North Carolina Governor Mike Easley signed into law a new minimum wage for the U.S. state Thursday. The increase of $1 will raise the rate to $6.15. Easley said that the new law will make it easier for North Carolinians to deal with the rising cost of living. The new law will become effective on January 1 next year. This is the first raise to the North Carolina minimum wage in nearly nine years.
http://www.bloggernews.net/2006/07/north-carolina-to-see-mini_115309874597676296.html

There is an abundance of research on the minimum wage and literature reviews regularly report that raising it induces firms to hire fewer workers and to cut back on hours.

The effects are not huge but they are significant. It is hardly rocket science. If you raise the price of apples, people buy fewer apples. If you raise the price of labor, firms buy less of it. And if you look at what happens to those whose lives are disrupted by higher minimum wages, the policy seems less and less just.

In a recent study, economists David Neumark and Olena Nizalova documented the long-run negative consequences of following the Democrats' favorite policy (and, sadly, some Republicans').

They began with the insight that minimum wages are particularly tough on young adult workers; the literature shows that lengthy unemployment can have a "scarring effect" on them, the economists noted. That is, young adults unemployed for a long period have significantly more negative labor-market experiences well into adulthood.

This effect often has resulted in an increased propensity to engage in criminal activity, among other things. Neumark and Nizalova reasoned that the negative employment effects of high minimum wages may increase this "scarring" and therefore continue to harm the victims as they grow older.

To evaluate this hypothesis, Neumark and Nizalova compared outcomes for older workers who grew up in a state that had relatively high minimum wages with outcomes for those who faced low minimum wages when young. They found strong evidence that the negative effects of high minimum wages last into adulthood.

A 29-year-old worker who grew up in a state with higher minimum wages has a significantly lower wage on average than a similar individual from a state with a lower minimum wage. This effect was especially strong for black workers.

It is true that those folks who are on the minimum wage and don't lose their job have higher earnings. But the trade-off is morally ambiguous at best.

Should we enact a policy that gives 10 people an extra $40 a week, but whacks the 11th guy?

Shouldn't the terrible disruption to the lives of those who are fired be more of a concern to us than the extra money for those who are not?

Is it right to redistribute from the worse-off poor to the better-off poor?

It's especially wrong when there are superior options. The earned-income tax credit gets money to working poor people without creating the disincentives that go with higher minimum wages. Columbia University economist Ned Phelps also has suggested a tax subsidy for firms that hire low-wage workers. That, too, would be preferable.
http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/guests/s_461933.html

7/19/2006 5:15:38 PM

maybe if young adult workers could actually get the earned income tax credit, that would be a valid argument. unfortunately, if you're under 25, you need not apply for the earned income tax credit.

7/19/2006 5:18:33 PM

Quote :

"If you raise the price of apples, people buy fewer apples. If you raise the price of labor, firms buy less of it."

That's not necessarily true. People don't need apples, but firms need labor.

7/19/2006 5:18:48 PM

Quote :

"Easley said that the new law will make it easier for North Carolinians to deal with the rising cost of living."

bullshit...it means the cost of living will go up

lower income tax rates if you want people to be able to deal with the rising cost of living

7/19/2006 5:19:10 PM

Quote :

" There is an abundance of research on the minimum wage and literature reviews regularly report that raising it induces firms to hire fewer workers and to cut back on hours."

/bullshit republican talking point made up by rich white people

7/19/2006 5:21:43 PM

$5.15 and $6.15 arent shit

neither of them is enough to live well on

is this hike supposed to really do anything?

7/19/2006 5:23:29 PM

Quote :

"maybe if young adult workers could actually get the earned income tax credit, that would be a valid argument. unfortunately, if you're under 25, you need not apply for the earned income tax credit."

Well, if you went ahead and had a child you could have gotten the EITC before turning 25.

7/19/2006 5:24:34 PM

yeah...thats how to make/save money...have a child before you're 25...right

7/19/2006 5:25:34 PM

Quote :

"That's not necessarily true. People don't need apples, but firms need labor."

A common misconception. Even if you were right that firms need labor to operate it does not follow that firms need to operate.

I suspect that this increase will have sufficiently small effects to get lost in the noise of the wider labor market, but the effects will be real for someone, even if we could never know who exactly it was. If instead of $1 the raise was $10, a massive increase, the effects would be too large to miss as small interstate manufacturers closed and service providers closed or economized (having people from India working the drive through).

"Eight Out of Ten Labor Economists Agree: Low-Wage Workers Lose in 'Living Wage' Laws"
A national survey of labor economists in the American Economic Association was conducted by the University of New Hampshire Survey Center for the Employment Policies Institute. The conclusion shows nearly eight in ten labor economists (79%) believe that a typical living wage law applied locally would cause employers to hire entry-level employees with greater skills or experience than the applicants they previously hired. Seven out of ten labor economists (71%) believe that even modest local living wage proposals would cause employers to reduce the number of entry-level employees.
http://www.epionline.org/news_detail.cfm?rid=3


[Edited on July 19, 2006 at 5:50 PM. Reason : new servey]

7/19/2006 5:37:05 PM

I get this feeling that if you start raising the minimum wage, then firms will simply shed legitimate workers through attrition and hire more illegals to make up for it. Afterall, minimum wage primarily affects unskilled labor; most skilled labor have wages high enough that it would not be impacted directly by this sort of increase.

7/19/2006 5:56:01 PM

Tell it to Bernanke...

7/19/2006 5:58:19 PM

Quote :

"TreeTwista10 ^I'm with stupid 33764 Posts user info edit post $5.15 and $6.15 arent shit neither of them is enough to live well on is this hike supposed to really do anything?"

An extra ~2080 yr isn't a lot to a poor person? This assumes they only work 40hrs a week, and I bet many of em are working 50-60 trying to make ends meet.

7/19/2006 6:10:35 PM

Quote :

"/bullshit republican talking point made up by rich white people"

http://www.acorn.org/
ACORN, a group that crusades for the minimum wage, has been trying to pay its employees below the minimum wage for years. Ad hominem attack, right? No, there’s more to it:

In a suit ACORN filed to exempt itself from California’s minimum wage laws, the organization wrote in its brief:
“As acknowledged both by the trial court and California, the more that ACORN must pay each individual outreach worker–either because of minimum wage or overtime requirements–the fewer outreach workers it will be able to hire.”

Obviously someone believes this "bullshit republican talking point" to be true.

7/19/2006 6:15:57 PM

I believe you said it with:

Quote :

"The effects are not huge"

You haven't offered me anything that leads me to the conclusion that the bad of raising the minimum wage to something more closely approximating a standard of fucking living outweighs the good.

7/19/2006 7:16:46 PM

yeah, the minimum wage is a regular whipping boy of the la sez faire economists

7/19/2006 7:25:11 PM

oh man, high schoolers can buy an extra 1/8 during the summer

7/19/2006 8:04:40 PM

The minimum wage was never designed to make a living off of.

7/19/2006 9:29:28 PM

I predict that nothing will change.

7/19/2006 9:41:30 PM

well if I didnt get layed off by the Record Exchange I would be making more money.

7/19/2006 10:05:05 PM

The minimum wage is just an issue that gets thrown about when people need votes. It has no actual effect on anything, because virtually all households are headed by someone making above the minimum wage. As almost every shred of economic research will tell you: Raising the minimum wage only helps teenagers and housewives. Teenagers is obvious, but housewives is often overlooked. If you raise the wage she can get, she'll enter the part-time workforce. Guess who gets hired first, poor Willie Negro or college educated, but currently at home Joan.
*Of course feel free to swap that for a househusband and an uneducated redneck*

Point being, this is a moot debate, because hardly anyone lives off the minimum wage. But it does a good job of drumming up votes when elections are around the bend.

7/19/2006 10:11:37 PM

Quote :

"Josh8315: /bullshit republican talking point made up by rich white people"

Agreed, I think the state should raise the minimum wage to $20.00/hr

7/19/2006 10:29:47 PM

i stopped listening to most stuff based on economic theories once i realized that they usually make lots of assumptions about the population at large that arent always true (ie: the assumption that people will always save).

7/19/2006 10:55:57 PM

^^whatever, cracker.

7/19/2006 10:57:03 PM

Quote :

"(ie: the assumption that people will always save)."

When do we use that assumption?

7/19/2006 11:03:14 PM

So LoneSnark/Wacko Libertarians: is there such thing as exploitation?

Do employers and laborers make 100% rational decisions, each from an equal footing as far as mobility and economic power are concerned?

Because if it ever where the case that laborers were forced into making decisions that weren't in their best interests due to an imbalance of power between them and their employers, you guys would look pretty dumb.





[Edited on July 20, 2006 at 12:11 AM. Reason : .]

7/20/2006 12:07:25 AM

Hahahahahahahahahahahahaha

7/20/2006 12:11:56 AM

Quote :

""That's not necessarily true. People don't need apples, but firms need labor." A common misconception. Even if you were right that firms need labor to operate it does not follow that firms need to operate. "

I'm not sure what you're trying to say here. How is it a misconception that firms need labor to operate? How would you get a burger at McDonalds if there weren't someone there to give it to you?

Even if McDonald's decided to close shop because of minimum wage laws, the market would compensate with some other business, maybe more efficiently run (but I suspect McDs is quite efficient as things are now) would fill their spot and do well. McDonalds knows this and would gladly take the negligible hit to their bottom line that a raise in minimum wage would cost, in order to continue making money.

7/20/2006 12:20:41 AM

Quote :

"How would you get a burger at McDonalds if there weren't someone there to give it to you? "

ROBOTS, DUH!

7/20/2006 12:26:43 AM

I would prefer a robot.

7/20/2006 12:27:02 AM

Quote :

"LoneSnarkIs it right to redistribute from the worse-off poor to the better-off poor? It's especially wrong when there are superior options. The earned-income tax credit gets money to working poor people without creating the disincentives that go with higher minimum wages. Columbia University economist Ned Phelps also has suggested a tax subsidy for firms that hire low-wage workers. That, too, would be preferable."

While I generally tend to agree with you I must object here. The earned-income tax credit is a horrible idea. It is rediculous for people to get a tax "refund" for more $ than they paid for taxes. That's not a refund, it's welfare. More than just that, it encourages large scale tax corruption. Before the earned-income tax credit the reward for lying about your income was probably in the hundreds, but now with the earned-income tax credit you not only save that few hundred you get back $5000 from uncle sam. This encourages corruption in small buisnesses run by families big time. I'm all for reducing the tax burden on the little guy, but we ought to find a way to do it that doesn't create so much fraud.

Incidentally, how much did the US loose to the earned-income tax credit last fiscal year? I wouldn't know where to begin to look, but I think someone here might. It seems huge to me because I know many relatives in my extended family who are ripping off the government in this way. Every one of them cancels the tax collected from like 2-3 of me. I suppose that in the big scheme of things it might not be much $$ given that most tax $$ actually comes from the rich, still the principle of the thing bugs me.

I'm surprised more hasn't been said in this thread about illegals doing work in NC. Raising the minimum wage gives one more reason to consider hiring an illegal to work under the table. It must grow the blackmarket economy further increasing fraud and ultimately the difficulty for an honest buisnessman to make a go of it in NC.

7/20/2006 1:22:59 AM

Quote :

"Even if McDonald's decided to close shop because of minimum wage laws, the market would compensate with some other business, maybe more efficiently run (but I suspect McDs is quite efficient as things are now) would fill their spot and do well. McDonalds knows this and would gladly take the negligible hit to their bottom line that a raise in minimum wage would cost, in order to continue making money."

Hey moron, that's a fantastic idea. We should raise the minimum wage to $40/hr and all we'll have is SUPER-EFFICIENT firms running the economy. I don't know why no one thought of this before.

7/20/2006 7:24:43 AM

Quote :

"I think the state should raise the minimum wage to $20.00/hr"

you would

7/20/2006 7:28:47 AM

Quote :

"lower income tax rates if you want people to be able to deal with the rising cost of living"

Or the gas tax, or the sales tax (might actually do this one), or the property tax, or the estate tax, or the myriad of other taxes that they raise each year. Make sure to raise the tax levels while the cost of living keeps going up - that really helps the working class. </sarcasm>

Quote :

"Guess who gets hired first, poor Willie Negro or college educated, but currently at home Joan. "

My guess is that college educated, but currently at home Joan would command more than the minimum wage (re)entering the workforce... and that someone with a college education would get hired over someone without one. I'm not sure where you were going with that.

My only shoot from the hip 'cause I don't know what I'm talking about statement would be... wouldn't raising the minimum wage translate to some form of inflation? Granted not all that much since there is only a small percentage of the workforce that work at minimum wage, but I'd imagine there would be some.

The republican in me also tries to persuade me saying that if all the minimum wagers out there get a $1/hour raise then I am suddenly making less, because my $/hour rate isn't going to go up by 1 any time soon. When the price of things goes up as a result of the minimum wage increase I'll be stuck in the middle. Then the democrat in me takes over and wakes up to the fact that my economic wellbeing shouldn't depend on the suppression of others economic wellbeing

[Edited on July 20, 2006 at 8:00 AM. Reason : -]

7/20/2006 7:57:52 AM

Im a republican and I think somthing needs to be done about min. wage. You cant keep it at such a low rate forever. Its going to go up. Its the same as cost of living raises that companies give out for their skilled laborors.

Do you think Food Lion will ever give out a cost of living raise? Doubtfully. Companies like Food Lion get away with paying their part time employees the least amount of money. Part time employees make up a huge labor base for many companies like Food Lion, who work their employees 38 hours a week but continue to call them part time. So in cases like this, minimum wage hikes are helpful.

7/20/2006 8:17:30 AM

Quote :

"I'm not sure where you were going with that."

The general idea is that people who don't have to work to support themselves (housewives, high school students, etc.) may be induced by higher wages to find a job. The guy who minimum wage is supposed to help ends up losing out because he is now competing with better qualified people who heretofore have chosen not to work.

[Edited on July 20, 2006 at 8:40 AM. Reason : ]

7/20/2006 8:39:08 AM

Makes sense now. I'm not sure the $1 increase would entice that many people to the workforce. Heck, the added cost in gas start going to work alone would offset that $1/hour gain. Plus, like I said, I'm pretty sure the college grad housewife would command a higher than minimum wage job anyway.

[Edited on July 20, 2006 at 9:04 AM. Reason : -]

7/20/2006 9:03:47 AM

Quote :

"rjrumfel: So in cases like this, minimum wage hikes are helpful."

Agreed. I think the state should raise the minimum wage to $20.00/hr.

Think about it: all those "38 hours per week but still part-time" Food Lion workers can go from $10,176/yr to $39,520 /yr, overnight! Plus, that's $30K extra they'll have to spend at other businesses, spreading prosperity in ever wider circles!

It's a win-win situation for everybody 

7/20/2006 9:08:59 AM

Quote :

"An extra ~2080 yr isn't a lot to a poor person?"

No

An extra 40 dollars a week before taxes isn't a lot to a poor person

7/20/2006 9:31:33 AM

rjrumfel, Companies that only pay the minimum wage for a long period of time do so because the minimum wage was set too high.

Quote :

"Even if McDonald's decided to close shop because of minimum wage laws, the market would compensate with some other business"

Again, why would that be? Why does hillsboro "need" 20 fast food places? They are currently competing fiercely, paying low wages, and charging relatively low prices. You must remember, firms are not just competing with each other, they are competing with non-existence. People don't need to eat at McDonald's, they can eat bag lunches from home. The average U.S. town has not always had such fast food choices, back in the day most areas were lucky to have one. This was because eating out cost so much more than a bag lunch the average citizen was unwilling to pay it. With a sufficiently high minimum wage it can be that way once again.

But over the last few decades the real-value of the minimum wage has been eaten away, allowing employment to rise markedly. Minority and teenage employment are setting new records, and as the article posted first in this thread points out work experience while young, even at low wages, is a lifetime benefit.

Also, the percentage of American workers actually earning the minimum wage is only 0.44%, a nearly insignificant amount (http://www.bls.gov). Compare this to the already 1.3% that are earning less than the minimum wage. As stated already in this thread, raising the minimum wage increases illegality, decreases employment among minorities and young through job destruction and substitution with workers that previously did not work.

Quote :

"You haven't offered me anything that leads me to the conclusion that the bad of raising the minimum wage to something more closely approximating a standard of fucking living outweighs the good."

Alright, how many disadvantaged people need to suffer unemployment before it outweighs an extra dollar for the majority? If your figure is very high then you should probably push for a ridiculously high minimum wage. 20% of America's young black men are already unemployed, surely making that figure 40% (as existed not that long ago) or even higher if it earns young white kids an extra couple bucks an hour would be worth it </sarcasm>.

BTW, TreeTwista10, an extra $1 to someone earning the minimum wage is a 19.4% raise.

[Edited on July 20, 2006 at 9:35 AM. Reason : .,.]

7/20/2006 9:32:44 AM

Quote :

"An extra 40 dollars a week before taxes isn't a lot to a poor person"

Something is better than nothing, you've got to start somewhere, etc. I never understood the mentality that dictates if you can't up and solve a complex problem in one fell swoop you shouldn't even try to apply aide in incremental steps that eventually could get you there.

7/20/2006 9:46:52 AM

40 more lottery tickets for me!

7/20/2006 9:50:53 AM

^^the federal minimum wage was raised to $5.15 on September 1, 1997

and the NC minimum wage is going to be raised to $6.15 on January 1, 2007

A $1 hike in a 9 1/2 year period is pretty worthless considering the rises in cost of living, taxes, etc

7/20/2006 10:02:26 AM

poor people suck

7/20/2006 10:04:54 AM

its not a lot, but im sure the people who will be getting an increase in pay are happy about it.

they're getting almost a 20% pay increase....its better then nothing.

7/20/2006 10:05:09 AM

^^^You're right. The raise is so worthless we should just keep minimum wage where it's at. If you are only going to raise it that much why even bother raising it in the first place!

Quote :

"A $1 hike in a 9 1/2 year period is pretty worthless considering the rises in cost of living, taxes, etc"

Sorry to pick on you, but this is the way NC government operates. Over that same 9.5 year period I'd bet that state employees had about three 2% raises.

[Edited on July 20, 2006 at 10:10 AM. Reason : -]

7/20/2006 10:09:39 AM

maybe the concept of minimum wage itself is worthless...did you ever think about that?

7/20/2006 11:54:31 AM

Quote :

"A common misconception. Even if you were right that firms need labor to operate it does not follow that firms need to operate."

I think you missed his point. That being, the labor market is generally not perfectly elastic. Raising the price of labor will not exactly proportionally lower thedemand for labor. Additionally, raising the price of labor will generally not raise marginal costs above marginal revenue, thus the firm will generally still employ a similar number of people in most cases.

I think you fail to see the economic good that minimuim wages ultimately provide. Price floors aren't neccesarily a bad thing, even though they tend to make liberitarians shit themselves.

7/20/2006 12:17:04 PM

One less employee to be hired per day for all the places that pay minimum wage.

7/20/2006 1:27:19 PM

So LoneSnark/Wacko Libertarians: is there such thing as exploitation?

7/20/2006 2:29:22 PM

Not unless someone is holding a gun to your head. Or to put it another way, how are you being exploited when even McDonalds will pay you above minimum wage. In general if you are working for minimum wage, you are doing so by choice.

7/20/2006 2:37:35 PM