Sunday, August 06, 2006

"A Pittance"

Judge Richard Posner weighs in on the criminally low minimum wage:
At the current minimum wage in Illinois of $7.75 an hour, an employee who works 2000 hours a year (a 40-hour week with two weeks of annual vacation) and is paid the minimum wage earns only $15,500 a year. This is a pittance, though if the minimum-wage employee's spouse is employed at a significantly higher wage, the family's income may not be at a hardship level. Similarly, the minimum-wage employee may be an elderly person who receives social security and Medicare and may have a company pension in addition. These possibilities show that minimum wage laws, even if they had no disemployment effects, would be a clumsy instrument for combating poverty.

A better approach than raising the mininum wage would be increasing the earned-income tax credit (negative income tax), which is a method of increasing the earnings of marginal workers without confronting their employer with a higher cost of labor and thus inducing the employer to discharge those workers whose marginal product is lower than the minimum wage. But this would be difficult for an individual city or even state to do; it would require federal action.
Which is yet another reason America needs new management.

via your Chicago Reader's
Daily Harold.

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