Minimum Wages

by David Neumark, William L. Wascher

A comprehensive review of evidence on the effect of minimum wages on employment, skills, wage and income distributions, and longer-term labor market outcomes concludes that the minimum wage is not a good policy tool.

Genres: Economics

377 pages, Hardcover

First published October 31, 2008

Reviews

[John · Rating 4 out of 5]

This book isn't an easy read but it presents a thorough examination of the academic literature on the effects of minimum wages. Neumark and Wascher find that minimum wages generally have consequences opposite to those intended and hurt those they are supposed to help. They are, in short, bad public policy.

The book is now nearly ten years old and much new research has been done in this field in that time. Neumark reviews this in a 2017 paper and his earlier conclusions are reaffirmed, but this excellent book would benefit from a second edition.

[Tung · Rating 4 out of 5]

Informative but lofty writing. Skimmed through the last two chapters but at least I'm done. Yay!

(Would definitely have to reread.)

[Alexander Poulsen · Rating 4 out of 5]

In this important book, Neumark and Wascher provide an overview of all the research that economists have done on minimum wages. In addition to presenting in detail their own research, they both present and rigorously analyze the most important research in the field that has been done by other economists, and summarize the key findings of the vast amount of research that has been done on the subject.

A warning: This is a "dense" book. If you are not versed in microeconomic theory as well as applied econometrics, large sections of it will be difficult to get through. Even as an economics PhD student, it took me a while to get through it. However, the Introduction and Conclusion chapters are nontechnical, and give a fairly detailed summary of all of their findings and conclusions. I would recommend reading these if you are interesting in the subject.

Since it can be a difficult read, I'll summarize their main findings:

The vast majority of research on minimum wage's effect on employment confirms the hypothesis of competitive labor markets. Higher minimum wages decrease employment. This consensus is especially true when considering the research that uses the most convincing data and methods. While employment effects are the most studied aspect of minimum wages, Neumark and Wascher point out that it is actually the wrong question to ask about minimum wages. The purpose of minimum wages is to help those at the lower end of the income distribution to become economically self-sufficient and get out of poverty, and economic theory has no sure prediction about what the minimum wage's effect on this will be; it depends on the labor demand elasticity.

Neumark and Wascher directly address the question of how minimum wages affect poverty, and find that in fact, minimum wage has no effect on poverty rates; it does however affect rates of entry into and exit from poverty. What is going on is that while some families leave poverty because of increased wages, other families descend into poverty due to job loss, because of the higher minimum wages. The two effects cancel each other out, leaving a zero net effect on poverty, with some evidence actually pointing to an increase in poverty due to the minimum wage.

Beyond these undesirable qualities, Neumark and Wascher also show that the minimum wage decreases skill accumulation, educational attainment, as well as long-run earnings for workers exposed to the minimum wage.

Neumark and Wascher point out as well that a large problem with the minimum wage is that it is an extremely blunt instrument. Most minimum wage earners are not the kind of people we are worried about. They are teenagers and young adults. Very few minimum wage earners are the principal wage earners of their household, struggling to make ends meet.

Neumark and Wascher conclude that the minimum wage does not accomplish its desired goal, and suggest that if we wish to help the poor, we should focus on other policies, like the Earned Income Tax Credit (EITC), which has been shown to be much more effective than minimum wages at helping those in poverty, in part because it is directly targeted at those with low incomes, and doesn't decrease employment.

[Macy Meredith]

I would rate the book Minimum Wages by David Neumark as a 6 out of 10. The information in this nonfiction book is very useful and relevant to today's world. The author goes in depth about the history of the minimum wage in the United States as well as all of the different impacts that it has on the economy, the unemployment ratio, and inflation. By using different charts and diagrams to show the statistics of what he is trying to explain, he makes the information clear and easy to read and understand because of the visuals of the information. The book is split into chapters with different subheadings in each, which breaks the book up nicely and makes it easy to locate information. The first and last chapters of the book are an introduction and conclusion respectively, which helps to set the book up so that the reader knows what he/she are going to be learning about, and also provides a concluding statement that summarizes the points that the author was trying to get across in the different chapters of the book. All of the information in the book was useful to readers as it pertained to all citizens of the United States, especially given the abundance of discussions about this particular topic lately. By using multiple different sources of information and providing a works cited of his references at the end of the book, he was able to establish credibility by showing that he wasn't simply just discussing his personal opinion in this book, but was using concrete facts that he has found through his research. He also establishes this credibility in the introduction, by explaining that he is an economist and going into depth about the details of his career. The reason that I would rate this book as a six out of ten personally is because of my interest in the book, not because of the content and formatting of the book itself, which I believe to be very well done. As I personally would prefer to read a fiction novel, I found it difficult to keep an interest in the reading for long periods of time and therefor had to break up my reading more often. However, I would recommend this book to anyone that is interested in learning more about the federal minimum wage.

[Crew]

In this book, David Neumark and William Wascher offer a comprehensive overview of the evidence on the economic effects of minimum wages. Synthesizing nearly two decades of their own research and reviewing other research that touches on the same questions, Neumark and Wascher discuss the effects of minimum wages on employment and hours, the acquisition of skills, the wage and income distributions, longer-term labor market outcomes, prices, and the aggregate economy. Arguing that the usual focus on employment effects is too limiting, they present a broader, empirically based inquiry that will better inform policymakers about the costs and benefits of the minimum wage.

Based on their comprehensive reading of the evidence, Neumark and Wascher argue that minimum wages do not achieve the main goals set forth by their supporters. They reduce employment opportunities for less-skilled workers and tend to reduce their earnings; they are not an effective means of reducing poverty; and they appear to have adverse longer-term effects on wages and earnings, in part by reducing the acquisition of human capital. The authors argue that policymakers should instead look for other tools to raise the wages of low-skill workers and to provide poor families with an acceptable standard of living.

http://mitpress.mit.edu/catalog/item/...

[Siv · Rating 2 out of 5]

While the discussion is made in good faith, I found that the authors allowed their personal opinions to leak into their writing. The compilation of literature and studies was thorough and well-done, however, their use of their own case studies as their primary evidence for each of their conclusions leads readers to conclude, at the very least, that researcher bias might potentially be influencing the writing. Additionally, it did not help that I personally hold beliefs that oppose the authors (perhaps I suffer from the same bias that I accuse the writers of having).

1.8/5