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A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labor. Although minimum wage laws are in effect in many jurisdictions, differences of opinion exist about the benefits and drawbacks of a minimum wage.

Supporters of the minimum wage say that it increases the standard of living of workers, reduces poverty, and forces businesses to be more efficient. Opponents say that if it is high enough to be effective, it increases unemployment, particularly among workers with very low productivity due to inexperience or handicap, thereby harming less skilled workers and possibly excluding some groups from the labor market; additionally it is less effective and more damaging to businesses than other methods of reducing poverty.^[1]

History[link]

A sweatshop in Chicago, Illinois in 1903

The minimum wage has a strong social appeal, rooted in concern about the ability of markets to provide income equity for the least able members of the work force. For some people, the obvious solution to this concern is to redefine the wage structure politically to achieve a socially preferable distribution of income. Thus, minimum wage laws have usually been judged against the criterion of reducing poverty.^[2]

Statutory minimum wages were also proposed as a way to control the proliferation of sweat shops in manufacturing industries. The sweat shops employed large numbers of women and young workers, paying them what were considered to be substandard wages. The sweatshop owners were thought to have unfair bargaining power over their workers, and a minimum wage was proposed as a means to make them pay "fairly". Over time, the focus changed to helping people, especially families, become more self sufficient. Today, minimum wage laws affect workers in most low-paid fields of employment.^[3]

Although the goals of the minimum wage are widely accepted as proper, there is great disagreement as to whether the minimum wage is effective in attaining its goals. From the time of their introduction, minimum wage laws have been highly controversial politically, and have received much less support from economists than from the general public. Despite decades of experience and economic research, debates about the costs and benefits of minimum wages continue today.^[3]

The classic exposition of the minimum wage's shortcomings in reducing poverty was provided by George Stigler in 1946:

• Employment may fall more than in proportion to the wage increase, thereby reducing overall earnings;
• As uncovered sectors of the economy absorb workers released from the covered sectors, the decrease in wages in the uncovered sectors may exceed the increase in wages in the covered ones;
• The impact of the minimum wage on family income distribution may be negative unless the fewer but better jobs are allocated to members of needy families rather than to, for example, teenagers from families not in poverty;
• Forbidding employers to pay less than a legal minimum is equivalent to forbidding workers to sell their labour for less than the minimum wage. The legal restriction that employers cannot pay less than a legislated wage is equivalent to the legal restriction that workers cannot work at all in the protected sector unless they can find employers willing to hire them at that wage.^[2]

Direct empirical studies indicate that anti-poverty effects in the U.S. would be quite modest, even if there were no unemployment effects. Very few low-wage workers come from families in poverty. Those primarily affected by minimum wage laws are teenagers and low-skilled adult females who work part time, and any wage rate effects on their income is strictly proportional to the hours of work they are offered. So, if market outcomes for low-skilled families are to be supplemented in a socially satisfactory way, factors other than wage rates must also be considered. Employment opportunities and the factors that limit labor market participation must be considered as well.^[2]

Minimum wage law[link]

First enacted in New Zealand in 1894,^[4][5] there is now legislation or binding collective bargaining regarding minimum wage in more than 90% of all countries.^[6]

Minimum wage rates vary greatly across many different jurisdictions, not only in setting a particular amount of money (e.g. US$7.25 per hour under U.S. Federal law, $9.04 in the U.S. state of Washington,^[7] and £6.08 (for those aged 21+) in the United Kingdom^[8]), but also in terms of which pay period (e.g. Russia and China set monthly minimums) or the scope of coverage. Some jurisdictions allow employers to count tips given to their workers as credit towards the minimum wage level. (See also: List of minimum wages by country)

Informal minimum wages[link]

Sometimes a minimum wage exists without a law. Custom and extra-legal pressures from governments or labor unions can produce a de facto minimum wage. So can international public opinion, by pressuring multinational companies to pay Third World workers wages usually found in more industrialized countries. The latter situation in Southeast Asia and Latin America has been publicized in recent years, but it existed with companies in West Africa in the middle of the 20th century.^[9] Blanket minimum wage levels for all industries could also be set as a fixed percentage of the GDP per capita or the income tax threshold of the nation.

Considerations in fixing an initial minimum wage[link]

Among the indicators that might be used to establish an initial minimum wage rate are ones that minimize the loss of jobs while preserving international competitiveness.^[10] Among these are general economic conditions as measured by real and nominal gross domestic product; inflation; labor supply and demand; wage levels, distribution and differentials; employment terms; productivity growth; labor costs; business operating costs; the number and trend of bankruptcies; economic freedom rankings; standards of living and the prevailing average wage rate.

In the business sector, concerns include the expected increased cost of doing business, threats to profitability, rising levels of unemployment (and subsequent higher government expenditure on welfare benefits raising tax rates), and the possible knock-on effects to the wages of more experienced workers who might already be earning the new statutory minimum wage, or slightly more.^[11]

Among workers and their representatives, political consideration weigh in as labor leaders seek to win support by demanding the highest possible rate. ^[12] Other concerns include purchasing power, inflation indexing and standardized working hours.

In the United States, the minimum wage promulgated by the Fair Labor Standards Act of 1938 was intentionally set at a high, national level to render low-technology, low-wage factories in the South obsolete.^[13]

Economics of the minimum wage[link]

Simple supply and demand[link]

An analysis of supply and demand of the type shown in introductory mainstream economics textbooks implies that by mandating a price floor above the equilibrium wage, minimum wage laws should cause unemployment.^[14][15] This is because a greater number of people are willing to work at the higher wage while a smaller numbers of jobs will be available at the higher wage. Companies can be more selective in those whom they employ thus the least skilled and least experienced will typically be excluded.

According to the model shown in nearly all introductory textbooks on economics, increasing the minimum wage decreases the employment of minimum-wage workers.^[16] One such textbook says:

If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces, the quantity of unskilled workers employed will fall. The minimum wage will price the services of the least productive (and therefore lowest-wage) workers out of the market. ... The direct results of minimum wage legislation are clearly mixed. Some workers, most likely those whose previous wages were closest to the minimum, will enjoy higher wages. This is known as the "ripple effect". The ripple effect shows that when you increase the minimum wage the wages of all others will consequently increase due the need for relativity. (Formby, J., Bishop, J., & Kim, H.. (2010). The Redistributive Effects and Cost-Effectiveness of Increasing the Federal Minimum Wage. Public Finance Review, 38(5), 585. Retrieved April 18, 2012, from ABI/INFORM Global. (Document ID: 2140268271).) Others, particularly those with the lowest prelegislation wage rates, will be unable to find work. They will be pushed into the ranks of the unemployed or out of the labor force. Some argue that by increasing the federal minimum wage, however, the economy will be adversely affected due to small businesses not being able to keep up with the need to subsequently increase all workers wages. (Belman, D., & Wolfson, P.. (2010). The Effect of Legislated Minimum Wage Increases on Employment and Hours: A Dynamic Analysis. Labour, 24(1), 1-25. Retrieved April 18, 2012, from ABI/INFORM Global. (Document ID: 1960232931).) ^[17]

It illustrates the point with a supply and demand diagram similar to the one below.

Graph showing the mainstream conception of the labour market

It is assumed that workers are willing to labor for more hours if paid a higher wage. Economists graph this relationship with the wage on the vertical axis and the quantity (hours) of labor supplied on the horizontal axis. Since higher wages increase the quantity supplied, the supply of labor curve is upward sloping, and is shown as a line moving up and to the right.^[18]

A firm's cost is a function of the wage rate. It is assumed that the higher the wage, the fewer hours an employer will demand of an employee. This is because, as the wage rate rises, it becomes more expensive for firms to hire workers and so firms hire fewer workers (or hire them for fewer hours). The demand of labor curve is therefore shown as a line moving down and to the right.^[18]

Combining the demand and supply curves for labor allows us to examine the effect of the minimum wage. We will start by assuming that the supply and demand curves for labor will not change as a result of raising the minimum wage. This assumption has been questioned.^{[citation needed]} If no minimum wage is in place, workers and employers will continue to adjust the quantity of labor supplied according to price until the quantity of labor demanded is equal to the quantity of labor supplied, reaching equilibrium price, where the supply and demand curves intersect. Minimum wage behaves as a classical price floor on labor. Standard theory says that, if set above the equilibrium price, more labor will be willing to be provided by workers than will be demanded by employers, creating a surplus of labor, i.e., unemployment.^[18]

In other words, the simplest and most basic economics says this about commodities like labor (and wheat, for example): Artificially raising the price of the commodity tends to cause the supply of it to increase and the demand for it to lessen. The result is a surplus of the commodity. When there is a wheat surplus, the government buys it. Since the government doesn't hire surplus labor, the labor surplus takes the form of unemployment, which tends to be higher with minimum wage laws than without them.^[9]

So the basic theory says that raising the minimum wage helps workers whose wages are raised, and hurts people who are not hired (or lose their jobs) because companies cut back on employment. But proponents of the minimum wage hold that the situation is much more complicated than the basic theory can account for.

One complicating factor is possible monopsony in the labor market, whereby the individual employer has some market power in determining wages paid. Thus it is at least theoretically possible that the minimum wage may boost employment. Though single employer market power is unlikely to exist in most labor markets in the sense of the traditional 'company town,' asymmetric information, imperfect mobility, and the 'personal' element of the labor transaction give some degree of wage-setting power to most firms.^[19]

Criticism of the "textbook model"[link]

The argument that minimum wages decrease employment is based on a simple supply and demand model of the labor market. A number of economists (for example Pierangelo Garegnani,^[20] Robert L. Vienneau,^[21] and Arrigo Opocher & Ian Steedman^[22]), building on the work of Piero Sraffa, argue that that model, even given all its assumptions, is logically incoherent. Michael Anyadike-Danes and Wyne Godley ^[23] argue, based on simulation results, that little of the empirical work done with the textbook model constitutes a potentially falsifying test, and, consequently, empirical evidence hardly exists for that model. Graham White ^[24] argues, partially on the basis of Sraffianism, that the policy of increased labor market flexibility, including the reduction of minimum wages, does not have an "intellectually coherent" argument in economic theory.

Gary Fields, Professor of Labor Economics and Economics at Cornell University, argues that the standard "textbook model" for the minimum wage is "ambiguous", and that the standard theoretical arguments incorrectly measure only a one-sector market. Fields says a two-sector market, where "the self-employed, service workers, and farm workers are typically excluded from minimum-wage coverage… [and with] one sector with minimum-wage coverage and the other without it [and possible mobility between the two]," is the basis for better analysis. Through this model, Fields shows the typical theoretical argument to be ambiguous and says "the predictions derived from the textbook model definitely do not carry over to the two-sector case. Therefore, since a non-covered sector exists nearly everywhere, the predictions of the textbook model simply cannot be relied on."^[25]

An alternate view of the labor market has low-wage labor markets characterized as monopsonistic competition wherein buyers (employers) have significantly more market power than do sellers (workers). This monopsony could be a result of intentional collusion between employers, or naturalistic factors such as segmented markets, search costs, information costs, imperfect mobility and the 'personal' element of labor markets. In such a case the diagram above would not yield the quantity of labor clearing and the wage rate. This is because while the upward sloping aggregate labor supply would remain unchanged, instead of using the downward labor demand curve shown in the diagram above, monopsonistic employers would use a steeper downward sloping curve corresponding to marginal expenditures to yield the intersection with the supply curve resulting in a wage rate lower than would be the case under competition. Also, the amount of labor sold would also be lower than the competitive optimal allocation.

Such a case is a type of market failure and results in workers being paid less than their marginal value. Under the monopsonistic assumption, an appropriately set minimum wage could increase both wages and employment, with the optimal level being equal to the marginal productivity of labor.^[26] This view emphasizes the role of minimum wages as a market regulation policy akin to antitrust policies, as opposed to an illusory "free lunch" for low-wage workers.

Another reason minimum wage may not affect employment in certain industries is that the demand for the product the employees produce is highly inelastic;^[27] For example, if management is forced to increase wages, management can pass on the increase in wage to consumers in the form of higher prices. Since demand for the product is highly inelastic, consumers continue to buy the product at the higher price and so the manager is not forced to lay off workers.

Three other possible reasons minimum wages do not affect employment were suggested by Alan Blinder: higher wages may reduce turnover, and hence training costs; raising the minimum wage may "render moot" the potential problem of recruiting workers at a higher wage than current workers; and minimum wage workers might represent such a small proportion of a business's cost that the increase is too small to matter. He admits that he does not know if these are correct, but argues that "the list demonstrates that one can accept the new empirical findings and still be a card-carrying economist."^[28]

Debate over consequences[link]

Various groups have great ideological, political, financial, and emotional investments in issues surrounding minimum wage laws. For example, agencies that administer the laws have a vested interest in showing that "their" laws do not create unemployment, as do labour unions, whose members' jobs are protected by minimum wage laws. On the other side of the issue, low-wage employers such as restaurants finance the Employment Policies Institute, which has released numerous studies opposing the minimum wage.^[29] The presence of these powerful groups and factors means that the debate on the issue is not always based on dispassionate analysis. Additionally, it is extraordinarily difficult to separate the effects of minimum wage from all the other variables that affect employment.^[9]

The following table summarizes the arguments made by those for and against minimum wage laws:

In 2006, the International Labour Organization (ILO)^[6] argued that the minimum wage could not be directly linked to unemployment in countries that have suffered job losses. In April 2010, the Organisation for Economic Co-operation and Development (OECD)^[47] released a report arguing that countries could alleviate teen unemployment by “lowering the cost of employing low-skilled youth” through a sub-minimum training wage. A study of U.S. states showed that businesses' annual and average payrolls grow faster and employment grew at a faster rate in states with a minimum wage.^[48] The study showed a correlation, but did not claim to prove causation.

Although strongly opposed by both the business community and the Conservative Party when introduced in 1999, the minimum wage introduced in the UK is no longer controversial and the Conservatives reversed their opposition in 2000.^[49] A review of its effects found no discernible impact on employment levels.^[50] However, prices in the minimum wage sector were found to have risen significantly faster than prices in non-minimum wage sectors, most notably in the four years following the implementation of the minimum wage.^[51]

Since the introduction of a national minimum wage in the UK in 1999, its effects on employment were subject to extensive research and observation by the Low Pay Commission. The Low Pay Commission found that, rather than make employees redundant, employers have reduced their rate of hiring, reduced staff hours, increased prices, and have found ways to cause current workers to be more productive (especially service companies).^[52] Neither trade unions nor employer organizations contest the minimum wage, although the latter had especially done so heavily until 1999.

Empirical studies[link]

Economists disagree as to the measurable impact of minimum wages in the 'real world'. This disagreement usually takes the form of competing empirical tests of the elasticities of demand and supply in labor markets and the degree to which markets differ from the efficiency that models of perfect competition predict.

Economists have done empirical studies on numerous aspects of the minimum wage, prominently including:^[3]

• Employment effects, the most frequently studied aspect
• Effects on the distribution of wages and earnings among low-paid and higher-paid workers
• Effects on the distribution of incomes among low-income and higher-income families
• Effects on the skills of workers through job training and the deferring of work to acquire education
• Effects on prices and profits
• Effects on on-the-job training

Until the mid-1990s, a strong consensus existed among economists, both conservative and liberal, that the minimum wage reduced employment, especially among younger and low-skill workers.^[16] In addition to the basic supply-demand intuition, there were a number of empirical studies that supported this view. For example, Gramlich (1976) found that many of the benefits went to higher income families, and in particular that teenagers were made worse off by the unemployment associated with the minimum wage.^[53]

Brown et al. (1983) note that time series studies to that point had found that for a 10 percent increase in the minimum wage, there was a decrease in teenage employment of 1-3 percent. However, for the effect on the teenage unemployment rate, the studies exhibited wider variation in their estimates, from zero to over 3 percent. In contrast to the simple supply/demand figure above, it was commonly found that teenagers withdrew from the labor force in response to the minimum wage, which produced the possibility of equal reductions in the supply as well as the demand for labor at a higher minimum wage and hence no impact on the unemployment rate. Using a variety of specifications of the employment and unemployment equations (using ordinary least squares vs. generalized least squares regression procedures, and linear vs. logarithmic specifications), they found that a 10 percent increase in the minimum wage caused a 1 percent decrease in teenage employment, and no change in the teenage unemployment rate. The study also found a small, but statistically significant, increase in unemployment for adults aged 20–24.^[54]

Wellington (1991) updated Brown et al.'s research with data through 1986 to provide new estimates encompassing a period when the real (i.e., inflation-adjusted) value of the minimum wage was declining, because it had not increased since 1981. She found that a 10% increase in the minimum wage decreased the absolute teenage employment by 0.6%, with no effect on the teen or young adult unemployment rates.^[55]

Some research suggests that the unemployment effects of small minimum wage increases are dominated by other factors.^[56] In Florida, where voters approved an increase in 2004, a follow-up comprehensive study confirms a strong economy with increased employment above previous years in Florida and better than in the U.S. as a whole.^[57]

When it comes to on-the-job training, some believe the increase in wages is taken out of training expenses. A 2001 empirical study found that there is "no evidence that minimum wages reduce training, and little evidence that they tend to increase training."^[58]

Card and Krueger[link]

In 1992, the minimum wage in New Jersey increased from $4.25 to $5.05 per hour (an 18.8% increase) while the adjacent state of Pennsylvania remained at $4.25. David Card and Alan Krueger gathered information on fast food restaurants in New Jersey and eastern Pennsylvania in an attempt to see what effect this increase had on employment within New Jersey. Basic economic theory would have implied that relative employment should have decreased in New Jersey. Card and Krueger surveyed employers before the April 1992 New Jersey increase, and again in November–December 1992, asking managers for data on the full-time equivalent staff level of their restaurants both times.^[59] Based on data from the employers' responses, the authors concluded that the increase in the minimum wage increased employment in the New Jersey restaurants.^[60]

Card and Krueger expanded on this initial article in their 1995 book Myth and Measurement: The New Economics of the Minimum Wage.^[61] They argued that the negative employment effects of minimum wage laws are minimal if not non-existent. For example, they look at the 1992 increase in New Jersey's minimum wage, the 1988 rise in California's minimum wage, and the 1990-91 increases in the federal minimum wage. In addition to their own findings, they reanalyzed earlier studies with updated data, generally finding that the older results of a negative employment effect did not hold up in the larger datasets.

Critics, however, argue that their research was flawed.^[62] Subsequent attempts to verify the claims requested payroll cards from employers to verify employment, and found that the minimum wage increases were followed by decreases in employment. On the other hand, an assessment of data collected and analyzed by David Neumark and William Wascher did not initially contradict the Card/Krueger results,^[63] but in a later edited version they found that the same general sample set did increase unemployment. The 18.8% wage hike resulted in "[statistically] insignificant—although almost always negative" employment effects.^[64]

Another possible explanation for why the current minimum wage laws may not affect unemployment in the United States is that the minimum wage is set close to the equilibrium point for low and unskilled workers. Thus in the absence of the minimum wage law unskilled workers would be paid approximately the same amount. However, an increase above this equilibrium point could likely bring about increased unemployment for the low and unskilled workers.^[18]

Reaction to Card and Krueger[link]

Some leading economists such as Kevin M. Murphy and Nobel laureate Gary Becker do not accept the Card/Krueger results,^[65] while some others, like Nobel laureates Paul Krugman^[66] and Joseph Stiglitz, accept them.^[67][68]

According to economists Donald Deere (Texas A&M), Kevin Murphy (University of Chicago), and Finis Welch (Texas A&M), Card and Krueger's conclusions are contradicted by "common sense and past research". They conclude:^[69]

Each of the four studies examines a different piece of the minimum wage/employment relationship. Three of them consider a single state, and two of them look at only a handful of firms in one industry. From these isolated findings Card and Krueger paint a big picture wherein increased minimum wages do not decrease, and may increase, employment. Our view is that there is something wrong with this picture. Artificial increases in the price of unskilled laborers inevitably lead to their reduced employment; the conventional wisdom remains intact.

Nobel laureate James M. Buchanan responded to the Card and Krueger study in the Wall Street Journal, arguing:^[70]

...no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimum scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.

Alan Krueger responded in The Washington Post:^[71]

More was at stake here than the minimum wage – the methodology of public policy analysis was also at issue. Some economists, such as James Buchanan, have simply rejected the notion that their view of economic theory possibly could be proved wrong by data.

Nobel laureate Paul Krugman, has argued in favour of the Card and Krueger result, stating that Card and Krueger;^[72]

... found no evidence that minimum wage increases in the range that the United States has experiences led to job losses. Their work has been attacked because it seems to contradict Econ 101 and because it was ideologically disturbing to many. Yet it has stood up very well to repeated challenges, and new cases confirming its results keep coming in.

Neumark and Wascher[link]

In a 2008 book, David Neumark and William L. Wascher described their analysis of studies on the minimum wage, from several countries covering a period of over 50 years (but primarily from the 1990s onward).^[3] According to the Neumark and Wascher, a large majority of the studies show negative effects for the minimum wage; those showing positive effects are few, questionable, and disproportionately discussed.

Based on the published studies they considered, Neumark and Wascher conclude that the minimum wage is not good social policy. They emphasize three conclusions: First, while acknowledging Card and Krueger, they found that studies since the early 1990s have strongly pointed to a "reduction in employment opportunities for low-skilled and directly affected workers." Second, they found some evidence that the minimum wage is harmful to poverty-stricken families, and "virtually no evidence" that it helps them. Third, they found that the minimum wage lowers adult wages of young workers who encounter it, by reducing their ultimate level of education.

Statistical meta-analyses[link]

Several researchers have conducted statistical meta-analyses of the employment effects of the minimum wage. In 1995, Card and Krueger analyzed 14 earlier time-series studies on minimum wages and concluded that there was clear evidence of publication bias (in favor of studies that found a statistically significant negative employment effect). They point out that later studies, which had more data and lower standard errors, did not show the expected increase in t-statistic (almost all the studies had a t-statistic of about two, just above the level of statistical significance at the .05 level).^[73] Though a serious methodological indictment, opponents of the minimum wage largely ignored this issue; as Thomas C. Leonard noted, "The silence is fairly deafening."^[74]

In 2005, T.D. Stanley showed that Card and Krueger's results could signify either publication bias or the absence of a minimum wage effect. However, using a different methodology, Stanley concludes that there is evidence of publication bias, and that correction of this bias shows no relationship between the minimum wage and unemployment.^[75] In 2008, Hristos Doucouliagos and T.D. Stanley conducted a similar meta-analysis of 64 U.S. studies on dis-employment effects and concluded that Card and Krueger's initial claim of publication bias is still correct. Moreover, they concluded, "Once this publication selection is corrected, little or no evidence of a negative association between minimum wages and employment remains."^[76]

Surveys of economists[link]

Until the 1990s, economists generally agreed that raising the minimum wage reduced employment. This consensus was weakened when some well-publicized empirical studies showed the opposite, although others confirmed the original view. Today's consensus, if one exists, is that increasing the minimum wage has, at worst, minor negative effects.^[77]

According to a 1978 article in the American Economic Review, 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers.^[78]

A 1992 survey by published in the same journal revealed 79% of economists in agreement that a minimum wage increases unemployment among young and unskilled workers.^[79]

A 2000 survey by Dan Fuller and Doris Geide-Stevenson reports that of a sample of 308 American Economic Association economists, 45.6% fully agreed with the statement, "a minimum wage increases unemployment among young and unskilled workers", 27.9% agreed with provisos, and 26.5% disagreed. The authors of this study also reweighted data from a 1990 sample to show that at that time 62.4% of academic economists agreed with the statement above, while 19.5% agreed with provisos and 17.5% disagreed. They state that the reduction on consensus on this question is "likely" due to the Card and Krueger research and subsequent debate.^[80]

A similar survey in 2006 by Robert Whaples polled PhD members of the American Economic Association. Whaples found that 37.7% of respondents supported an increase in the minimum wage, 14.3% wanted it kept at the current level, 1.3% wanted it decreased, and 46.8% wanted it completely eliminated.^[81]

Surveys of labor economists have found a sharp split on the minimum wage. Fuchs et al. (1998) polled labor economists at the top 40 research universities in the United States on a variety of questions in the summer of 1996. Their 65 respondents were nearly evenly divided when asked if the minimum wage should be increased. They argued that the different policy views were not related to views on whether raising the minimum wage would reduce teen employment (the median economist said there would be a reduction of 1%), but on value differences such as income redistribution.^[82] Daniel B. Klein and Stewart Dompe conclude, on the basis of previous surveys, "the average level of support for the minimum wage is somewhat higher among labor economists than among AEA members."^[83]

In 2007, Klein and Dompe conducted a non-anonymous survey of supporters of the minimum wage who had signed the "Raise the Minimum Wage" statement published by the Economic Policy Institute. They found that a majority signed on the grounds that it transferred income from employers to workers, or equalized bargaining power between them in the labor market. In addition, a majority considered disemployment to be a moderate potential drawback to the increase they supported.^[84]

Alternatives[link]

Economists and other political commentators have proposed alternatives to the minimum wage. They argue that these alternatives may address the issue of poverty better than a minimum wage, as it would benefit a broader population of low wage earners, not cause any unemployment, and distribute the costs widely rather than concentrating it on employers of low wage workers.

Basic income[link]

A basic income (or negative income tax) is a system of social security, that periodically provides each citizen with a sum of money that is sufficient to live on. Except for citizenship, a basic income is entirely unconditional. There is no means test, and the richest as well as the poorest citizens would receive it. A basic income is often proposed in the form of a citizen's dividend (a transfer payment from the government). Proponents argue that a basic income that is based on a broad tax base, would be more economically efficient, as the minimum wage effectively imposes a high marginal tax on employers, causing losses in efficiency.

In 1968 James Tobin, Paul Samuelson, John Kenneth Galbraith and another 1,200 economists signed a document calling for the US Congress to introduce in that year a system of income guarantees and supplements.^[85] Both Tobin and Samuelson have also come out against the minimum wage.^[86] In the 1972 presidential campaign, Senator George McGovern called for a 'demogrant' that was very similar to a basic income.^[87]

Winners of the Nobel Prize in Economics that fully support a basic income include Herbert A. Simon,^[88] Friedrich Hayek,^[89] Robert Solow,^[88] Milton Friedman,^[90] Jan Tinbergen,^[88] James Tobin^[85][91][92] and James Meade.^[88]

Guaranteed minimum income[link]

A guaranteed minimum income is another proposed system of social welfare provision. It is similar to a basic income or negative income tax system, except that it is normally conditional and subject to a means test. Some proposals also stipulate a willingness to participate in the labor market, or a willingness to perform community services.^{[citation needed]}

Refundable tax credit[link]

A refundable tax credit is a mechanism whereby the tax system can reduce the tax owed by a household to below zero, and result in a net payment to the taxpayer beyond their own payments into the tax system. Examples of refundable tax credits include the earned income tax credit and the additional child tax credit in the U.S., and working tax credits and child tax credits in the UK. Such a system is slightly different from a negative income tax, in that the refundable tax credit is usually only paid to households that have earned at least some income.

In the United States, earned income tax credit rates, also known as EITC or EIC, vary by state—some are refundable while other states do not allow a refundable tax credit.^[93] The federal EITC program has been expanded by a number of presidents including Jimmy Carter, Ronald Reagan, George H.W. Bush, and Bill Clinton.^[94] In 1986, President Reagan described the EITC as "the best anti poverty, the best pro-family, the best job creation measure to come out of Congress." ^[95] The ability of the earned income tax credit to deliver larger monetary benefits to poor workers than an increase in the minimum wage and at a lower cost to society was documented in a 2007 report by the Congressional Budget Office.^[96]

Collective bargaining[link]

Germany,^[97] Italy, Sweden and Denmark are examples of developed nations where there is no minimum wage that is required by legislation. Instead, minimum wage standards in different sectors are set by collective bargaining.^{[citation needed]}

See also[link]

Notes[link]

References[link]

• http://www.dol.gov/whd/minwage/coverage.htm

External links[link]

• Minimum wages database from the International Labour Organization (a UN agency)
• Characteristics of Minimum Wage Workers: 2009 U.S. Department of Labor Bureau of Labor Statistics
• Find It! By Topic: Wages: Minimum Wage U.S. Department of Labor
• The National Minimum Wage (U.K.) (official UK government website)
• Minimum Wage Rates in All States of India from Paycheck India

Support

• The Minimum Wage: Information, Opinion, Research (pro-minimum wage site with links to a variety of viewpoints)
• Issues about Minimum Wage from the AFL-CIO (U.S. labor federation favoring the minimum wage)
• Issue Guide on the Minimum Wage from the Economic Policy Institute

Opposed

• Reporting the Minimum Wage from The Cato Institute (U.S. libertarian organization opposed to the minimum wage)
• The Economic Effects of Minimum Wages from Show-Me Institute (U.S. libertarian organization opposed to the minimum wage)
• Economics in One Lesson: The Lesson Applied, Chapter 19: Minimum Wage Laws by Henry Hazlitt

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John Stossel
John Stossel outside Fox Studios after a taping of Stossel, June 9, 2010.
Born	John F. Stossel (1947-03-06) March 6, 1947 (age 65) Chicago Heights, Illinois, U.S.
Education	B.A. in Psychology, Princeton University (1969)
Occupation	Journalist, author, columnist, reporter, TV presenter
Years active	1969–present[1]
Notable credit(s)	20/20 Stossel
Spouse	Ellen Abrams
Website
http://www.johnstossel.com/

John F. Stossel (born March 6, 1947) is an American consumer reporter, investigative journalist, author and libertarian columnist. In October 2009 Stossel left his long time home on ABC News to join the Fox Business Channel and Fox News Channel, both owned and operated by News Corp. He hosts a weekly news show on Fox Business, Stossel, which debuted on December 10, 2009. The show airs in prime time every Thursday, repeating on both Saturdays and Sundays. Stossel also regularly provides signature analysis, appearing on various Fox News shows, including weekly appearances on The O'Reilly Factor, in addition to writing the Fox News Blog, "John Stossel's Take".^[2]

Stossel practices advocacy journalism, often challenging conventional wisdom.^[3] His reporting style, which is a blend of commentary and reporting, reflects a libertarian political philosophy and his views on economics are largely supportive of the free market.^[4]

In his decades as a reporter, Stossel has received numerous honors and awards, including nineteen Emmy awards and has been honored five times for excellence in consumer reporting by the National Press Club.^[5] John Stossel is doctor honoris causa from Universidad Francisco Marroquín.^[6] Stossel has written two books recounting how his experiences in journalism shaped his socioeconomic views, Give Me a Break in 2004 and Myths, Lies, and Downright Stupidity in 2007.

Stossel began his journalism career as a researcher for KGW-TV and later became a consumer reporter at WCBS-TV in New York City, before joining ABC News as a consumer editor and reporter on Good Morning America. Stossel went on to be an ABC News correspondent, joining the weekly news magazine program 20/20, going on to become co-anchor.^[7]

ABC is reported to believe "his reporting goes against the grain of the established media and offers the network something fresh and different...[but] makes him a target of the groups he offends."^[8]

Early life[link]

John Stossel was born in Chicago Heights, Illinois, the younger of two sons,^[9] to a prominent Jewish family, and graduated from New Trier High School in Winnetka. He overcame a stuttering problem so he could become a reporter, and is now a supporter and advocate for the Stuttering Foundation of America. Stossel graduated from Princeton University with a BA in Psychology in 1969 and was a member of Princeton Tower Club while there. He began his journalism career as a researcher for KGW-TV in Portland, Oregon. Stossel later became a consumer reporter at WCBS-TV in New York City before joining ABC News in 1981 as consumer editor and reporter on Good Morning America.

Career[link]

[edit] 20/20

Stossel was named co-anchor of ABC News' 20/20 in May 2003. He joined the weekly news magazine program in 1981, initially as a correspondent. His "Give Me a Break" segments featured a skeptical look at subjects from government regulations and pop culture to censorship and unfounded fear. The series was spun off into a series of one-hour specials (which, Stossel stated in an interview with ReasonTV^[10] cost ABC half a million dollars per special), beginning in 1994, with titles including:

• "Give Me a Break" – regular segment
• You Can't Even Talk About It – 2009^[11]
• Bailouts and Bull (in association with ReasonTV) – 2009
• Age of Consent – 2009
• John Stossel's Politically Incorrect Guide to Politics – 2008
• Sex in America – 2008
• Sick in America, Whose Body Is It Anyway? – 2007
• Cheap In America – 2007
• Myths, Lies and Downright Stupidity – 2007
• Cheap in America – 2006
• Stupid in America: How We Cheat Our Kids – 2006^[12]
• Privilege in America: Who's Shutting You Out? – 2006
• War on Drugs: A War on Ourselves – 2002
• Freeloaders – 2001
• John Stossel Goes to Washington – Spring 2001
• Is America #1? – 1999
• Greed – 1999
• Common Sense – 1995
• Are We Scaring Ourselves to Death?
• Junk Science: What You Know That May Not Be So
• Boys and Girls Are Different
• You Can't Say That!
• The Power of Belief

Fox News Channel and Fox Business Network[link]

In September 2009, it was announced that Stossel was leaving ABC News and joining Fox News Channel and Fox Business Network. In addition to appearing on The O'Reilly Factor every Tuesday night, he now hosts a one-hour weekly program for Fox Business Network and a series of one-hour specials for Fox News Channel, as well as making regular guest appearances on Fox News programs.

The program, entitled Stossel, debuted December 10, 2009, on Fox Business Network. The program looks at consumer-focused topics, such as civil liberties, the business of health care, and free trade. His blog, "Stossel’s Take", is published on both FoxBusiness.com and FoxNews.com.^[13][14][15]

Publications[link]

Stossel has written three books. Give Me a Break: How I Exposed Hucksters, Cheats, and Scam Artists and Became the Scourge of the Liberal Media is a 2005 autobiography from Harper Perennial documenting his career and philosophical transition from liberalism to libertarianism. It describes his opposition to government regulation, his belief in free market and private enterprise, support for tort reform, and advocacy for shifting social services from the government to private charities. It was a New York Times bestseller for 11 weeks.^[3] Myths, Lies, and Downright Stupidity: Get Out the Shovel – Why Everything You Know Is Wrong, which was published in 2007 by Hyperion, questions the validity of various conventional wisdoms, and argues that the belief he is conservative is untrue. On April 10, 2012, Threshold Editions, an imprint of Simon & Schuster, published Stossel's third book No, They Can't: Why Government Fails-But Individuals Succeed. It argues that government policies meant to solve problems instead produce new ones, and that free individuals and the private sector perform tasks more efficiently than the government does.^[16]

With financial support from the libertarian Palmer R. Chitester Fund, Stossel and ABC News launched a series of educational materials for public schools in 1999 entitled "Stossel in the Classroom".^[17][18] It was taken over in 2006 by the Center for Independent Thought and releases a new DVD of teaching materials annually. In 2006, Stossel and ABC released Teaching Tools for Economics, a video series based on the National Council of Economics Education standards.^[19]

Charity and other work[link]

Stossel often makes public appearances and speeches, advocating his brand of libertarian thought.^[20] Stossel explained at the end of the December 30, 2010 episode of Stossel that he gives away his earnings from these engagements to charity; they contribute 25% of his income. The three main groups he supports with his donations are the The Doe Fund, the Central Park Conservancy (on whose board he sits), and Student Sponsor Partners (SSP), which partners low-income high school students with donors who mentor the students and pay tuition for the students to attend private school (usually Catholic schools), which Stossel says have higher graduation rates than public schools.^[21]

Stossel and his former ABC News colleague Chris Cuomo are silent investors in Columbus Tavern, a restaurant on Columbus Avenue at 72nd Street on Manhattan's Upper West Side.^[22][23][24]

Political and personal beliefs[link]

Contrarianism[link]

Stossel's news reports and writings attempt to debunk popular beliefs. His Myths and Lies series of 20/20 specials challenges a range of widely held beliefs. He also hosted The Power of Belief (October 6, 1998), an ABC News Special that focused on assertions of the paranormal and people's desire to believe. Another report outlined the belief that opposition to DDT is misplaced and that the ban on DDT has resulted in the deaths of millions of children,^[25] mostly in poor nations.^[26]

Libertarianism[link]

Stossel speaking at the Free State Project's New Hampshire Liberty Forum.

As a libertarian, Stossel says that he believes in both personal freedom^[27] and the free market. He frequently uses television airtime to advance these views and challenge viewers' distrust of free market capitalism and economic competition. He received an Honoris Causa Doctorate from Francisco Marroquin University, a libertarian university in Guatemala, in 2008. He told The Oregonian, on October 26, 1994:

I started out by viewing the marketplace as a cruel place, where you need intervention by government and lawyers to protect people. But after watching the regulators work, I have come to believe that markets are magical and the best protectors of the consumer. It is my job to explain the beauties of the free market.^[28]

I'm a little embarrassed about how long it took me to see the folly of most government intervention. It was probably 15 years before I really woke up to the fact that almost everything government attempts to do, it makes worse.^[29]

Stossel argues that personal greed creates an incentive to work and to innovate.^[30] He has promoted school choice as a way to improve American schools, because he believes that when people are given a choice, they will choose the better schools for their children.^[31] Referring to educational tests that rank American students lower than others he says:

The people who run the international tests told us, "the biggest predictor of student success is choice." Nations that "attach the money to the kids" and thereby allow parents to choose between different public and private schools have higher test scores. This should be no surprise; competition makes us better.^[32]

Stossel has criticized government programs as inefficient, wasteful, and harmful.^[33] He has also criticized the American legal system, opining that it provides lawyers and vexatious litigators the incentive to file frivolous lawsuits indiscriminately, which Stossel contends often generate more wealth for lawyers than deserving clients, stifle innovation and personal freedoms, and cause harm to private citizens, taxpayers, consumers and businesses.^[34] Although Stossel concedes that some lawsuits are necessary in order to provide justice to people genuinely injured by others with greater economic power,^[35] he advocates the adoption in the U.S. of the English rule as one method to reduce the more abusive or frivolous lawsuits.^[36]

Stossel opposes corporate welfare, bailouts^[37] and the war in Iraq.^[5] He also opposes legal prohibitions against pornography, marijuana, gambling, ticket scalping, prostitution, homosexual activity, and assisted suicide,^[38] and believes most abortions should be legal.^[39] He favors replacing the income tax with the FairTax.^[40]

When President Barack Obama altered federal guidelines in April 2010 governing the employment of unpaid interns under the Fair Labor Standards Act,^[41] Stossel criticized the guidelines, appearing in a police uniform during an appearance on the Fox News program America Live, commenting, "I’ve built my career on unpaid interns, and the interns told me it was great – I learned more from you than I did in college." Asked why he did not pay them if they were so valuable, he said he could not afford to.^[42]

Regarding religion, Stossel identified himself as an agnostic in the December 16, 2010 episode of Stossel, explaining that he had no belief in God, but was open to the possibility.^[43]

Praise and criticism[link]

Awards[link]

Stossel has won 19 Emmy Awards. He was honored five times for excellence in consumer reporting by the National Press Club, and has received the George Polk Award for Outstanding Local Reporting and the Peabody Award. In one year, according to Stossel in his book Give Me A Break, "I got so many Emmys, another winner thanked me in his acceptance speech 'for not having an entry in this category'".^[44] According to Stossel, when he was in favor of government intervention and skeptical of business he was deluged with awards, but in 2006 he stated, "They like me less... Once I started applying the same skepticism to government, I stopped winning awards."^[29] On April 23, 2012, Stossel was awarded the Chapman University Presidential Medal, by the current president, James Doti, and chancellor, Danielle Struppa. The award has only been presented to a handful of people over the past 150 years. ^[45]

Praise[link]

The Nobel Prize–winning Chicago School monetarist economist Milton Friedman lauded Stossel, stating: "Stossel is that rare creature, a TV commentator who understands economics, in all its subtlety."^[46] Steve Forbes, the editor of Forbes Magazine, described Stossel as riveting and "one of America’s ablest and most courageous journalists."^[46] P. J. O'Rourke, best-selling author of Eat the Rich and Parliament of Whores praised Stossel, stating:

... about John Stossel's fact-finding. He seeks the truths that destroy truisms, wields reason against all that's unreasonable, and ... puncture(s) sanctimonious idealism.... He makes the maddening mad. And Stossel’s tales of the outrageous are outrageously amusing.^[46]

An article published by the libertarian group Advocates for Self Government notes praise for Stossel.^[47] Independent Institute Research Analyst Anthony Gregory, writing on the libertarian blog, LewRockwell.com, described Stossel as a "heroic rogue... a media maverick and proponent of freedom in an otherwise statist, conformist mass media."^[48] Libertarian investment analyst Mark Skousen said Stossel is "a true libertarian hero".^[49]

Criticism and controversy[link]

Watchdog groups[link]

Liberal media organizations such as Fairness and Accuracy In Reporting (FAIR) and Media Matters for America (MMfA), have criticized Stossel's work,^[50][51] for what was perceived by those groups as a lack of balance of coverage and distortion of facts. For example, Stossel was criticized for a segment on his October 11, 1999, show during which he argued that AIDS research has received too much funding, "25 times more than on Parkinson's, which kills more people." FAIR responded that, "In fact, AIDS killed more than 16,000 people in the United States in 1999," whereas Parkinson's averaged "a death toll in the United States of less than 4,000 per year."^[52]

However, the Centers for Disease Control National Vital Statistics Reports do not support FAIR's claim. The CDC reported that HIV/AIDS killed 14,802 Americans in 1999, compared to 14,593 who succumbed to Parkinson's.^[53] The following year the order was reversed, with 14,478 dying from HIV/AIDS, and 15,682 from Parkinson's.^[54]

Accusation of conflict of interest[link]

In a February 2000 Salon.com feature on Stossel entitled "Prime-time propagandist", David Mastio wrote that Stossel has a conflict of interest in donating profits from his public speaking engagements to, among others, a non-profit called "Stossel in the Classroom" which includes material for use in schools, some of which uses material made by Stossel.^[55][56]

Galbraith and Stossel[link]

University of Texas economist James K. Galbraith has alleged that Stossel in his September 1999 special, Is America #1?, used an out of context clip of Galbraith to convey the notion that Galbraith advocated the adoption by Europe of the free market economics practiced by the United States, when in fact, Galbraith actually advocated that Europe adopt some of the United States' social benefit transfer mechanisms such as Social Security, which is the economically opposite view. Stossel denied any misrepresentation of Galbraith's views, and stated that it was not his intention to convey that Galbraith agreed with all of the special's ideas, but re-edited that portion of the program for its September 2000 repeat, in which Stossel paraphrased, "Even economists who like Europe's policies, like James Galbraith, now acknowledge America's success."^[57][58][59]

Organic vegetables[link]

A February 2000 story about organic vegetables on 20/20 included statements by Stossel that tests had shown that neither organic nor conventional produce samples contained any pesticide residue, and that organic food was more likely to be contaminated by E. coli bacteria. The Environmental Working Group objected to his report, mainly questioning his statements about bacteria, but also managed to determine that the produce had never been tested for pesticides. They communicated this to Stossel, but after the story's producer backed Stossel's recollection that the test results had been as described, the story was rebroadcast months later, uncorrected, and with a postscript in which Stossel reiterated his claim. Later, after a report in The New York Times confirmed the Environmental Working Group's claims, ABC News suspended the producer of the segment for a month and reprimanded Stossel. Stossel apologized, saying that he had thought the tests had been conducted as reported. However, he asserted that the gist of his report had been accurate.^{[60][61][62][63][64]}

Frederick K. Price[link]

In a March 2007 segment about finances and lifestyles of televangelists, 20/20 aired a clip of Rev. Frederick K. Price, a TV minister, that was originally broadcast by the Lifetime Network in 1997. Price alleged that the clip portrayed him describing his wealth in extravagant terms, when he was actually telling a parable about a rich man. ABC News twice aired a retraction and apologized for the error.^[65][66] In August 2010, a lower court's dismissal of the minister's defamation suit against ABC, Price v. Stossel, was overturned by the U.S. 9th Circuit Court of Appeals.^[67]

"Sick Sob Stories"[link]

In an opinion piece published in The Wall Street Journal in September 2007 called "Sick Sob Stories", Stossel described the case of Tracy and Julie Pierce that was explored in Michael Moore's film, Sicko.^[68] Julie Pierce criticized Stossel, saying her husband would have been saved by the Canadian health care system, and she thought Stossel should have interviewed her and her doctor before writing about them.^[69] Stossel expressed sympathy, but said she had been misled to believe the treatment was routinely available in Canada. He said that the treatment is also considered "experimental" in Canada, and is provided there even more rarely than in the U.S.^[70]

Global warming[link]

He challenges the notion that man-made global warming would have net negative consequences, pointing to assertedly warmer periods in human history.^[71] Central to his argument is the idea that groups and individuals get much more public attention, donations, and government funding when they proclaim "this will be terrible" than groups that say "this is nothing to worry about." He points to groups like the World Wildlife Fund, Greenpeace, the Environmental Defense Fund, the Natural Resources Defense Council, and to activists such as Rachel Carson and former U.S. Vice President Al Gore as examples of environmental scaremongers.^[72]

In 2001, the media watchdog organization Fairness and Accuracy in Reporting criticized Stossel's reportage of global warming in his documentary, Tampering with Nature, for using "highly selective...information" that gave "center stage to three dissenters from among the 2,000 members of the UN's Intergovernmental Panel on Climate Change, which recently released a report stating that global temperatures are rising almost twice as fast as previously thought."^[73]

In a 2006 discussion hosted by the Fraser Institute, Stossel stated that he accepts that global warming has occurred in the past century, that it has been about one degree Celsius, and that man-made emissions "may be part of the cause." Nevertheless he groups environmental groups with astrologers and psychics in his second book, Myths, Lies and Downright Stupidity. He stated that the "myths" come in with the debate about proposed solutions to reduce global warming, which he argues will not solve the problem at all and will restrict people's freedom.^[5]

David Schultz incident[link]

On December 28, 1984, during an interview for 20/20 on professional wrestling, wrestler David Schultz struck Stossel after Stossel stated that he thought professional wrestling was "fake". Stossel stated that he suffered from pain and buzzing in his ears eight weeks after the assault.^[74] Stossel sued and obtained a settlement of $425,000 from the World Wrestling Federation (WWF). In his book, Myths, Lies, and Downright Stupidity, he writes that he has come to regret doing so, having adopted the belief that lawsuits harm hundreds of innocent people.^[75][76] Schultz maintains that he attacked Stossel on orders from Vince McMahon, the head of the then-WWF.^[77]

Personal life[link]

Stossel lives in New York City with his wife, Ellen Abrams. They have two grown children.^[78]

Stossel's older brother, Thomas P. Stossel,^[9] is a hematologist at Brigham and Women's Hospital,^[79] and a professor at Harvard Medical School. He has served on the advisory boards of Merck, Biogen Idec and Dyax,^[80] as a senior fellow at the free-market Manhattan Institute,^[81] and as a trustee of the American Council on Science and Health.^[82]

Stossel's nephew is the journalist and magazine editor Scott Stossel.^[83]

See also[link]

• List of newspaper columnists

References[link]