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Minimum Wage Laws – Moral Imperative or Political Gambit?

The following guest blog is by John Swindell, retired Vice President and Managing Director of RR Donnelley Financial.

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Our current federal minimum wage of $7.25 per hour went into effect in July, 2009, and is not indexed to any measure of inflation.  President Obama and fellow Democrats are now proposing to increase the federal minimum wage to approximately $10 per hour in a couple of stages.  Early battle lines are being drawn along traditional ideology, with Democrats supporting the raise by citing the moral imperative to fight poverty and reduce income inequality and Republicans opposing the raise by repeating the long-held belief that the laws of economics negate the impact of minimum wage increases, repeating the old adage that you get less of what costs more – higher wages equals reduced employment.  Democrats counter that a plethora of studies have shown no ‘employment effect’ of increasing minimum wage.  A recent Glenn Hubbard Op Ed in The Washington Post disagrees, citing a book by David Neumark and William Wascher:  “a higher wage almost surely reduces employment.”  A recent editorial in Investor’s Business Daily argues that the studies frequently cited by minimum wage supporters did not include wage increases of the magnitude now being contemplated and, further, that the periods studied were relatively short and failed to account for longer-term impacts.Swindell Blog Minimum Wage

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