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  • The consequences of Romney’s proposed minimum wage hike

    By Daniel Hamermesh
    Published: Feb. 9, 2012

    Daniel Hamermesh

    Daniel Hamermesh

    Daniel Hamermesh is the Sue Killam Professor in the Foundations of Economics. A nationally known labor economist, Hamermesh specializes in social programs, the economic benefits of beauty, academic labor markets and unusual applications in everyday life.


    Poor Mitt Romney. He has been vilified by the Republican right this week for reiterating a position he took in 2008 that he favors indexing the minimum wage (having it rise each year with inflation). This position goes counter to the usual Republican ideology that the minimum wage should be abolished.

    I don’t like the minimum wage — it does kill jobs, especially among youths and minorities — although not very many. It generates more heat relative to its importance than practically any other social/economic policy. Democrats have to love it to curry favor and obtain money from trade unions; Republicans have to hate it to curry favor and obtain money from small business interests.

    Election 2012 graphic

    Experts from across The University of Texas at Austin will weigh in here on the politics and the issues.

    Indexing the minimum wage would reduce the rhetoric devoted to this relatively unimportant issue. And given that the minimum wage has not been raised in a while, an indexed minimum would start at a reasonable level. The only major effect of taking the discussion out of politics by indexing the minimum wage would be that politicians of both parties would no longer be able to demonstrate their bona fides to their core constituents by arguing for, or against the minimum.

    Mitt is right — let’s finally defuse this issue.

    More from Daniel Hamermesh:

    • Quote 2
      Jeff said on Aug. 31, 2012 at 2:36 a.m.
      The minimum wage is an interesting topic in that liberal and conservative bases have switched arguments a little bit. Not because they haven't been true to their ideologies, but because the topic plays both sides of the fence in subtle ways. Conservatives like to argue that liberals should like reducing minimum wage because more people can get jobs. Liberals for the most part miss a chance to argue that conservatives should like minimum wage because it skews the labor market in ways that actually make companies more efficient. Companies who would have 5 8 dollar workers might only have 3 10 dollar workers plus a new labor saving device to push output up for those three employees. Saving 20 dollars an hour might make something economical that saving 16 dollars an hour wouldn't. And the people making the labor saving device are probably paid enough that minimum wage doesn't matter. If Nike were forced as a condition for product import, to pay every employee worldwide at least $1.50 an hour, then you can bet they would find a way to increase the number of shoes each employee currently making $2 to work a long 12 hours produces. Of course there would be a lot of people out of work because of this, but the argument is that they would find something else to do. The important thing is that massive amounts of labor that was wasted in some extremely inefficient activity has been freed up to do something more productive. Of course, if it is wrong when a liberal makes it to a conservative, then it also has to be wrong if a conservative makes it to a liberal... Perhaps they could put "Peg and Awl" from 1928 on the Radio as they make the transition. I would suggest you can't take arguments like this at face value, but have to look at them in terms of what is actually going on in the economy at the time the changes are made. What is good in a strong labor market can be bad in a week labor market and vice versa. This is probably the strongest argument a liberal has against free traders. Market interference can't possibly be wrong in *both* directions. Actually it can, but not very often as it requires a spectacularly balanced economy. Once you admit that the economy is stronger after you move in one direction than it is if you move in the opposite way, then you also have to admit that studying the world has power and you don't want to be the one arguing before a scientific committee that we were all put on the correct path by our higher power.
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