America's Complicated Minimum Wage Argument

The president wants to raise the federal minimum wage to $9 an hour. Does it make good economic sense?

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In addition, the economic evidence on the topic is inconclusive; plenty of studies have shown that minimum wage increases have had little to no effect on employment.

That doesn't make any sense. It's like up being down, or dogs and cats living together.

Not really. A higher minimum wage can have positive effects within businesses, like reducing turnover—paying workers more means that they stay longer, meaning lower training costs and greater productivity.

It also doesn't necessarily have to increase prices; it can simply result in "wage compression"—higher wages for people at the bottom, but lower wages for people at the top.

So raising the minimum wage can be a way of sticking it to the man?

You can put it that way. Other people simply say that businesses have the money, but haven't been allocating it to their lowest-paid workers. While corporate profits have generally grown in recent decades, workers have not seen rising shares of those profits, as the Washington Post's Ezra Klein reported this week. Plenty of factors have contributed to that, including external influences like globalization, but it is yet more evidence of the growing divide between the lowest-paid and highest-paid Americans.

Is there any definitive solution?

In a word, no. Even people who spent their college days taking econometrics instead of classes about horror films can't figure it out.

What a drag.

Tell that to your McDonald's cashier.

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