Tuesday, January 28, 2014

Minimum Wages

This graphic, from the Wall Street Journal, appears today in anticipation of President Obama's likely State of the Union mention tonight.  Here is the same data presented in a handy map:

Oregon and Washington, as you probably know, lead the pack in terms of the minimum wage (something I always remind myself when shelling out $12 for a burger and fries at a brewpub).

The question is: is the minimum wage a good way to address income inequality or poverty?  Most economists would probably agree with the premise that it isn't.  Policies that do a better job of targeting income transfers to low wage workers, like the Earned Income Tax Credit, are much, much more effective at reaching the target population.  But is it a good second-best policy (i.e. one that might not be as efficient but is politically possible and does a reasonable job of doing what we want)?  This is a big and open question and where you'll find the most active debate among economists.

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