Raise The Minimum Wage: But Not For The US!
Jim Blair

There is an article on the front page of Wall Street Journal, Monday May 20, '96 that puts some new light on the debate over the minimum wage. The item I found of most interest is the 3rd paragraph.

One of the organizations lobbying for an increase in the minimum wage is the Association of Community Organizations for Reform (ACORN). But even as they want it raised for everyone else, they are seeking an exemption from the law for their own organization, so its organizers can work longer hours without exceeding their limited funds. I love it when someone wants a law that applies to everybody else.

Most of the article deals with the large number of workers that are either not covered by the law, or are being paid less in violation of the law. Alan Krueger of Princeton (and of Card/Krueger fame) estimates that 2 million workers are now illegally paid less than the current minimum. These are concentrated in a few industries such as garment makers and in the "underground economy" that exists in inner cities and immigrant communities.

Currently about 90% of all US "nonsupervisory employees" are theoretically "protected" by the law. But there many independent contractors who are excluded. For example, truckers who own their own rig or are paid by the load. The article cites a recent study that about half of long-haul drivers earn less than $4.25 an hour now, if their pay is divided by the time worked. Many small business owners, domestic help and others are in the same situation. Recall my previous post about the sailing instruction program at Wisconsin, and the post from the small college.

Just who should be "protected"? What about volunteer and charity organizations? Should those who build houses for Habitat for Humanity be covered? Or can such organizations avoid the law and still have workers on salary by having positions which are "part time pay and part time volunteer?"

Enforce before extend?

For those of you who think the minimum wage is a good law, doesn't it make sense to enforce the existing law before raising the level? Or is it better politics to sign a new law to "help the poor" (and don't worry, it doesn't cost anything!), than to lead a group of US Marshals into the inner city to close down existing businesses? Would actually enforcing the existing law give the "wrong image"?


I found that the UW library has a copy of David Card's book and I hope to get it and look over his method of study. One way to evaluate a method is to see how it deals with a hypothetical but realistic situation.

For example, how are the impact studies effected by this:

Wigets & Mexico

Wigets can be made by low skill workers using relatively cheap tools. There is an international market for them, so you can't sell them unless your price is competitive. But you have an improvement and can make what you think are better Widgets. Maybe you can sell them for more (and thus pay your workers more) after customers see how good yours are. But to start, you can meet the going price either by building a plant in the US and paying $5 an hour, or building it in Mexico and paying $1 an hour (but transportation and other costs are higher, with the poor roads and water supply, etc.)

You are all set to go with the US plant, when Congress passes an increase in the minimum wage (to help the working poor, of course). So you decide on Mexico. How will that decision effect the employment of fast food workers in the US community where you had planned your factory?

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