Economic theory predicts that an increase in the minimum wage, will result in frictional unemployment. Just who are the workers affected by the minimum wage?
There are only 2.7 million workers who earn the minimum wage or less. They represent 2.3% of the labor force. There are roughly 147 million workers in the labor force. These are the characteristics of those holding a job that pays the Federal minimum wage rate:
* They are young.
* Tend to be women
* Minimum wage workers represented all races, genders, ethic background.
* Minimum wage workers tend to work in leisure and hospitality sectors.
* Tend to be part-time workers.
These conclusions are taken from the 2007 Current Population Survey found on the BLS website.
Most economists believe that an increase in the minimum wage will increase unemployment. Usually, teens are the first to be let go. When I observe an increase in the minimum wage, I see employers cutting hours but not workforce. I think the percentage of minimum wage workers is so small that prices are not affected. These workers only marginally contribute to structural unemployment.
I would think that the minimum wage increase would be a structural factor. I was taught (and I'm willing to be corrected on this) that frictional unemployment was largely voluntary - (the example I used was the country-western song "Take This Job and...").
ReplyDeleteI understood structural to mean that the way we do things. In this case, it's an institutional change - a change in the rules - which would indicate a change in the structure of the market.
What's your understanding of the definition of the two?
I was taught that frictional unemployment was a voluntary separation from a job. Perhaps the worker found a hirer paying job. Again, I was taught that structural unemployment was the result of institutional changes. In reading Paul Krugman's introductory text and N. Gregory Mankiw's intermediate text, both economists write that efficiency wages, union bargaining, and minimum wage results in structural unemployment. I can see what they mean. All three create sticky wages and don't allow the market to clear. How good to hear from you...
ReplyDeleteHave you seen "Minimum Wage", part of Morgan Spurlock's tv documentary series "30 days"? He did "Super Size Me". He can be a bit much to take, but I found it interesting. He spent 30 days trying to make it in Columbus, OH with his then fiancee starting with zero and then getting an apartment, having no health insurance, finding a job and getting transportation...
ReplyDeleteEcontalk just had an interview with Charles Platt. Mr. Platt worked at Wal-Mart after reading Nickel and Dimed. The link is: http://www.econtalk.org/archives/2009/06/platt_on_workin.html Russ Roberts does an excellent job with his interview. Back to your question--I have not seen "30 Days"...I will look for it on YouTube...best
ReplyDeleteNice post... Looks like flash memory is finally starting to take off. Hopefully we'll start seeing a drop in solid-state drive prices in the near future. Five dollar 32 gigabyte Micro SDs for your Nintendo DS flash card... imagine that!
ReplyDelete(Posted from KU2 for R4i Nintendo DS.)