Raising Minimum Wage Annotated Bibliography

Jose R. Torres Mendez

Raising the minimum wage in New York City. The reason this topic is important is because of
the surprising fact that raising the wage can sometimes have negative effects on workers. My
research is focused on people who depend the most on decent wages in New York City. I will
explain the evidence that I found useful and reliable and how it relates to my main points which
include the effectiveness of raising it and alternative more effective solutions.

Economics Nobel Prize Winner George J. Stigler. The American Economic Review: The
Economics of Minimum Wage (pp. 358-365)
On the book The American Economic Review I focused only on chapter The
Economics of Minimum Wage which itself focuses on 4 different aspects on the subject:
Effects of minimum wage on the allocation of resources, Effects on aggregate
employment, Effects on family income and Alternative policies to combat poverty. The
author addresses these 4 points as the 4 most important basis on this matter.
Dr. Stigler made an excellent job separating speculation and assumptions from facts.
What he proposes seems intuitive and is supported by evidence aside from the fact that he
was awarded 1982 Economic Science Nobel Prize which adds further credibility to what
he is saying. When he talks about the Effects of minimum wage on the allocation of
resources he simplifies the outcomes of what he calls an effective minimum wage to
two possible scenarios; workers whose services are worth less than the minimum wage
are discharged (and thus forced into unregulated fields of employment, or into
unemployment or retirement from the labor force); or, second, the productivity of low-

efficiency workers is increased then these productivity increase comes to be either the
laborers working harder or the entrepreneurs will use different production techniques.
He explains this even further but this is enough to provide evidence for one of my main
points; raising the minimum wage will in general (competitive jobs) result in
unemployment, in this case by different production techniques. These production
techniques refer to the New York example of McDonalds replacing many of its workers
with machines instead of paying $15 an hour.

Professors David Neumark and William Wascher. Employment Effects of Minimum and
Subminimum Wages: Panel Data on State Minimum Laws Article
This article explains some surprising evidence about minimum wage found by the authors
and provides fascinating conclusions. In simple words, after reevaluating data from 19731989 and under the economic conditions of the state minim wage laws their
estimates

indicated a 10% increase on the minimum wage reduces teenage employment by

1% to 3%. This decrease is for workers with minimum and near minimum wages. The article
also explains that government minimum wage given analyses have a few potential
problems. The minimum wage variable used for these studies has very little variation
because there exists a correlation between government social welfare and for this
reason it is difficult to isolate the effects of minimum wage.
This article fits perfectly for my research for it provides strong empirical evidence on the
effects of minimum wage legislation and unemployment. Another crucial point is the
suggestion of governmental information not being independent from other factors that
can miss guide analysis on the data and for this reason many other reliable sources of

minimum wage information often disagree with one another. For example, the official
Department of Labor in the U.S. claims that there is no evidence for increasing minimum
wage and unemployment and if this were to be true my research would be of no value.
Thankfully evidence from this article is provides great insight on the reasons for the
contradictions in conclusions on the same data.
Peter H. Lindert. Growing Public Volume 1, The Story: Social Spending and Economic Growth
I found this book incredibly helpful for understanding the psychology behind many
social debates throughout history between the wealthy and the poor, taxation and the
allocation of resources. The book addresses historical events to compare how this social
issues were being solved and how they repeat over time. Many of these welfare
governmental strategies were merely new like the use of tax payers dollars to pay for the
education of other peoples children which seems like a basic human right for us today
yet this ideology is no more than 300 years old. These social acts were also happening
throughout Europe in countries such as Germany and England.
This book not only helped me gain better understanding of social resource allocation
conflicts, but also helps my research by relating to alternative solutions to minimum wage
increase for fighting poverty and insufficient salaries for workers. Welfare is very
different from raising minimum wage in my opinion, as welfare targets specific groups
that really depend on the aid instead of the broader group of people that benefits from a
higher minimum wage which as stated before causes other multiple problems. The most
important point in relation to my research is the success that all these countries which
were using all this welfare programs had in the following years, the United States and

Europe being perfect examples of the implementation of this programs in contrast with
countries which did not.
Bernard Fortin and Guy Lacroix. Welfare Benefits, Minimum Wage Rate and the Duration of
Welfare Spells: Evidence from a Natural Experiment in Canada
This article analyzes the problems and benefits regarding welfare reforms using a
natural experiment approach in Canada for retrieving data before and after welfare
legislation. In August 1938 in the Province of Quebec Canada a welfare reform
introduced abolishment of age discrimination to benefit childless couples and single
individuals below the age of 30 increasing monthly benefits from $173 to $425 on
average, however data also suggested a dependency increase of expected duration on
welfare from 2 up to 4.5 months.
The model being used is purely mathematical and the few assumptions are stated clearly
as they provide graphical representation of the functions and relations to illustrate results.
This experiments suggests that there is a relation between welfare aid and this so called
dependency which refers to an increase in time that it takes for individuals to exit
welfare. Although my research suggests direct governmental aid to workers instead of
raising the minimum wage this source is useful to raise awareness of the risks that
welfare presents. The result provides evidence that increased education can have great
impact on reducing mean duration into welfare. For this reason it this source is very
important to my research since it provides a complete solution to insufficient salaries,
suggesting that the problem lies in part on the level of education of people who receive
government aid.

Mike Patton, The Facts on Increasing the Minimum Wage. Mike Patton is a Certified Financial
Planner and Charted Mutual Fund Counselor.
This article is an analysis on the overall minimum wage subject. As the tittle says it states
the facts of minimum wage and upon those facts derives conclusions. One of the main
points is Debating the Merits of the Minimum Wage where the author claims that the
U.S. Department of Labor suggests that raising the minimum wage would help the
economy by increasing consumer purchasing power putting money into peoples
pockets and calculates that if every dollar earned by every minimum wage worker payed
the raised minimum wage of $15/hour and spent it all in goods in the U.S. for a year
(which is doubtful) excluding all taxes, it would equate to 0.23% of the U.S. economy
which he says is insignificant disproving the boost the economy argument. The
article also suggests that elected officials do not intend to boost the economy by raising
the minimum wage but rather to garner votes.
I found this article useful to my research because it provides evidence against raising the
minimum wage which is important if we are to start looking for alternative solutions for
it and to avoid unemployment. The article addresses increased automation on
businesses
my

as a result of raised minimum wage to protect profit margins, and this is useful to

point of higher unemployment due to the wage just like McDonalds was forced to
automatize many services they provided after the increase in minimum wage in New
York City.

Max Ehrenfreund, The Washington Post: Why raising the minimum wage in Seattle did little to
help workers, according to a new study

The article talks about the effects of the one dollar and 50 cents increase in the minimum
wage of the city of Seattle and how recent studies conducted by economist Vidgor. The
new studies and their findings pointed that benefits on workers might have been
minimal;

there were fewer of the workers earning more than those without the increase and

those who work had had fewer hours than they would have without the wage increase. Taking
these factors into consideration, the average increase in total earnings was very small,
they even found the minimum wage hike actually caused a decrease in total weekly
earnings of $5.22 using alternate methods. Although many of the methods used to
measure the efficacy of minimum produced contradictory results, New York and
California are planning to raise their minimum wage to $15 an hour.
This article suggests that the minimum wage is used to stop factors such as automation of
services and technology from leaving people out of jobs and the author claims that the
effectivity of this method is not certain. In my research this is useful because it is an
important point the understanding of the purpose and the effects of minimum wage
legislations and it questions their effectiveness with new economic methods used by
Vidgor.
Department of Labor: Minimum Wage Myth-busters
The Department of Labor has this section called Wage Myth busters were they provide
evidence for the claims the make in favor of raising the minimum wage. The page says
that out of all that benefit from the minimum wage raise only 11% are teens disproving
the myth that only teens benefit from the legislation. Myth: Small business owners cant
afford to pay their workers more, and therefore dont support an increase in the minimum
wage as we can see this pages calls a some of my points

myths and I think this is

okay, as this is no black or white solution to this problem and it is very important to
understand this issue and identify key problems and solutions without being completely
biased towards one side of the subject. For this, I think that this page is useful for my
research, because I have to question all of my points and look at both sides of the
argument in order to get the best out of my research. In my point of view it is important
that at the very least everyone tries to understand the effects of minimum wage and not
just arbitrarily choosing one side or the other.