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January 02, 2006


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dan levine

Dean Levmore,
Couldn't there also be political pressure in the opposite (i.e., downward) direction? For example, an employer with wage-insensitive employees might lobby for a lower minimum wage than the one currently prevailing. A lower minimum would allow it to lower its labor costs without losing employees while its competitors who face union-pressure (or any other form of upward pressure, or more wage-sensitive employees) would be stuck with higher costs.
Of course such employers couldn't push state wage levels below the federal minimum, but they could keep them from rising above the federal level. Are you just suggesting that in some states there are more super-wage-paying employers than in others?



Agreed, in a sense. Current minimum wage laws, state and federal, are the product of various interest group pressures (among other things) and can be thought of as in a kind of equilibrium. No doubt they would be higher if not for some employers, consumers, and wrokers holding them down, as you say. My claim responds to the puzzle, or at least what I identify and claim as a puzzle, of why some states raise minimum wages. It is a puzzle because economists generally think consumers are made worse off, and it is a puzzle that the states are not particularly strong labor states. When the voters of Florida and Nevada vote for higher minimum wages, there is something interesting going on.


Might it be that, to the extent that the overall economy is improving, voters simply feel that minimum wage workers should be allowed to share in the bounty? An implicit expression of voter's desire for the moderation of increasing economic disparity (i.e., fairness)?

Similarly, perhaps current public sentiment supports a higher minimum only because inflation has become less of a concern in the public's mind.

This doesn't explain why it's happening at the state rather than national level. But maybe its easier to ask why it has not happened at the national level. That answer to that seems clear: Republican dominance. It may also be that both parties desire not to alienate certain large donors - a concern that can be skirted at the state level through the ballot initiative process.

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