Former Obama White House economist: $15 minimum wage is a ‘risk not worth taking’
AEIdeas
Alan Krueger during a media briefing at the White House in Washington November 26, 2012.
REUTERS/Kevin Lamarque.
The Democratic Party platform calls for a $15 per hour national minimum wage. Hmm. Here is economist Alan Krueger, a former chairman of President Obama’s Council of Economic Advisers, on the “fight for 15,” (via a New York Times op-ed):
I am frequently asked, “How high can the minimum wage go without jeopardizing employment of low-wage workers? And at what level would further minimum wage increases result in more job losses than wage gains, lowering the earnings of low-wage workers as a whole?”
Although available research cannot precisely answer these questions, I am confident that a federal minimum wage that rises to around $12 an hour over the next five years or so would not have a meaningful negative effect on United States employment. One reason for this judgment is that around 140 research projects commissioned by Britain’s independent Low Pay Commission have found that the minimum wage “has led to higher than average wage increases for the lowest paid, with little evidence of adverse effects on employment or the economy.” A $12-per-hour minimum wage in the United States phased in over several years would be in the same ballpark as Britain’s minimum wage today.
But $15 an hour is beyond international experience, and could well be counterproductive. Although some high-wage cities and states could probably absorb a $15-an-hour minimum wage with little or no job loss, it is far from clear that the same could be said for every state, city and town in the United States. … Although the plight of low-wage workers is a national tragedy, the push for a nationwide $15 minimum wage strikes me as a risk not worth taking, especially because other tools, such as the earned-income tax credit, can be used in combination with a higher minimum wage to improve the livelihoods of low-wage workers.
Indeed, there is a risk-free way to boost incomes for low-wage workers. More on this subject:
So if we really, really boost the minimum wage, what happens?
By cranking up its minimum wage, LA is taking an unnecessary gamble
the point of the policy is not to benefit the workers, but to create taxpayers and move them off welfare…
Actually, the point of cities raising the minimum wage is to drive poor people out of town. This can make the town more attractive and boost the local economy. Of course the displaced poor people go off somewhere and quietly starve, but at least they’re not doing it in town.
Alan Blinder is skeptical, too
A $15 minimum wage directly affects 41.8% of the jobs. Add in secondary effects and you easily affect over half of all jobs. That would be a major disruption to the economy.
A $12 minimum wage directly affects 28.7% of all jobs. With secondary effects you easily affect a third or more. Again a major disruption to the economy.
Looks incredibly risky either way.