Obama’s newest appointee, Alan Krueger, is best known for his research on the minimum wage: a flashpoint for the debate over job creation.Monday in Washington, President Obama announced he was nominating Dr. Krueger to be the new Chairman of the White House Council of Economic Advisors, replacing Austan Goolsbee, who will be stepping down to return to the University of Chicago.
Alan Krueger’s nomination signifies a shift towards a focus on job creation from the Obama administration, as Krueger’s background is in labor economics.
Minimum Wages and Employment
His best known work is the 1994 study “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” which he co-authored with fellow Princeton economist David Card. Krueger and Card found, contrary to conventional wisdom and theoretical tenet, that increases in minimum wage did not have negative effects on employment numbers, but might actually increase employment numbers.
The study compared employment numbers in New Jersey and Pennsylvania fast food restaurants after New Jersey raised their minimum wage, while Pennsylvania’s stayed constant. They found that “employment actually expanded in New Jersey relative to Pennsylvania.” Despite the fact that this was discovered through empirical research, it is a quite unpopular notion among Republicans.
In fact, Republican maybe-frontrunner Michele Bachmann has raised eyebrows in recent weeks as reporters unearthed some controversial comments about the minimum wage from years back.
Bachmann’s Opposing Viewpoint
In 2005, Bachmann said:
The current federal minimum wage is $7.25 an hour, and it was $5.15 an hour when Bachmann said what she said — she has since tip-toed around the issue, but never rescinded the comment.
At current levels, working a full 40-hour week at minimum wage would secure a worker $15,080 annually, before taxes. This keeps a family of two just above the poverty line, by about $300. At $5.15 an hour, that’s an annual salary of $10,712, which would land you just under the poverty line today, which for an individual is $10,890 a year. Let’s not forget, too, that Bachmann supports broadening the tax base, to make the poor pay more in income taxes.
No, lowering the minimum wage doesn’t seem likely to help that many jobless Americans. However, raising the minimum wage would transfer a relatively small amount of capital to poor people, who typically spend that extra income, from a corporation, which would likely hoard that money otherwise.
The important takeaway from all of this? As we huff and puff our way towards Labor Day, it’s good to remember that federal regulations on labor are not always the “job killers” that politicians like to claim they are. Unless you live in a very rural area, it’s hardly enough to survive on.
Your president might not have all the answers on job creation, but at least it’s not that.