David Farrar today posted on the minimum wage, noting that, despite the much higher median wage, and much higher GDP per capita in the UK, their minimum wage (just increased) is only 88% of ours.
A regular commenter on Kiwiblog posted a link to a 2006 paper reporting on a (smallish) survey of American economists conducted by Robert Whaples. Among the issues on which the economists were surveyed was the minimum wage.
The Kiwiblog commenter used this quote from the paper in an attempt to highlight the lack of consensus among economists on the efficacy of minimum wages.
The efficacy of the minimum wage continues to divide economists. As Table 3 shows, almost half (46.8%) have concluded that the federal minimum wage should be eliminated, while a slightly smaller number (37.7%) favor increasing it.
First off, I think it is worth noting that 46.8% is not slightly more than 37.7%. It’s a significant difference. Of the 77 economists who responded, 36 thought that minimum wage should be abolished altogether, and 29 thought that it should be increased. That’s a 24% difference. There’s nothing “slight” about it.
Here are the full results.
The federal minimum wage in the U.S. should be:
- eliminated. 46.8%
- decreased. 1.3%
- kept at the current level. 14.3%
- increased by about 50 cents per hour. 5.2%
- increased by about $1 per hour. 15.6%
- increased by more than $1 per hour. 16.9%
At the time of the survey, the federal minimum wage in the US was $5.15 per hour. Only 16.9% of respondents thought that the federal minimum wage should increase by more than $1 per hour.
What that means is that 83.1% thought that minimum wage should be $6.15 per hour or less. As best I can make out, the median personal income in the US in 2006 was a little under US$33,000. The annual income on $6.15 per hour, assuming 2080 hours per year would be about $12,800. So 83.1% of economists opposed lifting the minimum wage above about 39% of the median wage.
It’s also worth noting that in 2006 the US ecomony appeared to be in good shape, and unemployment levels were low.
So, the Kiwiblog commenter has rather helpfully, though entirely inadvertently, highlighted what is actually a clear demonstration of consensus among economists* that the New Zealand minimum wage is too high.
Unfortunately, it’s set to go even higher in a few days.
*To be fair, 77 isn’t a great sample size.