Effects of the Minimum Wage

I agree with Rick that the consequences of a minimum wage matter -- in the same way that the consequneces of any morals legislation matter within traditional Catholic approaches to legal theory.

The empirical record on the minimum wage is a mixed one.  In a series of articles, David Card and Alan Krueger have found that modest increases in the minimum wage have actually increased employment.  Here's the abstract of a paper they wrote in 1994:

On April 1, 1992 New Jersey's minimum wage increased from $4.25 to $5.05 per hour. To evaluate the impact of the law we surveyed 410 fast food restaurants in New Jersey and Pennsylvania before and after the rise in the minimum. Comparisons of the changes in wages, employment, and prices at stores in New Jersey relative to stores in Pennsylvania (where the minimum wage remained fixed at $4.25 per hour) yield simple estimates of the effect of the higher minimum wage. Our empirical findings challenge the prediction that a rise in the minimum reduces employment. Relative to stores in Pennsylvania, fast food restaurants in New Jersey increased employment by 13 percent. We also compare employment growth at stores in New Jersey that were initially paying high wages (and were unaffected by the new law) to employment changes at lower-wage stores. Stores that were unaffected by the minimum wage had the same employment growth as stores in Pennsylvania, while stores that had to increase their wages increased their employment.  (Card, David and Alan B. Krueger, "Minimum Wages and Employment: A Case Study of the Fast-Food Industry In New Jersey and Pennsylvania." American Economic Review. September 1994: pp. 772-793)

See also David Card & Alan Krueger, Minimum Wages and Employment, 90 Amer. Econ. Rev. 1397 (2000) (confirming earlier results); Mark B. Stewart, The Impact of the Introduction of the UK Minimum Wage on the Employment Probabilities of Low-Wage Workers, 2 J. European Econ. Ass'n 67 (2004); Paul Wolfson & Dale Belman, The Minimum Wage:  Consequences for Prices and Quantities in Low Wage Markets, 22 J. of Bus. & Econ. Stat. 296 (2004).  Other studies (in fact, probably the majority of studies prior to Card & Krueger's work) have found modestly negative effects on low-wage employment.

So the economists can't seem to agree on this.  But, as in other areas of law, I think it's important not to lose sight of law's symbolic significance.  Making contracts to pay workers less than a minimum wage illegal has some communicative value independent of the actual consequences it generates for low wage workers.   Whether the positive effects of an increase in the minimum wage (in both communicative and concrete terms) outweigh the negative consequences is obviously a complex prudential calculation on which reasonable people of good will can differ.  I think a strong argument can be made, however, that, because negative employment consequences will be de minimis at some level (even for those who reject the Card & Krueger results) SOME level of minimum wage is morally required, if only for those symbolic reasons. 

Finally, even if folks like Posner turn out to be right, I don't think that relieves opponents of the minimum wage from the obligation to generate alternative proposals for ensuring that those earning sub-living wages in the absence of an adequate minimum wage law receive the material resources to which they are entitled as a matter of justice.  Since -- within the Catholic moral tradition -- the material well being of those at the bottom is a crucial measure of the justice of an economic order (along with the avoidance of excessive inequality, as we've been discussing), we as a society should be willing to tolerate even declines in aggregate wealth in exchange for absolute (and, to a point, relative) improvements for those at the bottom. 

Being opposed to tolerance of continuing poverty and excessive inequality does not commit one to any particular policy to remedy those problems.  But I would put the onus on those who oppose modest increases in the minimum wage to explain how they hope to combat poverty and excessive inequality more effectively.  I don't see those currently filibustering the minimum wage making heroic efforts to expand the EITC or to increase the rate of union representation in the private sector or to return the progressivity of our income tax to pre-Reagan levels.  Simply saying that the market will take care of it is not an option Catholics can endorse.

UPDATE:  I think I can explain the difference between Cowen's approach and mine more clearly.  Cowen (or really anyone who favors an exclusive focus on absolute well being of the poor) would appear to think a marginal increase in the well being of the rich is justifiable as long as it does not affirmatively harm the absolute well being of those at the bottom (some people who argue along these lines would refuse to honor increased envy among the poorest as a cognizable harm, though the arguments for disregarding envy have always struck me as unconvincing).  I, however, think that a marginal increase in well being of the rich is not justifiable unless it -- at a minimum -- affirmatively improves things for those at the bottom.  Finally, depending on the size of the increase for the rich and the poor, the improvement for the rich might not be justifiable, even with a small benefit to the poorest, since the independent harm to social solidarity of added inequality might more than offset a small (absolute) improvment for those at the bottom.