# What's wrong with indexing the minimum wage? **URL:** \ **Category:** Great Debates\ **Created:** [January 18, 2007, 9:17pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511 "2007-01-18T21:17:32Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![According\_to\_Pliny](https://avatars.discourse-cdn.com/v4/letter/a/8e7dd6/32.png) [@According\_to\_Pliny](https://boards.straightdope.com/u/According_to_Pliny)\ **Post date:** [January 18, 2007, 9:17pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/1 "2007-01-18T21:17:32Z")
Say, starting from it’s original amount. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [January 18, 2007, 9:29pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/2 "2007-01-18T21:29:23Z")
The only problem I see is it would increase vastly the political pressure to alter the Cost of Living index – either keeping it down if the powers that be want low wages, or more likely despite the power of corporations, pressure to make it artificially high to increase wages. This in turn would wreak havoc on other things that are linked to the Cost of Living, although some of them such as Inflation Indexed Savings Bonds do have provisions to de-link if they feel the COLA has been politicized. However, if it gets so bad that no one bases their COLA on whatever index the government uses, it’s back to the same old situation of ad hoc increases since the COLA becomes entirely worthless! ---
**Author:** ![Common\_Tater](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/common_tater/32/13846_2.png) [@Common\_Tater](https://boards.straightdope.com/u/Common_Tater)\ **Post date:** [January 18, 2007, 9:42pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/3 "2007-01-18T21:42:19Z")
A “dollar” really doesn’t have a precise definition - which benefits those holding large amounts of debt, as they get to pay off those debts with cheaper dollars. Unfortunately long term obligations, insurance policies and similar items are seriously impacted. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 18, 2007, 10:17pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/4 "2007-01-18T22:17:22Z")
[QUOTE=According to Pliny] Say, starting from it’s original amount. [/QUOTE] You mean you want to lower it to about [$3.75](http://oregonstate.edu/instruct/anth484/minwage.html) now? 😉 Seriously, though, I don’t think it would be that big a deal, provided the % of workers making the MW is low. If it gets too high (and I don’t know what “too high” is), you would probably get a feedback look creating inflation, since an increase in wages can lead to an increase in inflation. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [January 18, 2007, 10:45pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/5 "2007-01-18T22:45:58Z")
You mean, index it to inflation? We adopted that in [Florida](http://www.floridajobs.org/resources/fl_min_wage.html) in a referendum in 2005. Too soon to tell how its effects will differ from a non-indexed MW law. ---
**Author:** ![Stratocaster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/stratocaster/32/16393_2.png) [@Stratocaster](https://boards.straightdope.com/u/Stratocaster)\ **Post date:** [January 18, 2007, 11:01pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/6 "2007-01-18T23:01:32Z")
Because it institutionalizes the [ever-increasing damage](http://www.washingtonpost.com/wp-dyn/content/article/2007/01/03/AR2007010301619.html) such a policy produces: > [@](#): > > Most of the working poor earn more than the minimum wage, and most of the 0.6 percent (479,000 in 2005) of America’s wage workers earning the minimum wage are not poor. Only one in five workers earning the federal minimum live in families with household earnings below the poverty line. Sixty percent work part-time and their average household income is well over $40,000. (The average and median household incomes are $63,344 and $46,326 respectively.) > > Forty percent of American workers are salaried. Of the 75.6 million paid by the hour, 1.9 million earn the federal minimum or less, and of these, more than half are under 25 and more than a quarter are between 16 and 19. Not to mention: > [@](#): > > But wait. Ronald Blackwell, the AFL-CIO’s chief economist, tells The New York Times that state minimum wage differences entice companies to shift jobs to lower-wage states. So: states’ rights are bad, after all, at least concerning – let’s use liberalism’s highest encomium – diversity of economic policies. And… > [@](#): > > Raising the minimum wage predictably makes work more attractive relative to school for some teenagers, and raises the dropout rate. Two scholars report that in states that allow persons to leave school before 18, a 10 percent increase in the state minimum wage caused teenage school enrollment to drop 2 percent. Minimum wage is a wrong-headed, feel-good issue that does more damage than good. Systematically increasing it is not a good idea. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 18, 2007, 11:16pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/7 "2007-01-18T23:16:17Z")
I’m no fan of the MW, but if we **had** to develop some kind of automatic increase, I’d do it this way. Pick two percentage points that define a range that we think is reasonable for the number of MW workers. Let’s say it’s 4% and 7%. When the MW hits 4%, we hike it a certain amount such that we will have 7% of hourly workers making the MW. Then, no more increases until it falls back to 4%. We could try to hit a certain fixed %, but then we’d have to reduce the MW at times, and I don’t see that as politically feasible. ---
**Author:** ![Stratocaster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/stratocaster/32/16393_2.png) [@Stratocaster](https://boards.straightdope.com/u/Stratocaster)\ **Post date:** [January 18, 2007, 11:23pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/8 "2007-01-18T23:23:52Z")
[QUOTE=John Mace] I’m no fan of the MW, but if we **had** to develop some kind of automatic increase, I’d do it this way. Pick two percentage points that define a range that we think is reasonable for the number of MW workers. Let’s say it’s 4% and 7%. When the MW hits 4%, we hike it a certain amount such that we will have 7% of hourly workers making the MW. Then, no more increases until it falls back to 4%. We could try to hit a certain fixed %, but then we’d have to reduce the MW at times, and I don’t see that as politically feasible. [/QUOTE] Not following. If 4% are currently earning the minimum wage, increasing it will lower that percentage, not raise it, correct? If you want to maximize the number of people earning the MW, lower it. Or did I misunderstand? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 18, 2007, 11:28pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/9 "2007-01-18T23:28:09Z")
[QUOTE=Stratocaster] Not following. If 4% are currently earning the minimum wage, increasing it will lower that percentage, not raise it, correct? If you want to maximize the number of people earning the MW, lower it. Or did I misunderstand? [/QUOTE] I’m assuming that some people making more than MW will now make MW once it’s raised. Everyone doesn’t get an automatic raise just because the MW goes up. Look at the last graph in the link I gave in my first post. We’re at an historic low for % workers making MW. But I’d much, much rather do this at the state level than at the federal level. There’s too much variability in CoL across this great nation. ---
**Author:** ![DanBlather](https://avatars.discourse-cdn.com/v4/letter/d/f4b2a3/32.png) [@DanBlather](https://boards.straightdope.com/u/DanBlather)\ **Post date:** [January 18, 2007, 11:48pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/10 "2007-01-18T23:48:58Z")
[QUOTE=John Mace] I’m assuming that some people making more than MW will now make MW once it’s raised. Everyone doesn’t get an automatic raise just because the MW goes up. Look at the last graph in the link I gave in my first post. We’re at an historic low for % workers making MW. But I’d much, much rather do this at the state level than at the federal level. There’s too much variability in CoL across this great nation. [/QUOTE] It’s fine to let states fend for themselves, but the problem is that the progressive areas end up paying for the places like Missisipi, Alabama, and other states with brain dead economic policies. Big cities and liberal states that conservatives love to hate have thriving economies and end up paying more in federal taxes than they get back in benefits. ---
**Author:** ![The\_Flying\_Dutchman](https://avatars.discourse-cdn.com/v4/letter/t/9fc348/32.png) [@The\_Flying\_Dutchman](https://boards.straightdope.com/u/The_Flying_Dutchman)\ **Post date:** [January 18, 2007, 11:51pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/11 "2007-01-18T23:51:12Z")
[QUOTE=According to Pliny] Say, starting from it’s original amount. [/QUOTE] I was going to jump in with my strong views on the minimum wage until it registered that your primary concern was indexation. That concern is meaningless unless you have a reasonable minimum wage to start with and are prepared to restrict labour to documented workers. And, if you believe in government mandated entitlements, you might as well argue for and against all indexation. ---
**Author:** ![Common\_Tater](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/common_tater/32/13846_2.png) [@Common\_Tater](https://boards.straightdope.com/u/Common_Tater)\ **Post date:** [January 18, 2007, 11:54pm UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/12 "2007-01-18T23:54:27Z")
It’s tough to make comparisons between “then and now” - for example in the 1960’s, the minimum wage only applied to skilled workers - not everybody la-de-da-di. Hardly anyone is actually paid minimum wage, most make considerably more (at least on a percentage basis) and are awarded further wage increase when skills and longetivity increase. It’s the political equivalent of spam, I suppose - and any increased costs won’t be borne by the employer but rather consumers and/or taxpayers. ---
**Author:** ![Shagnasty](https://avatars.discourse-cdn.com/v4/letter/s/9dc877/32.png) [@Shagnasty](https://boards.straightdope.com/u/Shagnasty)\ **Post date:** [January 19, 2007, 12:13am UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/13 "2007-01-19T00:13:19Z")
[QUOTE=DanBlather] It’s fine to let states fend for themselves, but the problem is that the progressive areas end up paying for the places like Missisipi, Alabama, and other states with brain dead economic policies. Big cities and liberal states that conservatives love to hate have thriving economies and end up paying more in federal taxes than they get back in benefits. [/QUOTE] If they are true liberals, that shouldn’t be a problem at all now should it? Mississippi, Alabama, and others have issues that the Connecticuts of the country don’t and they aren’t all self-induced at least not within the last generation or two. The population demographics are skewed in ways that no state has fully overcome let alone in the amount that they have to address. ---
**Author:** ![Doug\_Bowe](https://avatars.discourse-cdn.com/v4/letter/d/df788c/32.png) [@Doug\_Bowe](https://boards.straightdope.com/u/Doug_Bowe)\ **Post date:** [January 19, 2007, 12:22am UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/14 "2007-01-19T00:22:45Z")
[QUOTE=Common Tater] … It’s the political equivalent of spam, I suppose - and any increased costs won’t be borne by the employer but rather consumers and/or taxpayers. [/QUOTE] I think you hit on something. The minimum wage has been a political football for one party or the other from the start. For the last 5 years it seems to have been the political football of Democrats. If you index MW, you remove that football from the political arena. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 19, 2007, 12:34am UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/15 "2007-01-19T00:34:15Z")
[QUOTE=DanBlather] It’s fine to let states fend for themselves, but the problem is that the progressive areas end up paying for the places like Missisipi, Alabama, and other states with brain dead economic policies. Big cities and liberal states that conservatives love to hate have thriving economies and end up paying more in federal taxes than they get back in benefits. [/QUOTE] Then don’t pay. It was the “progressives” who set up that type of system in the first place. I have a problem with that type of circular argument. First you come in and say we have to federalize services, then you say we have federalize taxes to pay for the federalized services. No thanks. But I dispute your claim that progressive states are rich and non-progressive states are poor, if there even is a way to define “progressive states” and “non-progressive states”. If we could turn Lousisiana into an industrial powerhouse by simply raising the MW, I think that would’ve been done by now. More likely you’re mixing cause and effect. Certain states raise the MW because they can-- they’re rich enough that it doesn’t affect the economy much to do it. They didn’t become rich because they had a high MW. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 19, 2007, 12:53am UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/16 "2007-01-19T00:53:25Z")
Alternatively, **Dan** , can you tell us how much less taxes the “progressive states” will have to pay to the “non-progressive” states for each $.50 incrimental raise in the MW in the latter? If not, then I think your objection is one more of policy than of economics. ---
**Author:** ![DanBlather](https://avatars.discourse-cdn.com/v4/letter/d/f4b2a3/32.png) [@DanBlather](https://boards.straightdope.com/u/DanBlather)\ **Post date:** [January 19, 2007, 2:30am UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/17 "2007-01-19T02:30:33Z")
[QUOTE=John Mace] Alternatively, **Dan** , can you tell us how much less taxes the “progressive states” will have to pay to the “non-progressive” states for each $.50 incrimental raise in the MW in the latter? If not, then I think your objection is one more of policy than of economics. [/QUOTE] If only economics were more science and less art then we could have factual answers to questions like the OP. I can see the downside to the MW as well as the upside, but I think you are right that I favor it as much for policy reasons as economic. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 19, 2007, 3:12am UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/18 "2007-01-19T03:12:18Z")
[QUOTE=DanBlather] If only economics were more science and less art then we could have factual answers to questions like the OP. I can see the downside to the MW as well as the upside, but I think you are right that I favor it as much for policy reasons as economic. [/QUOTE] One thing I will say for it is that, as welfare systems go, it has very little if any administrative costs. But I think it probably would hurt the economy significantly if it were raised to a level where it could be an **effective** welfare system. It would be effective for those people who still had jobs, but a disaster for those who lost theirs. As I’ve said in other threads, I favor the EITC as an alternative to the MW, and that should be indexed to inflation. The proposed MW increase by the current Congress sets it back up to about where it was historically, on the average. Shouldn’t make that much difference in terms of performance of the economy as a whole. Indexing it to inflation without any other control would be risky, though. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [January 19, 2007, 4:03am UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/19 "2007-01-19T04:03:26Z")
The problem with a federal minimum wage is precisely that it levels the playing field. This eliminates comparative advantage in labor at the low end. If a depressed state like Arkansas can’t support a $7/hr minimum wage, then people won’t find jobs. Or conversely, a state might offer a lower minimum wage to attract investment and create job opportunity for people who would be otherwise unemployable. Notice that the current minimum wage hike exempts American Samoa, for precisely this reason. The economy there simply can’t support a minimum wage of $7.15/hr. Of course, it helps that American Samoa’s main employer, the Del Monte corporation, has its headquarters in Nany Pelosi’s home district. I wonder how many other regions that will also have a hard time supporting it are out of luck because they don’t have a powerful Democrat behind them? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 19, 2007, 5:25am UTC](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511/20 "2007-01-19T05:25:38Z")
[QUOTE=Sam Stone] The problem with a federal minimum wage is precisely that it levels the playing field. This eliminates comparative advantage in labor at the low end. If a depressed state like Arkansas can’t support a $7/hr minimum wage, then people won’t find jobs. Or conversely, a state might offer a lower minimum wage to attract investment and create job opportunity for people who would be otherwise unemployable. [/quote] Arkansas is actually at $6.25 already. Bad choice. 🙂 There aren’t that many left at $5.15. Although I agree with you in principle, **Sam** , the current increase is small enough that it won’t likely matter. Many of the states at $5.15 aren’t the poorer states: Texas, South Carolina, Utah, Indiana, Virginia. One might make a case for Louisiana and Mississippi, though. > [@](#): > > Notice that the current minimum wage hike exempts American Samoa, for precisely this reason. The economy there simply can’t support a minimum wage of $7.15/hr. Of course, it helps that American Samoa’s main employer, the Del Monte corporation, has its headquarters in Nany Pelosi’s home district. I wonder how many other regions that will also have a hard time supporting it are out of luck because they don’t have a powerful Democrat behind them? American Samoa has gnerally not been subject to the federal MW, so I doubt Pelosi had anything to do with that this time around. According to wikipedia: > [@](#): > > The Fair Minimum Wage Act [of 2007] makes no reference to American Samoa;[18] the territory’s minimum wage is set by a committee appointed by the U.S. Department of Labor under the Fair Labor Standards Act.[19] After accusations by Republican lawmakers that Speaker of the House Nancy Pelosi was unethical because Del Monte (parent company of StarKist Tuna which owns one of the two tuna canneries in Samoa) is based in her district, she instructed a House committee to have Samoa be included. Samoa’s representative Eni Faleomavaega noted that the territory has not been subject to the mainland minimum wage… You gotta fact check on some of those righty blogs, **Sam**. 😉 [Next page](https://boards.straightdope.com/t/whats-wrong-with-indexing-the-minimum-wage/388511.md?page=2)