Doing the Minimum: Congress Spins the Roulette Wheel with New Minimum Wage Increase

Today, new minimum wage rules go into effect, meaning that millions of people earning between $6.55 and $7.25 per hour will get either extra green or a pink slip. It all depends on a big bet by Congress — a bet they’re happy to make, but that they never have to pay on.

The bet works like this: if most minimum wage workers are underpaid, they win! They all get raises, and the money they make is closer to what they’re worth. They spend more money, the economy gets a boost, and everyone gets to thank Congress for making sure they’re paid the right amount.

And if they aren’t worth it — or they are worth the money, but it’s money their employers don’t have? In that case, they get laid off. But, of course, it’s harder to measure when that happens, or what really caused it. In the end, the easiest person to blame is the employer.

It’s a simple case of heads, Congress wins, tails, employers and employees both lose. But what makes it worse is who is affected: minimum wage workers are generally young, and generally women. In other words, they’re often economically vulnerable (and, in the case of young people, often getting “paid” mostly in experience).

With math like that, it’s an easy bet for some folks to make. Unfortunately, it ignores the economic realities of work and experience. Many people work for less than minimum wage — as interns, as volunteers, or under the table. Few of them expect to keep working for that much money forever, but all of them are clearly more willing to work for low wages than to spend their time some other way.

There are plenty of reasons to think that minimum wage is too low — but the most compelling reason to think so is when inexperienced people get hired for more than minimum wage, not that people complain that the wages they willingly work for are too low.

• The New York Times charts who is affected by the new minimum wage law.

• Kay Bell at Don’t Mess With Taxes also discusses the news.

• The AFL-CIO has a different view. They mention workers “Affected by an increase,” without pointing out how often the effect of an increase is a layoff. Oh well!