Wednesday, March 20, 2013

Elizabeth Warren suggested what?

A $22 per hour minimum wage might be reasonable.

Here is a telling passage from the full article on Huffington Post:
"If we started in 1960 and we said that as productivity goes up, that is as workers are producing more, then the minimum wage is going to go up the same. And if that were the case then the minimum wage today would be about $22 an hour," she said, speaking to Dr. Arindrajit Dube, a University of Massachusetts Amherst professor who has studied the economic impacts of minimum wage. "So my question is Mr. Dube, with a minimum wage of $7.25 an hour, what happened to the other $14.75? It sure didn't go to the worker."
It seems she basically believes that employers wouldn't pay workers without people like her making them. Now that is dumb. She also severely confuses average worker productivity with marginal worker productivity. Claiming that the minimum-wage worker in 1960 grown at the rate of productivity growth is the equivalent to the minimum-wage worker in 2013 is 1 + 2 = 7. That is dumber. Has nothing else changed since 1960? Job descriptions, labor pools, employer compliance with regulations, et al. all the same? Are we really sure the worker who should be earning the MINIMUM wage today is equal to the worker in 1960 who should have been earning the MINIMUM wage plus the AVERAGE growth in worker productivity?

Think about this simplified thought experiment that ignores A LOT of other changes: A grill cook with little capital equipment at a fast-food burger joint in 1960 can produce 200 burgers per hour. A grill cook with lots of capital equipment at a fast-food burger joint in 2013 can produce 500 burgers per hour. Should the worker in 2013 be paid a full 2.5x more than the worker in 1960, or should the guy who bought the capital equipment be paid something, which eats into the 2.5x for the worker?

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