More on the Minimum Wage

The chart above, from the Bureau of Labor Statistics, illustrates the minimum wage in 2012 dollars from its inception in 1938 to 2012. As you can see, the present minimum wage is just about trend. The low point was in 1938 when it started. Its high point in 1968.

The president is proposing to return the minimum wage to that level. The arguments in favor of doing so are the ones he’s made—the minimum wage is not a living wage. The arguments against are that the minimum wage is not intended as a living wage, the number of individuals that receive the minimum wage is very small, and many of those who earn minimum wage are young workers with low skills who aren’t trying to live on it.

The effect that raising the minimum wage would have on employment is a bone of contention—there are arguments both ways. One point that hasn’ been mentioned—the uptick in illegal immigration began just about the time that the minimum wage reached its peak. That might just be a coincidence or it might be that a higher minimum wage would incentivize a black market in labor of which illegals are a significant part.

I think it’s reasonable to speculate that the president wants to see the minimum wage play a different role than was intended and than it has historically. As I’ve said before, I’m of mixed minds on this subject. To gain my full support I’d need to believe that an increase in the minimum wage would help a lot more people than it would hurt and that it wouldn’t have much in the way of adverse unintended secondary effects. Neither of those seem to have been explored much in the discussion to date.

59 comments… add one

  • PD Shaw

    @steve, I think it might only be the state exchanges being run by the feds that would be eliminated.

    But the totality looks like traditional Republican ideology. A healthcare market driven by consumer choice. The government doesn’t get to decide what is good insurance and what is crappy insurance or force the consumer to buy something they don’t want. Refundable tax credits are used to assist those with less money buy catastrophic care coverage.

    That’s coming from a very different place than the Democrats, whom are concerned that real choice of insurance doesn’t always exist or that some people will choose poorly or be misled by insurance companies. Catastrophic care does not address the need for preventive care to control costs. Health Savings Account are tax dodges for the wealthy.

    (I’m not clear about pre-existing conditions, but it looks like it allows people to stay with their existing plans without getting charged more, so long as they keep continuously insured. That would come across as posing a significant risk for people who drop their insurance)

  • jan

    While still “allowing” HSAs, the ACA negatively impacts them in various subtle ways, by reducing HSA options and increasing the penalty for taking money out of the account for non-medical purposes.

    Regarding the differences of let’s say the CBH HC proposal and the current PPACA — PD’s list was a considerate one pointing out said differences. IMO, though, such a replacement bill’s biggest benefit is that it generally gives back the individual ownership and control of one’s own HC , by supplying more medical care options and doing away with the mandate provisions.

    Again, if one’s philosophy centers on government being the overall enforcer of everything to do with one’s life, including education, student loans, health care and now even retirement choices, then no other HC idea (especially anything offered by the conservative faction) will be satisfactory, and liberal partisans will find fault with whatever is proposed.

  • jan

    PD,

    My take on preexisting conditions is that state pools for those with preexisting conditions would be created, and insurance companies would be expected to contribute funding to them. I don’t know, though, if those who have now been insured with these conditions, could remain untouched on these ACA provisions or not.

  • steve

    PD- As I have said before, the ACA draws upon Republican ideas. It would be pretty easy to adjust it to become a plan that fits closer to their ideals. Most people dont realize how close it is already. If you read Taylor’s earlier analysis of the details on how it functions, and drawing from the consulting firm that rated it, the plan would provide fairly narrow networks much like we see happening in the ACA as a means to control costs. Far from providing more options, it likely narrows them further. Also, one should remember that they are assuming that people actually want to have health insurance, the same assumption made in the ACA. If people end up not buying it in the ACA, I dont see why they would suddenly buy it because it is a GOP plan.

    jan- As I said to PD, the analysis of the plan suggests more narrow networks. If you are referring to the idea that plans could be more innovative in what they offer in any given plan, we already have had that prior to the ACA. It did not result in better products. Indeed, if you have ever had to buy insurance for your company and try to read over the many plans available, what you mostly see is obfuscation. It is difficult to make direct apples to apples comparisons between plans. The ACA forces insurance companies to compete on actual costs because the plans are required to provide similar coverage.

    That said, it would be easy to change. If you think the coverage requirements are too numerous, reduce them. I would be a bit surprised, only a bit, if you could not get together enough votes to change those. I suspect some Dems would go along if they come from a more conservative or non-safe district.

    Steve

  • Andy

    Steve,

    I guess I don’t see the relevance of arguments regarding how many Republican ideas are (or are not) in the ACA. That has nothing to do with how good the ideas or or how well they are implemented.

    In a related matter, I saw this, to me, remarkable John Stewart interview with Rep. Nancy Pelosi:

    http://www.thedailyshow.com/watch/thu-january-30-2014/exclusive—nancy-pelosi-extended-interview-pt–1

    Watch all three parts, it’s well worth it. The TLDR version is that Stewart spend 1/2 hour trying to get the minory leader to acknowledge some basic truths about governance in America. Stewart gets it, Rep. Pelosi either doesn’t or is disingenuous or both. At the end the audience is laughing at her continual attempts to divert the argument away from competent governance toward partisan ideology. It is, frankly, depressing and it gives me no hope for any kind of substantive government reform.

  • Zachriel

    Dave Schuler: According to the World Bank publication, “Inequality Among World Citizens, 1820-1992″, Bourguignon and Morrison, 2002, global inequality as measured by Gini coefficient peaked around 1979 and has declined since, reversing a trend that goes back almost two centuries.

    Interesting paper. To clear up a misunderstanding, we had thought you used the word “globally” to refer to across China. We apologize.

    Not sure where you got “1979” as the peak. Bourguignon and Morrison’s study doesn’t purport to that sort of resolution. They say that income inequality increased until about the mid-twentieth century, then plateaued, saying “There is comparatively little difference between the world distribution {of income} today and in 1950.” Another interest point from the paper. Since the industrial age, differences between countries have been greater than within countries.

  • Zachriel

    Bourguignon and Morrison were writing in 2002. Continued developments in Asia have led to a small but significant decrease in income inequality.

  • steve

    Andy- Many people, including jan and maybe PD are advocating for the latest GOP plan, while claiming they hate the ACA. The plans really are not that much different. The ACas could easily be modified to approximate the Coburn plan. For that matter, the Coburn plan would need to be modified to pass also, so it would be easy to make it look more like the ACA. WHat I think is important to remember is that both parties are relying upon many of the same ideas. For years, the GOP has advocated for plans that required very narrow networks and high deductibles to work, even higher than the ones in the current ACA. After talking smack about how bad the ACA is for imposing narrow networks and high deductibles, they turn around and offer the same thing.

    Might it be offered or run more competently if done so by the GOP? I see no evidence of that. People forget that Medicare Part D, a simpler program, had its difficulties and also included risk corridors, the so called insurance company bailouts, that the GOP is now complaining about.

    Steve

  • Andy

    Steve,

    I can’t speak for anyone else, but my own view is that any plan will have major problems absent serious reform of federal institutions and processes. There are major systemic problems in the federal govt. This is a point that Nancy Pelosi and her peers in Congress on both sides seem oblivious to.

    As for reform, I’ll just repeat what I’ve said before which is that I’m not ideologically predisposed to a particular solution, but I’m also skeptical of the rosy assumptions underlying popular solutions like single-payer or HSA’s, or the Ryan plan. That said I think any reform should have three objectives:

    1. Get employers out of the health insurance/care business
    2. Replace fee-for-service with a better model.
    3. Focus on value for health-care dollar spent.

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