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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    45 comments

    • Comment Link Addie Thursday, 11 April 2013 17:26 posted by Addie

      Amazing that neither Mr. Bernstein nor Ms. Kornbluh are economists, that abolishing the minimum wage is such a policy no brainer, and that arguing for a minimum wage is essentially arguing that the law of demand doesn't exist (like saying the world is flat) yet the motion still got creamed. What is wrong with these voters?

    • Comment Link Steven Thursday, 11 April 2013 09:37 posted by Steven

      Which is better, fewer workers making a living wage (minimum wage) or more workers making less than a minimum wage and can't afford the basic necessities. No minimum wage drives a larger portion of people into poverty. It would be true that more people would have jobs, but fewer people would be able to live on what they make.

      I agree that if poverty is increased, crime would also increase. This would result in taxes increasing to pay for more cops and more jails. In addition, taxes would increase to pay for such government services such as food stamps. With minimum wage a person would pay more for a service or product that they buy. Without minimum wage people would pay more in taxes. Either way, the working people would pay.

      As for educating more people so that they become skilled labor, that would decrease the income of these skilled jobs because these jobs are limited and as the law of supply and demand dictates, too many people vying for the same jobs decreases their worth.

    • Comment Link jai Wednesday, 10 April 2013 14:30 posted by jai

      I was surprised that neither side mentioned the most important issue in the minimum wage debate, at least to my mind.

      It’s not about money it is about power, it’s about leverage.

      The minimum wage exists, and is important, because unskilled/uneducated/marginalized employees cannot hope to match the negotiating power of an employer. As a society we recognize this power gap, and hence the need for protection. Without the protection, the employers leverage enables exploitation. That is what we are afraid of, and rightly so.

    • Comment Link milt Friday, 05 April 2013 21:43 posted by milt

      I attended and just want to add two quick points. R&J mentioned the morality point(s). One additional one: if some guy wants to work at McWalBurgers for $6.00/hr because he thinks it will help him get ahead, who are J&K to say he cannot. They know better what he wants than himself.

      Also, another mental exercise: say the MW was abolished in downtown Detroit. I would imagine a lot of capital and business would flock there and many jobs would be created (even if below the MW). Would this be bad for the city and people of Detroit?

      Thanks for a great evening. Wish my boyz had won!

    • Comment Link David E Friday, 05 April 2013 12:18 posted by David E

      in a GLOBAL economy, minimum wage would have to be a global standard...

      otherwise it would lead to imbalances in supply and demand for labor...

      thus a US mandated minimum wage would become as irrelevant as a locally mandated minimum, such as for example, a "Little Rock AR minimum wage", or a "Shelbyville minimum wage"...

    • Comment Link Ben Collier Friday, 05 April 2013 10:52 posted by Ben Collier

      My response to Gordon Rohrbacher: Yes, I was being deliberately absurd.

      On another note: A KEY point that most people overlook is that workers are paid a package of benefits, with the money wage being only one of the components. If the government mandates that one of the components (such as the money wage) must increase, then a logical consequence is that one (or more) of the other components will adjust. This might be training, health care insurance (see the history of US employer provided health care insurance in the 1940's) or a variety of other benefits. So it is quite possible that for small increases in the minimum wage employment may not fall (because some other margin(s) has adjusted). Consequently, you CAN NOT conclude that a minimum wage increase that has no detectable impact on the employment of the affected workers produces a net benefit to these individuals.

    • Comment Link Jorge Mujica Wednesday, 03 April 2013 23:38 posted by Jorge Mujica

      So many funny postings here... here's mine:

      Minimum wage has a simple logic: it is not a wage to live "decently", be part of the middle class and have "cable tv". Not a leftist idea, either.

      Minimum wage is the legal base of the cheapest possible labor; i.e: labor as part of production factors, has a minimum cost. Paying less than minimum is unfair capitalist competition.

      In a "free for all" society, you can't regulate the cost of gas or steel (that would be leftist, pure communism), but you can regulate a standard cost for labor, for the benefit of all business (somebody here remembers the American civil War and its root causes, slavery versus wage-workers?)

      Of course, in a global economy, our minimum wage is pure grounded gold for people in other countries with lower minimum wages, and viceversa. Mexican workers are now "entitled" to 64 pesos and 74 cents per day, (some 5 US dollars a day) --- ever wonder why people risk their lives crossing the dessert and come over and face deportation as undocumented workers? Of course, companies go overseas and pay those wages and still sell their products here as if they were paying US wages... US-made Levi's are about $35, whether they are made in Texas or in Honduras...

      Minimum wage jobs are not "entry wages", as someone posted. The combinations between low skilled workers and greedy employers is rampant. I know workers who get paid minimum wage after 10 or 15 years working in the same place.

      Minimum wage raises don't make jobs disappear, either. Take a look at some references at the end of my posting.

      Finally, many people are not paid either legal minimum wage or overtime. Just in my area, the Cook County, Illinois, more than one million dollars a day go unpaid, some 386 million a year.

      In the end, minimum wage affects the profits margin, and that's why employers oppose it. They all want to make more money, period.

      Here, the references I recommend:

      http://en.wikipedia.org/wiki/Minimum_wage

      http://www.raisetheminimumwage.com/pages/job-loss

      http://www.huffingtonpost.com/2013/03/31/college-graduates-minimum-wage-jobs_n_2989540.html?utm_hp_ref=business

      https://www.youtube.com/watch?v=m4B5wbv0KmY

    • Comment Link Cristin Wednesday, 03 April 2013 13:42 posted by Cristin

      From the perspective of a retail worker:

      Assuming that it's because of having to pay all their employees minimum wage, many large retail companies often have to cut hours to the point of barely having enough staff on the sales floor. This makes the work more stressful for the few employees that the company has jobs to offer.

      If the company didn't have to pay higher wages, they COULD offer more jobs and have a better employee to customer ratio making the job easier and the customer happier and probably boosting repeat shoppers. Yay jobs!

      However, then you have to think about the employee.

      Before, they were working 40 hours a week to pay their bills. Now how much more will they have to work? And It's not that I'm against working hard, but time is important. How can the employees have time to better their lives? Or even have time to enjoy them? Especially when (in my experience), most of the workers are students, recent graduates, or are working more than one job to make ends meet. They don't have time.

      Specifically in a retail job scenario, there isn't much room for ladder climbing. So unless the raises and benefits are FANTASTIC, who can afford to have that job besides the desperate?

      That being said, I can imagine why the minimum wage could hinder success in some other fields. But retail is my only minimum wage experience.

    • Comment Link Dave Roberts Wednesday, 03 April 2013 00:19 posted by Dave Roberts

      I'd love to attend, but--wow!--40 bucks a head! Hey, I always saw WAMU as a low-budget publicly oriented organization.

      The pricing is a tad rich for this event, so I'll pass, although I'd be interested in attending if pricing was reasonable.

    • 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?

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