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Tuesday, December 26, 2006

Rethinking The Minimum Wage

By Rob on December 26, 2006 at 03:19 pm
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Greg Mankiw has a great way to look at minimum wage hikes.  Essentially, as he points out, a hike in the minimum wage is a subsidy for low-wage workers funded by a tax on the employers who hire low wage workers.

Sound sort of self-defeating?  It is, but then helping low-wage workers isn’t really what the minimum wage is about.  There are actually just a few Americans who are paid the minimum wage, and of those few most of them are students and retirees.  So why all the hubub about minimum wage?  It’s because union contracts are based on the minimum wage, and unions are nothing if not politically powerful.

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Avatar for kbiel

It’s not like the unions have to do much prodding though.  The government stands to benefit via increased tax revenue.  Of course, these idiots never think beyond the immediate gain as inflation will quickly rise to eat up any gain from an increased minimum wage.

kbiel on December 26, 2006 at 07:18 pm
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