Abolish The Minimum Wage

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Wed. April 3, 2013 in Washington, D.C.

The first attempt at establishing a national minimum wage, a part of 1933’s sweeping National Industrial Recovery Act, was struck down by the Supreme Court in 1935. But in 1938, under the Fair Labor Standards Act, President Franklin D. Roosevelt signed into law a minimum hourly wage of 25 cents—$4.07 in today’s dollars. Three-quarters of a century later, we are still debating the merits of this cornerstone of the New Deal. Do we need government to ensure a decent paycheck, or would low-wage workers and the economy be better off without its intervention?

  • dorn90

    For

    James A. Dorn

    Cato Institute Vice President for Academic Affairs, and Editor, Cato Journal

  • roberts90

    For

    Russell Roberts

    Research Fellow, Hoover Institution

  • bernstein90x90

    Against

    Jared Bernstein

    Former Chief Economist to Vice President Joe Biden

  • Kornbluh90x90

    Against

    Karen Kornbluh

    Former US Ambassador, Organization for Economic Cooperation and Development


    • Moderator Image

      MODERATOR

      John Donvan

      Author & Correspondent for ABC News

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dorn90

For The Motion

James A. Dorn

Cato Institute Vice President for Academic Affairs, and Editor, Cato Journal

James A. Dorn is the vice president for academic affairs, editor of the Cato Journal, and director of Cato’s annual monetary conference. His research interests include trade and human rights, economic reform in China, and the future of money. From 1984 to 1990, he served on the White House Commission on Presidential Scholars. He has lectured in Estonia, Germany, Hong Kong, Russia, and Switzerland and has directed international conferences in London, Shanghai, Moscow, and Mexico City. Dorn has been a visiting scholar at the Central European University in Prague and at Fudan University in Shanghai and is currently professor of economics at Towson University in Maryland. He has edited 10 books and his articles have appeared in numerous publications. Dorn holds a Ph.D. in economics from the University of Virginia.

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roberts90

For The Motion

Russell Roberts

Research Fellow, Hoover Institution

Russ Roberts is a research fellow at Stanford University's Hoover Institution. He is the host of EconTalk, a weekly hour-long award-winning podcast. His rap videos (created with filmmaker John Papola) on the ideas of Keynes and Hayek have been viewed over 6 million times on YouTube and subtitled in eleven languages. Roberts blogs (with Don Boudreaux) at Cafe Hayek. His latest web-based educational project is The Numbers Game where he discusses data and charts in annotated videos. Roberts is the author of three works of fiction that teach economic principles and lessons and numerous journal articles. Roberts was a professor of economics at George Mason University from 2003 to 2012. He has also taught at Washington University in St. Louis, the University of Rochester, Stanford University, and UCLA. His PhD is from the University of Chicago.

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bernstein90x90

Against The Motion

Jared Bernstein

Former Chief Economist to Vice President Joe Biden

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities. From 2009 to 2011, Bernstein was the chief economist and economic adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Bernstein’s areas of expertise include federal and state economic and fiscal policies, income inequality and mobility, trends in employment and earnings, international comparisons, and the analysis of financial and housing markets. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute in Washington, D.C. Between 1995 and 1996, he held the post of deputy chief economist at the U.S. Department of Labor. He is the author of Crunch: Why Do I Feel So Squeezed? and is an on-air commentator for the cable stations CNBC and MSNBC and hosts jaredbernsteinblog.com.

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Kornbluh90x90

Against The Motion

Karen Kornbluh

Former US Ambassador, Organization for Economic Cooperation and Development

Karen Kornbluh recently stepped down as US Ambassador to the Organization for Economic Cooperation and Development where she negotiated international Internet policymaking principles, launched a new OECD gender initiative, and championed the OECD's transition from the "rich man's club" to a global policy network focused on working with developing countries and emerging economic powers. She previously served as policy director for then-Senator Barack Obama, as deputy chief of staff at the US Treasury Department, and in a number of roles at the Federal Communications Commission including assistant chief of the International Division and Director of Legislative and Intergovernmental Affairs. She has been awarded a number of fellowships including a visiting fellowship at the Center for American Progress and a Markle technology fellowship. She founded the Work and Family Program at the New America Foundation for publications including the New York Times, the Washington Post, the Atlantic Monthly, and the Harvard Journal of Law and Technology.

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Declared Winner: Against The Motion

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Voting Breakdown:
 

75% voted the same way in BOTH pre- and post-debate votes (17% voted FOR twice, 53% voted AGAINST twice, 5% voted UNDECIDED twice). 25% changed their mind (3% voted FOR then changed to AGAINST, 0% voted FOR then changed to UNDECIDED, 4% voted AGAINST then changed to FOR, 2% voted AGAINST then changed to UNDECIDED, 5% voted UNDECIDED then changed to FOR, 11% voted UNDECIDED then changed to AGAINST) | Breakdown Graphic

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    46 comments

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    • Comment Link Aaron Tuesday, 02 April 2013 17:13 posted by Aaron

      While its perfectly logical to expect a positive correlation between dropouts and minimum wage due to incentives, studies have shown that dropout rates have risen over the past 50 years regardless of real minimum wages falling.

      Another point worth mentioning is the skew in poverty rates amongst different age groups considering individuals under 18 have double the poverty rates than that of the 'all people' group. I'd like to see an argument for lowering poverty rates amongst individuals under 24, and hence ineligible for the EITC, through increases in minimum wages.. This issue seems concurrent with deterioration of family environments and the US's overall sluggish income mobilities.

    • Comment Link john Tuesday, 02 April 2013 15:13 posted by john

      A fan of your great public service for many years Mr. Donvan. Quite disapointed over the cost for tickets. Not all intelligent folk in D.C. who have much to offer have that kind of money. Much of the elite who can have little to offer has been my experience.


      great good fortune for your work.
      jb

    • Comment Link Gordon Rohrbacher Tuesday, 02 April 2013 13:57 posted by Gordon Rohrbacher

      I am hoping that Ben Collier, above, was being intentionally absurd to make a point. Or maybe he was having a nice utopian dream and was sleep typing. I am definitely in agreement with the Friday, 22 March 2013 post by Economic Freedom.

    • Comment Link Robert Hershey Tuesday, 02 April 2013 10:11 posted by Robert Hershey

      Raising the MW must surely contribute to decisions by teenagers to drop out of school

    • Comment Link Jack R Jones Tuesday, 02 April 2013 00:33 posted by Jack R Jones

      Jack R Jones: first draft prior 12/1/2008

      Abstract:

      An economic problem for labor that many cite is the minimum wage as being not high enough (Liberals) or too high (Conservatives) or should not be one (Libertarian). I personally think the over time law is a greater problem than the minimum wage law and is an unintended consequence causing labor's depressed wages.


      Labor Law: Overtime and its Unintended Consequence
      In my opinion, there needs to be a change in the overtime law. The 1930 labor laws are outdated and in need of revision. They are a problem in that they were written to a particular and traumatic time, and in my opinion biased toward corporate privilege. Most of my fellow libertarians favor picking on the minimum wage law as the most problematic, however, after some though about it, I think the overtime law has created more of a problem by way of creating a fixed mind set about the workweek.

      My thoughts on this over time have lead me to the opinion that the overtime law has done more to depress wages and job opportunity than the minimum wage law.

      My reason for thinking this is based on a study reported on by the Association of Part Time Professionals in the early 1980's. The study showed that the workweek had steadily declined from 72 hours per week at the beginning of the Industrial Revolution in England until it went flat at 40 hours per week from the 1930's through the 2000's. Had the trend continued we would now be in the range of 20-25 hours per week, however, we are still around 40 hours per week. The ceiling of 40 hours as the start of overtime has had the unintended consequence of also being the floor to the length of the workweek. Note that anyone who works less than 40 hours per week is said to work "part time" 40 hours being "whole time" instead of just working "X" hours per week. As economic efficiency has allowed more production per worker in a 40 hour per week job there is decrease in the number of workers needed. Given that there are two ways to adsorb the efficiency, less workers per hour or less hours per worker, we need to look at which one is least complex economically. I believe fewer hours per worker will lead to full employment and therefore a lower need for government provision of social safety nets.

      I think that a "free market" effect could be achieved by changing the positive feedback loop of overtime law to a negative feedback loop to stabilize the economy by changing the law to have counter balancing set points based on unemployment and inflation. I would suggest that the overtime would apply to all employees, that is converting salary into wage. If one cannot get the job done in the allotted time then the worker has exceeded their ability or the job is too big and another worker is needed. Management will have to decide which case it is and not simply opt to get more work for free.

      My Proposal:
      Each year the unemployment rate and inflation rate could be used to adjust the next year's overtime point by decreasing or increasing the hours at which overtime pay begins, see the chart below.

      % Unemployment % inflation
      0-0.9 ==> - 1 hour 0-0.9 ¬==> +1 hour
      1-2.9 ==> - 2 hour 1-2.9 ==> +2 hour
      3-5.9 ==> -3 hour 3-5.9 ==> +3 hour
      6-9.9 ==> - 4 hours 6-9.9 ==> +4 hours
      10+ ==> -5 hours 10+ ==> +5 hours

      For example, in a given year the over time law is at 40 hours; inflation, say is 1%, raises the overtime to 42 hours; and the unemployment, say was 6%, decreases the overtime to 38 hours for the coming year. Should the conditions remain the same the following year, overtime will start at 36 hours. Thus the overtime hour will decrease until the point that higher wages from jobs chasing workers causes enough inflation to start increasing the work week. What the actual unemployment, due to job changing, is can set the rate lower than the 0.9 if experience shows it to be so.


      Jack R. Jones 12/30/2011

    • Comment Link T Monday, 01 April 2013 19:18 posted by T

      "Wednesday, 27 March 2013 15:51 posted by s peters
      ...a debate on the minimum wage that costs $40 per ticket?
      How many dishwashers will be going to this?"

      Oh, the humanity. Those poor dishwashers. If only there were some site, some "web" site, where they could see videos of the debates for free. Of course, managing a website of that nature, as well as an organization of this kind, would require considerable capital. I suppose they could earn said capital by charging high, but reasonable, prices for tickets to their debates...

    • Comment Link Mike R Friday, 29 March 2013 19:07 posted by Mike R

      Most economists agree that increasing the minimum wage reduces employment. The Chicago Federal Reserve estimates that each 10% MW increase causes a 2-4% increase in unemployment rates for low-skill workers. These low-skill jobs simply disappear. Take the recently proposed increase of the federal MW from $7.25 to $9.80. This 35% increase could result in a 6 to 12% (say 9%) decrease in low skill employment opportunities. In aggregate this might seem a good trade-off: 91% of low-skill workers will see a $2.55/hour increase, while only 9% will lose $7.25 to 9.80/hr (lose or not get a job).

      But what about the long-term cost from this increased unemployment? People with limited abilities, those at the margin of employability, may end up out of the workforce indefinitely. What's the added cost of perpetual public assistance for these people? People under 25, who represent half of all MW workers, are delayed in finding that first job, which in turn time-shifts the wage growth that generally follows with experience, and this reduces their accumulated earnings overall. Furthermore, MW increases will show up as price increases, particularly in the food industry where a large proportion of MW earners work. Increased food prices disproportionately impact the poor. In balance, the MW may actually reduce the average living standards for low skill workers.

      A superior alternative to the minimum wage is the earned income tax credit. This existing program subsidizes low-wage work, and it is scaled to the needs of the worker. A full-time working person with 3 children whose family income is less than $16k will get nearly $6K -- roughly equivalent to a $3/hr raise. A dependent teenager will get no subsidy.

      I think it's in society's best interest to maximize opportunities for anyone willing to work. To do this for low-skill workers we need to abolish the minimum wage and leverage the earned income tax credit -- with adjustments as needed -- to raise living standards for the most people.

    • Comment Link donald martin Friday, 29 March 2013 09:55 posted by donald martin

      If unfettered market forces produce wage rates and incomes that voters believe are too low let us collectively tax ourselves to transfer the difference to low wage workers rather than impose a tax only on employers, so that we may feel better about ourselves. Indeed don't we do this already with the earned income tax credit?

    • Comment Link Pava Renat Friday, 29 March 2013 09:13 posted by Pava Renat

      1. The minimum wage hurts unemployed minority youth the worst, so it is plainly racist on the face of it;
      2. The minimum wage benefits unions, esp. in low wage industries because it reduces competition for jobs.

      How is a man/woman of the left supposed to choose between these two conflicting facts?

      I guess we know -- the left is FOR the minimum wage. Who votes? Not minority youth. Who pays into coffers of the pols? Not the minority youth.

      Case closed. The left is composed of racist special interests.

    • Comment Link s peters Wednesday, 27 March 2013 15:51 posted by s peters

      I've enjoyed listening to these debates, and thought it would be great to go to one....

      But then I bumped into this disconnect - a debate on the minimum wage that costs $40 per ticket?

      How many dishwashers will be going to this?

    • Comment Link Joshua Sloan Tuesday, 26 March 2013 12:51 posted by Joshua Sloan

      how about an idea that would allow businesses to decide how they want to handle pay: i call it scaled differential pay rates. basically, remove the minimum wage but tie top pay rates to the lowest pay rates in the company. something like:

      lowest hourly gross pay maximum annual gross pay allowed
      $0 - 7.50/hour 10 times effective annual for lowest hourly gross pay
      $7.51 - 10.00/hour 50 times " "
      $10.01 - 12.50/hour 100 times " "
      $12.51 - 20.00/hour 300 times " "
      $20.01 and up no maximum

      and make sure it's watertight - no loop holes. maybe?

    • Comment Link Ben Collier Sunday, 24 March 2013 12:27 posted by Ben Collier

      I agree with Beth. The minimum wage should be raised so that the current working poor can afford a decent standard of living. With this in mind let me offer “a modest proposal.” For 2000 work hours per year (40 hours per week, 50 weeks a year [two weeks of vacation]) I would like to propose a minimum wage of $100 per hour. This would translate to an annual income of $200,000 which I believe is a decent standard of living.

      Now, of course, you might object that this would only bring people up to middle class living standards and if you really cared about them you would want them to be rich. In which case a wage of $500 (or more) per hour might be a more compassionate choice. A fine point. Like many people, I can be incredibly compassionate when I am spending someone else’s money.

      Others might object that a minimum wage law replaces the collective wisdom of tens of millions of buyers and sellers acting individually with the wisdom of the few. Well, I feel quite confident that I can make such a decision. No hubris here. In fact, I believe that it is my duty to share my wisdom by determining the correct price for cars, jeans, lettuce, etc.

    • Comment Link Economic Freedom Friday, 22 March 2013 21:44 posted by Economic Freedom

      The left assumes, for no good reason, that every conceivable kind of job — whether for a major corporation or a small business — ought to pay enough for the employee to "survive," by which they always mean: afford rent in a nice, middle-class apartment, start a savings account, get married, support a family, take occasional vacations, buy the latest consumer gadgets, have a convenient cable connection for their television sets and computers, etc. This is simply Utopian fantasy on the part of the left. FACT: not every conceivable kind of job is supposed to enable the employee to be economically self-sufficient. Minimum wage jobs are ENTRY-LEVEL jobs in something known as the "adult workforce", where the first things one learns are the discipline of getting up early in the morning without having partied oneself to exhaustion the night before; how to put on a suit and tie; and and how to show up at work on time and say "Yes, sir! or "Yes, ma'am!" to one's boss. THAT's the real payment: experience. Then — later — after having mastered those things, the employee can move on to a job that is more productive than slinging hash or washing dishes, and which consequently offers higher wages.

      The idea that "every job must be a GOOD job!" — including low-productivity entry-level jobs — is pure economic illiteracy.

    • Comment Link Beth Larson Friday, 22 March 2013 13:25 posted by Beth Larson

      At present, low wage workers employed by major corporations must take food stamps and other government assistance in order to survive. In essence, the failure to raise the minimum wage has resulted in a government subsidy to these corporations as government assistance comprises a portion of the employees' living wages. Raise the minimum wage enough so that these workers do not need government assistance. This is also a great way to cut government spending.

    • Comment Link Jose P. ONeil Wednesday, 20 March 2013 08:33 posted by Jose P. ONeil

      The real minimum wage is: $0.00.
      The minimum wage is really the "Minority Youth Unemployment Act".

    • Comment Link oscar_the_owch Tuesday, 19 March 2013 17:41 posted by oscar_the_owch

      Market forces are the biggest lies of the biggest hypocrites.
      Tax breaks for mortgage interests into the $millions;
      carried interest tax breaks for wall st.,,
      no regulation of derivatives,
      the list of rules writ to serve the very wealthy is endless.

      Real justice would be spending exactly as much on affordable housing in Chicago and Detroit as Illinois and Michigan's federal taxes lose to mortgage interest deducted.

      This is the cause of the wealth gap fighting to further impoverish millions more.

      Taint the notion of to abolish the minimum wage
      with the rank abuse of human life known as slavery.

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