‘No one who works full time should have to live in poverty’

The New York Times has an article on the effect of injecting morality into the debate over a living wage. The problem, of course, is that business owners frame any attempt to raise the minimum wage as a “job killer,” even though “[i]ncreasing the minimum wage to $7.25 an hour would directly affect the wages of only about 7 percent of the work force.” So while it is often legally possible to raise the minimum wage above the federal standard, “[w]hether a wage campaign was winnable turned out to be a more complicated matter. In the late 1990’s, Kern helped Acorn in a series of attempts to raise the minimum wage in Denver, Houston and Missouri. They all failed. ‘It wasn’t even close,’ she says. In the past few years, though, as the federal minimum wage has remained fixed at $5.15 and the cost of living (specifically housing) has risen drastically in many regions, similar campaigns have produced so many victories (currently, 134) that Kern speaks collectively of ‘a widespread living-wage movement.'”

The tenor of this debate began to change in the mid-1990’s following some work done by two Princeton economists, David Card (now at the University of California at Berkeley) and Alan B. Krueger. In 1992, New Jersey increased the state minimum wage to $5.05 an hour (applicable to both the public and private sectors), which gave the two young professors an opportunity to study the comparative effects of that raise on fast-food restaurants and low-wage employment in New Jersey and Pennsylvania, where the minimum wage remained at the federal level of $4.25 an hour. Card and Krueger agreed that the hypothesis that a rise in wages would destroy jobs was “one of the clearest and most widely appreciated in the field of economics.” Both told me they believed, at the start, that their work would reinforce that hypothesis. But in 1995, and again in 2000, the two academics effectively shredded the conventional wisdom. Their data demonstrated that a modest increase in wages did not appear to cause any significant harm to employment; in some cases, a rise in the minimum wage even resulted in a slight increase in employment.

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