On the occasion of the scheduled fast food-workers strike today (Thursday, December 5), I thought I’d dip into the vault and repost something from earlier this year on a proposal to hike the federal minimum wage. Workers in around 100 U.S. cities are striking on demands that their wages be moved from the current federal minimum of $7.25 per hour to $15 per hour – that’s well ahead of what President Obama suggested in a State of the Union address back in February. What we look at in this post is why basic economics breaks down when talking about increasing the cost of labor. While you’re looking, you might want to check out a couple other posts I did on minimum wages: one on Washington state (who’s minimum wage is above the federal one) and one on the relationship between minimum wage and federal assistance.
Minimum Wage Hikes – or – What Econ 101 Didn’t Teach You
Your entry-level economics class taught you (or should have) that when the price of something goes up, less of it is consumed. This holds for cars, interest rates, widgets, and wages. So, during this week’s State of the Union address, when President Obama called for raising the federal minimum wage from its current level of $7.25 per hour to $9.00 per hour, and tagging the minimum wage to the cost of living, it drew a decent amount of criticism. Read more
As you may recall, earlier this year, payroll taxes in the U.S. went up by 2% and I discussed how that tax increase could potentially affect spending. Well, we’re done with first quarter, so how have consumers reacted to that $16 less (based on average weekly earnings on non-farm payrolls) in take-home pay each week?
- Consumer spending increased the first two months of the year (up 0.7% in February and up 0.4% in January).
- Consumer confidence took a temporary hit in January, and then generally recovered in February and March.
And, here’s the real kicker, according to a survey recently done by Bankrate.com, almost half of Americans surveyed (48%) didn’t even notice the payroll tax increase. Read more
You may already know this, but because Santa Claus only works for one night a year, he occupies the rest of his time with detailed statistical analysis. That’s why he keeps detailed lists of all the “naughty” and “nice” children. It is, however, little known that Santa Claus also keeps various sub-lists for his statistical analyses. One of these lists is his Economic Naughty and Nice List. To get on Santa’s Economic Nice List, the subject must be achieving positive results for the economy. Santa’s Economic Naughty List contains those who, through action or inaction, do their economies harm. I happen to have seen a leaked portion of the list (Wikileaks again!) and wanted to share here. Read more
What happens when you combine five economists to come up with six economically sensible policy ideas, and then use the result to create a fake presidential candidate? Well, you get what the folks over at NPR’s Planet Money called “A political candidate who could potentially fix the economy, but would never win an election.” Their group of economists came from such vaunted institutions as Harvard, Cornell, George Mason University, the University of Chicago, and the Center for Economic and Policy Research. They were tasked with finding “major economic policies they could all stand behind.” This would then serve as the basis for an economic platform.
So what policies does this Frankenstein’s Monster of a potential POTUS stand on? Five tax changes and one alteration of the criminal code.
- Read more
The so-called “fiscal cliff” isn’t technically supposed to hit until 2013, when a mixture of tax increases and spending cuts could potentially go into effect. However, participants in the U.S. economy seem to be of two minds about whether the fiscal cliff is going to happen, or is maybe already here. Businesses seem to be acting like the economy already has one foot in the abyss – we’ll call this the pessimistic case. American consumers, on the other hand, seem to be operating under the assumption that all the partisan issues will get fixed before we reach the edge – we’ll call this the optimistic case.