or they are buying something you don’t approve of. But consistent, mass irrationality should be impossible for any small-l libertarian to believe in. The same people whom we trust as consumers and economic actors to be rational and efficient are not suddenly having stupid attacks when they vote.

    16. j.scott barnard Says:

      Shouldn’t we be differentiate, say, between a minimum wage (immigrants, entry level positions) and a training wage (Dr. Fleming’s coffee shop’s teenage employees, for instance)?

      And what other than greed might explain the correlation between the business community’s encouragement of illegal immigration and efforts to keep minimum wage low?

      Rigorous enforcement of our current immigration laws would raise wages. But would middleclass kids be interested in picking avacadoes for 6 or even 8 bucks an hour?

    17. Kevin Fleming Says:

      Re: “And what other than greed might explain the correlation between the business community’s encouragement of illegal immigration and efforts to keep minimum wage low?”

      No need to invoke greed here, as business people (farms, factories) and homeowners (maids, gardeners, roofers) are simply making use of the labor available to them at the lowest price. If spending as little as possible on products and services is being greedy, then the term is essentially meaningless, as it applies to every and all transactions except charity.

      Better to admit that we have mixed feelings about illegal immigration, and thus act inconsistently. If we were to tighten up the borders, the going rate for low wage jobs would certainly rise (and costs for related items increase).

      My beef about supporters of the minimum wage is that they get a free pass on the ethics of the issue. While raising the MW has surface appeal, its real effects are harmful to the very people it was meant to help: the marginal and impoverished. Thus, I believe it is an unethical policy. I find it puzzling that folks interested in the long-term harm of “global warming” are uninterested in the long-term harm of their economic policies.