Chuck Trzcinka is Professor of Finance and James and Virginia Cozad Faculty Fellow of the IU Kelley School of Business.
So raising the minimum wage, even having a minimum wage in the first place, makes no economic sense, but it is unquestionably politically popular. Voters soundly rejected Democrats in Tuesday's election but embraced a visible plank in the party's platform by backing minimum wage hikes in four Republican-leaning states and two cities. By January, more than half the states will have higher wage floors than the federal government. Voters in Alaska, Arkansas, Nevada and South Dakota passed ballot initiatives raising the minimum wage to $9.75 an hour even as they swept Republican Senate and gubernatorial candidates into office. All told, the initiatives will raise minimum hourly earnings for 609,000 low-wage workers, according to the National Employment Law Project.
The problem of course is the economics. The poor would be far better off if the minimum wage was lowered or eliminated and we expanded the earned income tax credit. But then our idea of “fairness” would be challenged by low wage workers. We would never think to ask any of these people why they were willing to work for a low wage since this conversation is uncomfortable. It’s better to get government to impose a wage floor and never meet them.