Will a Higher Minimum Wage Cost Jobs?

  February 19, 2013

Will a Higher Minimum Wage Cost Jobs?

Bob Pollin on the theory that a higher minimum wage will reduce jobs available to young people entering the work force and won't reduce poverty
Members don't see ads. If you are a member, and you're seeing this appeal, click here

Share to Facebook Share to Twitter

Since I happily discovered TRNN, I have noticed the great strides it has made with having numerous reporters on the ground in important sites - Jennifer Humiston
Log in and tell us why you support TRNN


Robert Pollin is Distinguished Professor of Economics and Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts-Amherst. He is also the founder and President of PEAR (Pollin Energy and Retrofits), an Amherst, MA-based green energy company operating throughout the United States. His books include The Living Wage: Building a Fair Economy (co-authored 1998); Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity (2003); An Employment-Targeted Economic Program for South Africa (co-authored 2007); A Measure of Fairness: The Economics of Living Wages and Minimum Wages in the United States (co-authored 2008), Back to Full Employment (2012), Green Growth (2014), Global Green Growth (2015) and Greening the Global Economy (2015).


Will a Higher Minimum Wage Cost Jobs?PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And welcome to this edition of The PERI Report with Bob Pollin, who now joins us from Amherst.

Bob's the cofounder and codirector of the PERI institute in Amherst. His latest book is Back to Full Employment.

Thanks for joining us again, Bob.


JAY: So, actually, I want to ask you a question. We received just a little while ago an email from Cornell University. Professor Richard Burkhauser has commented on President Obama's call to raise the minimum wage to $9 an hour. And here's what Burkhauser had to say:

President Obama's call for an increase in the minimum wage to reduce poverty flies in the face of 30 years of evidence from Card and Krueger to Newmark and Washer that increases in the minimum wage have no effect on poverty rates.

Bob, the argument that Burkhauser gives is that most people working at minimum-wage jobs are not heads of families, they're younger people in families that already have income earners, and that if you raise the minimum wage, it's going to reduce the number of jobs available for young people who are mostly in these minimum-wage jobs and really do nothing about poverty levels, because the main bread-earners are already earning more than the minimum wage, he argues. He says that's the evidence for 30 years. What do you make of that?

POLLIN: Well, that's not the evidence that I'm familiar with. The evidence that I'm familiar with, having studied living-wage proposals, minimum-wage proposals around the country at state levels, at municipal levels, and national levels, the evidence is the overwhelming majority of people who are at or near minimum-wage levels of wages are not teenagers—let's put it that way. They're—the median age is roughly in the 30s. Most of the people have been at their job or at similar jobs for over a decade. They are on their long-term employment trajectory; they're not about to jump up to some middle-income job as soon as they get out of college.

That doesn't mean that there aren't teenagers. The number of teenagers in the labor force are disproportionately at or near minimum-wage jobs. But the majority of people at or near minimum wages are not teenagers.

Now, there is another point. There are many cases in which teenagers or young people who are working at or near minimum-wage jobs are part of families that are above the poverty line, and some of my own research has shown that in fact the contribution of the teenager is what significantly helps to bring the family above the poverty line. So it is not just this image of middle-class teenagers taking jobs at McDonald's in order that they can go and buy the latest iPad. There's some of that, but disproportionately the majority are people that are making a significant contribution to keeping their families above water in terms of surviving in a very, very rough economy.

JAY: Well, we're going to invite Dr. (I'm assuming it's Dr.) Burkhauser to come on and have a debate with Bob about all of this.

But let me ask you another question about this $9 minimum-wage proposal by President Obama. The studies I've seen, in terms of doing—as I do these interviews, seem to suggest that if a minimum-wage earner is the head of a family, $9 an hour does not do what President Obama said it would do, which is raise a family out of poverty. It seems to me the minimum wage to do that would be something more like $14, $15 an hour. In some places it could be as high as $17 or $18.

POLLIN: That's certainly consistent with all the research that I myself have done with my colleagues here at PERI.

Look, the minimum wage in this country in 1968 was close to $11 an hour after we adjust for inflation. That means that any 16-year-old—by the way, middle-class/poor 16-year-olds showing up for a job at McDonald's in Texas somewhere in 1968 had to get paid close to $11 an hour.

Now, on top of that, average productivity, the amount the average worker produces over the course of a day, has more than doubled since that time, more than doubled. So if the minimum wage were simply to keep up with the average level of labor productivity in this country, we're talking at something around a $20 minimum wage.

JAY: But hang on for one sec. That increase in productivity, does that exist also in the service industry, where so much of this minimum-wage job are?

POLLIN: This is average labor productivity, and 65, 70 percent of the economy is services, so yes. Now, there are issues in how you measure productivity in services, but the point is the overall pie in this economy has grown a whole lot since the late 1960s, early '70s, when the minimum wage peaked.

So what we have now is a $7.25 national minimum wage. It's higher in some states. But it is not close to being decent to keep a family above the poverty line if the head of household is earning it. Even if the second earner in the family is earning a minimum-wage job and someone else is earning somewhat above that, that still doesn't keep a family above what I would call a basic living standard—not what I would call.

By the way, the U.S. Census department has now created other categories in addition to the, you know, badly inadequate poverty line as a measure of economic distress. So if we want to take a more reasonable measure of what it takes to live a minimally decent life, family life in this country, the poverty line isn't any good to begin with. Something closer to double the poverty line is more reasonable.

JAY: And what do you make of the argument Burkhauser and, of course, many other people make that especially smaller businesses, which I would guess is where a lot of the minimum-wage workers are working, unless it's a big chain, service, restaurant, or something like that, but at any rate, that they can't afford, given the market as it is, to have, you know, as many workers as they would now at $14, $15, $17 an hour? In other words, if that were to be instituted, they would have to get rid of some people.

POLLIN: Well, I mean, of course you have to increase the minimum wage in increments. If you go today from $7.25 to $17 an hour, of course it's going to create a lot of disruptions. So we have to move from where we are today, $7.25, incrementally up to where a decent wage would be.

And the main thing holding back job creation, of course, is the Great Recession and what's happened ever since. It is not the minimum wage. We know over and over again—he cites studies that have gone on for 30 years. It so happens those studies find that minimum-wage increases that are incremental do not cause any significant employment effects, negative employment effects, if any at all. That's the net result of 30 years of research. There's really no denying that.

And if you want to create jobs for small businesses, well, then, where you really need to start is to get credit back to small businesses. Small businesses essentially—in the aggregate, small businesses have not got net increases in borrowing basically since 2007. Now, that's six years now that they basically have been credit-starved. So that's the way—if you really care about creating opportunities within small businesses, we would focus on getting credit to small businesses.

JAY: So, as I said, we're going to invite Professor Burkhauser to come on and debate Bob Pollin about the minimum-wage laws, and I hope he will.

Thanks for joining us again, Bob.

POLLIN: Thank you very much for having me, Paul.

JAY: And thank you for joining us on The Real News Network.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at contact@therealnews.com

latest stories

President Maduro Calls on the Pope to Help Resolve Conflict with Opposition
The Industrial Agricultural System is Limiting Food Access and Driving Climate Change
TRNN REPLAY: The Real News Town Hall: Should the Community Control the Police? Pt.1
Breaking Through Power: Wendy Fields on Movement Building
How Washington's Money-Machine Stays Ahead of Democracy
Tribes Reclaim Unceded Territories to Block Dakota Access Pipeline
Obama Holding Further Military Involvement in Syria, But Will the Next President?
TRIPS: The Story of How Intellectual Property Became Linked to Trade (2/7)
A Just Transition for Fossil Fuels Workers is Possible
Breaking Through Power: Jordan Estevao on Training for Change
The Right to Housing in Baltimore - TRNN Grand Opening
Tom Hayden on the Obama-Biden Ticket
Clinton's Strategy: Make Obama Unelectable
Prospect of US Arms Shipments to Ukraine After Elections Prompts Restarting of Peace Negotiations
TRIPS: The Story of How Intellectual Property Became Linked to Trade (1/7)
Why is the State of Maryland Defending Racist Practices of the Pocomoke police?
Elites Outraged At Trump's Refusal to Accept Election Result
Two More Land Rights Activists Assassinated in Honduras
Final Presidential Debate Accentuates Candidates' Divide on Abortion Rights
Clinton Reaffirms Commitment to No-Fly Zone in Syria
A Bloodier Battle for Mosul Might Begin After the Ouster of ISIS
Covering the Epidemic of Violence in Baltimore - TRNN Grand Opening
Justice Department Sues Pocomoke For Violating Rights of Fired Black Police Chief
Officers Withdrawn from North Dakota Following Arrest of Madison Elected Official
Fair Elections Under Attack, Just Not in the Way Donald Trump Wants You to Believe
TiSA Agreement Leaks Show Corporations Pushing Privatization of Public Services
Exxon Fighting to Shut Down Investigations Into Company's Foreknowledge of Climate Change
Opposition Calls for a General Strike As Congolese President Wins Election Delay
The Path to Actual Police Reform Starts with Real Civilian Oversight
HFC Reduction Agreement Is Historic, But No Silver Bullet for Climate Change

TheRealNewsNetwork.com, RealNewsNetwork.com, The Real News Network, Real News Network, The Real News, Real News, Real News For Real People, IWT are trademarks and service marks of Independent World Television inc. "The Real News" is the flagship show of IWT and The Real News Network.

All original content on this site is copyright of The Real News Network. Click here for more

Problems with this site? Please let us know

Linux VPS Hosting by Star Dot Hosting