poverty

The Rationale for Minimum Wage Increases

This morning I gave oral testimony to the Vermont Senate Economic Committee on their proposal to raise the state minimum wage to $15 an hour by 2024. As part of my written evidence, I explored in detail the rationale for minimum wage hikes from the “Fight for $15” campaigners and other think-tanks. Below is a slightly edited version of that section of my testimony, which has wider applicability.

The Impact of The New German Minimum Wage

Germany introduced a new economy-wide minimum wage for the first time in 2015, at a relatively high rate of €8.50 ($9.67 today). This rose to €8.84 in 2017. For reference: between 10 and 14 percent of eligible workers were thought to earn less than €8.50 before the policy was introduced.

This is interesting from a research perspective. Most minimum wage studies examine the impact of minimum wages at low levels or assess small changes to their rate. But here we have a case study of a whole regime change with a high rate introduced for the first time.

The “Success Sequence” - What Does It Tell Us?

One story about poverty in the United States goes like this: Poverty is simple to escape. Finish high school. Get a job, even a menial one. Do not have kids until you’re married. And if you do all these things, you’re pretty unlikely to be poor.

Conservatives like this story because it suggests that no significant social changes are needed to end poverty. On this view, poverty may even be just a personal choice. It’s largely up to you whether you follow the so-called “success sequence” or not.

What 19 in 20 Americans Don’t Know About World Poverty

An overwhelming majority—95 percent—of Americans are confused about the state of global poverty. A survey from the late Hans Rosling’s web project Gapminder assessed the public’s knowledge on that subject. The survey asked twelve thousand people in fourteen countries if, over the last two decades, the proportion of the world’s population living in extreme poverty has a) almost doubled, b) stayed the same, or c) almost halved. 
 

Trump, Hillbillies, and Geographic Mobility

Following Trump’s electoral success in rustbelt states, the spotlight has been on white, rural, post-industrial poverty. J.D. Vance, author of the now-famous memoir Hillbilly Elegy, discussed some possible explanations for rural poverty yesterday in a podcast. In the interview, he suggests that geographic (im)mobility is partly to blame for the erosion of areas like Appalachia: the poor simply aren’t migrating to jobs. 

Vance is right that Americans have limited interest in relocating, and are relocating less than before. According to calculations[1] using University of Chicago data, the proportion of individuals unwilling to relocate for work is high: 42% of Americans say they will not move within the United States for work, and 68% of Americans will not move outside the country for work. A full quarter (25%) of Americans would not consider traveling further for a job, even if the decision resulted in unemployment. Meanwhile, Census data suggests that relocation—whether inter-state, inter-county, or intra-county—is down (Figure 1). 2016 had the lowest relocation rate in seventy years (Figure 2).

The Curse of Motivated Reasoning against Econ 101

Earlier this month, James Kwak penned an extensive critique for The Atlantic of the Econ 101 view that government-imposed minimum wage rates lead to job losses. But many of his own arguments for why the Econ 101 story might be misguided appear to be theoretically and empirically doubtful. What’s more, he does not actually show that significant minimum wage hikes would be good for reducing poverty.

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