The minimum wage in the USA

The economic effects of a possible increase in the minimum wage are contradictory and can affect levels of employment, prices of goods and services, economic growth, income inequality and poverty.

Unemployment

A 1994 study by economists Alan Krueger and David Card , examining the effect of raising the minimum wage established in New Jersey from $ 4.25 to $ 5.05 in April 2012, using 410 local restaurants as an example, did not reveal a decrease in the level of employment from increasing the minimum wage ^[4] . In February 2014, the US Congressional Budget Office evaluated the effects of a possible increase in the minimum wage in two possible scenarios: an increase in the minimum wage to $ 10.10 followed by indexation at the inflation level and up to $ 9 without subsequent indexation in another. The effects were rated as follows:

• The increase in the minimum wage will affect 16.5 million workers in the first option and 7.5 million in the second.
• The loss of work will affect 500 thousand people in the first option and 100 thousand in the second.

At the same time, many economists criticized the report, pointing to dubious methods of study and controversial assessments of the consequences ^{[5] [6]} . In a 2013 review by the Center for Economic and Policy Research analytical center of similar studies done since 2000 that the effect of increasing the minimum wage was minimal or did not appear at all, 11 reasons were given for the explanation, the main of which was a decrease in staff turnover, a slight increase in prices , increasing organizational effectiveness ^[7] . Another 2014 study found that increasing the minimum wage accelerates the creation of new jobs ^[8] . The Economist wrote in December 2013 that raising the minimum wage, if the bar is not set too high, will contribute to income without negative effects, and that most studies have not shown an increase in unemployment from the federal minimum wage or minimum wage of the state or revealed a small increase in unemployment, but nowhere else was not serious ^[9]

Prices

In principle, an increase in the minimum wage increases the cost of labor. Employers may come to terms with reduced profits and / or increased prices. With rising prices, the demand for the product decreases and buyers can switch to replacing the product or to imported analogues. Unprofitable producers can be forced out of business if they do not raise prices enough to compensate for the increase in labor costs. Whether the increase in employee income derived from the increase in the minimum wage can compensate for these effects is a moot point ^[10] . Some studies have shown rising prices in restaurants after raising the minimum wage ^[11] .

Economic Growth

Whether the GDP rises or falls depends to a large extent on whether the income redistributed to the employee goes to increase the level of total expenses. This trend is called marginal propensity to consume . The redistribution of income from a more economical employee with a lower marginal propensity to consume to a less economical employee with a higher marginal propensity to consume can lead to an increase in the level of consumption and demand, which gives an increase in employment ^[2] .

Income Inequality

Poverty Level

The US Congressional Budget Office in February 2014 estimated a decrease in the level of people living below the poverty line by 300 thousand with the option with an increase in the minimum wage to $ 9 and 900 thousand with the option with an increase in the minimum wage of up to $ 10.10 ^[2]

Federal budget deficit

Job Quality

Economist Comments

In 2014, more than 600 economists signed an appeal in support of raising the minimum wage to $ 10.10 with a study according to which this would have a small stimulating effect on the economy, creating a growth in demand and employment ^{[12] [13] [14] [15]} . Also, support for the idea of ​​raising the minimum wage was expressed by 7 Nobel Laureates in Economics ^{[16] [17] [18]} . According to a survey conducted by the IGM panel of economic experts at the University of Chicago , 34% of respondents agreed that when raising the federal minimum wage to $ 9, it is much more difficult to find low-skilled personnel (which 56% of respondents did not agree with or were not sure about), and 42% agreed that raising the minimum wage to $ 9 with indexing by inflation would be a desirable solution (which 32% of respondents expressed uncertainty and 11% did not agree) ^[19] . The economist Paul Krugman in 2013 spoke out in favor of a moderate increase in the minimum wage, which he calls the fact that the current minimum wage is lower in purchasing power than in the 1960s, although labor productivity has nearly doubled, as well as more evidence that the increase The minimum wage will not have a negative impact on employment, and that the initiative has great public support, especially among Democrats and women from Republicans ^[20] .

Politician Comments

In 2014, former President Bill Clinton ^[20] spoke in favor of raising the minimum wage. In September 2015, before the next presidential election, the following candidates spoke about raising the minimum wage: Bernie Sanders and Martin O'Malley - up to $ 15, Hillary Clinton - up to $ 12, Marco Rubio - up to $ 10.10, Rick Santorum - up to $ 8.75; Ben Carson - expressed support for the idea, but did not name a specific figure; Donald Trump , Jeb Bush , Rand Paul , Scott Kevin Walker called for keeping the minimum wage at the same level, Carly Fiorina - for canceling the idea of ​​the established minimum wage as such ^[21] .

A Pew Research Center survey conducted in January 2014 showed that 73% of Americans approve of a minimum wage increase of up to $ 10.10 (53% of Republicans, 90% of Democrats), while 20% are against ^[22] . A survey by Lake Research Partners in February 2012 showed: 73% of potential voters support the idea of ​​raising the minimum wage to $ 10 with inflation indexing, including 91% of Democrats, 74% of independents and 50% of Republicans; 56% are sure that raising the minimum wage will help the economy, 21% think that it will hurt, and 16% think that it will not affect the economy ^[23] .

In each state and territory of the United States there is a list of works that fall under federal minimum wage legislation. If work does not fall under the Wage and Hours Act , then state, city, or other local laws may set a minimum wage for it ^[24] . An exception to federal laws are companies with revenues of less than $ 500 thousand per year, while not conducting interstate commerce.

Workers who receive part of the income by tip, for example, waiters or bartenders, can legally have a salary lower than the minimum wage, provided that their income with included tips is not lower than the minimum wage ^[25] . Seven states (Montana, Minnesota, Alaska, California, Hawaii, Washington, Oregon) and Guam do not allow tips to be taken into account and paid below the federal minimum wage ^[26] . Additional exceptions to federal laws may include many seasonal workers, students, and certain categories of people with disabilities in accordance with the Wage and Hours Act.

In addition, some counties and cities may have an established local minimum wage level higher than the minimum wage level established by the laws of the state in which they are located. Sometimes such higher minimum wages apply only to enterprises that have contracts with local authorities, and sometimes to all without exception.

In case of overtime, the minimum wage for processing is paid one and a half times, and each state has its own conditions. Some states also have a special daily overtime limit, which means workers who are not excluded from recycling laws are required to receive a bonus of over 8 for every hour they spend on their work per day. That is, for example; if there is an employee who is subject to the laws on processing (that is, he can receive overtime in theory), works 12 hours a day on Mondays and 6 on Tuesdays (and does not have overtime for a week), then he, in the absence of special staff The laws regarding the daily overtime limit are not required to receive overtime by the weekly standard, since he did not work more than 40 hours a week, although he worked more than 8 hours on Friday. If, according to state laws, there is a separate daily overtime limit, he will receive overtime for the additional 2 hours worked on Monday, although the weekly limit of 40 business hours is not exceeded.

Some states have exceptions for certain jobs and businesses (other minimum wage rates with / without tip, exceptions to laws, etc.). There are laws in 10 states (Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont, Washington) that automatically index the minimum monthly wage at the inflation rate in accordance with the ICP , and other minimum wages are indexed manually (in some plans to introduce automatic indexing in the future).

Federal minimum wage

As of January 1, 2016:

Minimum wage for federal subcontractors

State minimum wage

As of January 1, 2016:

Washington

US minimum wage

Examples of minimum wage at the level of municipal authorities