A.One funny part of watching journalists cover the minimum wage debate is that theyoften have to try and referee cutting-edge econometric ( 计量经济学的) debates.
Some studies, notably those lead by UMass Amherst economist Arin Dube, argue thatthere are no adverse employment effects from small increases in the minimum wage.Other studies, notably those lead by University of California Irvine economist DavidNeumark, argue there is an adverse effect. Whatever can we conclude?
B.But instead of diving into that controversy, let's take a look at where these economists,and all the other researchers investigating the minimum wage, do agree: They all tendto think that raising the minimum wage would reduce poverty. That's the conclusion
of a major new paper by Dube, titled "Minimum Wages and the Distribution of
Family Incomes."
C.Let's first highlight the major results. Dube uses the latest in minimum-wagestatistics and finds a negative relationship between the minimum wage and poverty.
Specifically, raising the minimum wage 10 percent (say from $7.25 to near $8) wouldreduce the number of people living in poverty 2.4 percent. (For those who thriveon jargon, the minimum wage has an "elasticity" of -0.24 when it comes to povertyreduction.)
D.Using this as an estimate, raising the minimum wage to $10.10 an hour, as manyDemocrats are proposing in 2014, would reduce the number of people living inpoverty by 4.6 million. It would also boost the incomes of those at the 1Othpercentile ( 百分位 ) by $1,700. That's a significant increase in the quality of life for our worstoff that doesn't require the government to tax and spend a single additional dollar.And, given that this policy is self-enforcing with virtually no administrative costswhile challenging the employer's market power, it is a powerful complement to therest of the policies the government uses to boost the living standards of the worst off,including the Earned Income Tax Credit, food stamps, Medicaid, etc.
E.Now, this is normally the part where we'd have to go through the counter-arguments,using different data and techniques from different economists, to argue that theminimum wage wouldn't do this. But this is the fun part: Dube's paper finds aremarkable consistency across studies here. For instance, in a 2011 paper byminimum-wage opponent David Neumark, raising the minimum wage 10 percentwould reduce poverty 2.9 percent (an elasticity of-0.29) for 21-44-year-old familyheads or individuals. That's very similar to what Dube finds. Neumark doesn'tmention this directly in the paper however; Dube is able to back out this conclusionusing other variables that are listed.
F.Indeed, Dube digs out the effects of the minimum wage on poverty from 12 differentstudies in the new wave of literature on the topic that started in the 1990s with DavidCard and Alan Krueger field-creating research. Of the 54 elasticities that Dube isable to observe in these 12 papers,48 of them are negative. Only one study has asizable positive one, a 2005 one by David Neumark, a study that stands out for oddmethodology ( 方法论 ) (it lacks state and yearly fixed effects, it assumes quantiles ( 分位数 ) are moving in certain directions) that isn't standard in the field or inhis subsequent work. (Indeed, it is nothing like Neumark's standard 2011 study,mentioned above, which finds that the minimum wage reduces poverty.) Includingthat study, there's an average elasticity of-0.15 across all the studies; tossing it,there's one of-0.20 across the 11 studies, similar to what Dube finds.
G. However, these previous studies also have issues which Dube's new study examines.This paper uses data up through 2012, so there are much more substantial variationsto examine between states' minimum wages compared to earlier studies from the1990s. Meanwhile there are additional controls added, including those that deal withthe business cycle as well as regional effects. The range of controls provide 8 differentresults, all of which are highlighted.
H. Now, as a general rule with these numbers, you should never observe too far awayfrom the mean--that is, you shouldn't take the effects of small changes to see whatwould happen if we, say, increased the minimum wage 500 percent, or to levels thatdon't actually exist right now. But the results are promising.
Indeed, they are promising on three different measures of poverty. There's the normaldefinition of poverty established in the 1960s as a result of how much food costs takesup in your family budget.
J.However, the relationship is both relevant and even stronger for the poverty gap,which is how far people are away from the poverty line, and the squared poverty gap,which is a focus on those with very low incomes. The elasticities here are -0.32 and-0.96 respectively, with the second having an almost one-to-one relationship becausethe minimum wage reduces the proportions of those with less than one-half thepoverty line.
K. What should people take away from this? The first is that there are significantbenefits, whatever the costs. If you look at the economist James Tobin in 1996, forinstance, he argues that the "minimum wage always had to be recognized as havinggood income consequences...I thought in this instance those advantages outweighedthe small loss of jobs." Since then there's been substantially more work done arguingthat the loss of jobs is smaller or nonexistent, and now we know that the advantagesare even better, especially when it comes to boosting incomes of the poorest andreducing extreme poverty.
The second is that this isn't a thing that people proposing an inequality agenda justhappened to throw on the table. A higher minimum wage is a substantial response tothe challenges of inequality. Opponents of a higher minimum wage focus on the ideathat it largely won't benefit the worst off.
M. A higher minimum wage will lead to a significant boost in incomes for the worstoff in the bottom 30th percent of income, while having no impact on the medianhousehold.
N. As many economists have argued, the minimum wage "substantially 'held up' thelower tail of the U.S. earnings distribution" through the late 1970s, but this effectstopped as the real value of the minimum wage fell in subsequent decades. This givesus an empirical (以经验为依据的) handle on how the minimum wage would helpdeal with both insufficient low-end wages and inequality, and the results are striking.
O. Charles Darwin once wrote, "If the misery of the poor be caused not by the laws ofnature, but by our institutions, great is our sin." One of the key institutions of themodern economy, the minimum wage, could dramatically reduce the misery of thepoor. What would it say if we didn't take advantage of it?