For $1.75 an hour, they put up with abusive employers, muggers, rain, snow, potholes, car accidents, six-day weeks, and lousy tips. Not anymore.
Source: Arindrajit Dube, Suresh Naidu, and Michael Reich, Industrial and Labor Relations Review, July 2007
This paper presents the first study of the economic effects of a citywide minimum wage—San Francisco’s adoption of an indexed minimum wage, set at $8.50 in 2004 and $9.14 by 2007. Compared to earlier benchmark studies by Card and Krueger and by Neumark and Wascher, this study surveys table-service as well as fast-food restaurants, includes more control groups, and collects data for more outcomes. The authors find that the policy increased worker pay and compressed wage inequality, but did not create any detectable employment loss among affected restaurants. The authors also find smaller amounts of measurement error than characterized the earlier studies, and so they can reject previous negative employment estimates with greater confidence. Fast-food and table-service restaurants responded differently to the policy, with a small price increase and substantial increases in job tenure and in the proportion of full-time workers among fast-food restaurants, but not among table-service restaurants.
Today, the nation’s low-wage workers will start to get the raise the country voted to give them as the federal minimum wage hike goes into effect. The pay floor will rise from $5.15 per hour to $5.85, and then to $7.25 in two years.
But will it really happen?
The hike sounds good on paper, and we might assume the new law will put more money into the pockets of the workers who need it most. Unfortunately, it’s not that simple. First we need to make sure employers obey the law, since a. lot of low-road employers flouted the minimum wage law even at $5.15.
Source: Oren Levin-Waldman and Charles Whalen, Challenge: The Magazine of Economic Affairs, Volume 50, Number 3, May-June 2007
If raising the minimum wage affected only 2.5 percent of the labor market, as many argue it does, than it would not be such an explosive political issue. In truth, it affects wages well up the income ladder. The authors show why. They argue that a higher minimum wage is an essential part of any American wage policy.