Monday, July 27, 2009

The Raise in the Minimum Wage

The minimum wage rose today from $6.55 per hour to $7.25 per hour, the final step in a series of raises that have taken place over the past few years. I hope that didn’t affect too many of you, because if it did then you’re struggling to get by. Seeing this news in the morning’s paper reminded me that a couple of years ago I debated the wisdom of the legislation raising the minimum wage on the McCuistion Show on the local public television network, KERA. (The picture isn’t from the show I was on, but gives you an idea of the format—that’s Mr. McCuistion holding the microphone).

I probably spent more time preparing for that appearance than I did studying for the bar exam, largely because I was placed on the show to argue the “pro” side of raising the minimum wage while the extremely distinguished economist Robert McTeer (you can read his blog here: had the “con” side of the argument.

This had all the makings of a classic Joe versus Pro confrontation. In the final event, Professor McTeer wasn’t out to embarrass anybody, or maybe I wasn’t worth the effort of embarrassing, and the hour show passed both quickly and without much in the way of pain, at least to me. I can’t answer for the audience.

One surprising thing Professor McTeer and I ended up agreeing on, however, was that although the raise in the minimum wage would help a few people a little, and perhaps hurt a few people whose jobs got cut, in the end it wouldn’t effect very many people one way or another.

The reason is simple, even after it was raised to its current $7.25 per hour, the minimum wage is still so low that almost everybody working is paid more than the minimum wage. After all, you can only earn $15,000 in year working full-time at that pay rate, and that’s barely enough for a single person to keep body and soul together.

Here is part of the chart I made for that show that shows the effect of the raise in the minimum wage on total wages, depending on how many workers lost their jobs because employers couldn’t afford to pay the higher minimum wage:

As you can see, three years ago 863,000 workers in Texas were making $7.25 per hour or less, and even if 25% of them lost there job because of a rise in the minimum wage, total wages would still rise. Of course that would be much comfort to people who lost their job. That number has gone down over the past couple of years as the minimum wage rose, but there are still 262,000 working Texans (as of last year) for whom making $7.25 per hour will be a pay raise.

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