Tuesday, October 05, 2010

On Minimum Wage

I was surprised to see The Atlantic Wire pick up a "controversy" brewing about minimum wage. Some Republican candidates--Tea Party brand-- have made some comments about abolishing or reducing the minimum wage. Democrats are apparently picking up on it as "political death wishes."

We've been discussing price ceilings in the current unit of Principles of Microeconomics. Minimum wage increased in the middle of our recession and the result, as illustrated here, was an increase in teenage unemployment above what it would likely have been even due to the recession.

Here's a simple illustration from our campus:
We only have so much room in our operating budget to spend on student workers. Most of the jobs aren't very productive or difficult--many are work/study who spend most of their time studying or playing on Facebook while getting on paid to be on call to do odd jobs for their department. We have a lot of students willing to be paid less than $7.25/hour for doing this but the government says they don't have that freedom. If we could pay them less than $7.25, we could afford to hire many more than we do. So, we have a lot more applicants than jobs, or structural unemployment.

Some "progressives" find the minimum wage abhorrently low and would criticize SBU for paying it. Indeed, we could increase the wage paid to our work/study, but that means hiring even fewer students (increasing unemployment). Nancy Pelosi has unpaid workers (interns) in her office and no one raises a stink about that.

So, I hope some of these Republican candidates make this a teachable moment. It's not that hard.

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