Seven recipients of the Nobel Prize in Economic Sciences were among 75 economists endorsing an increase in the minimum wage for U.S. workers.
In a letter released today, the group called for the hourly minimum wage to reach $10.10 by 2016 from its current $7.25, and then be indexed for inflation thereafter. They said “the weight” of economic research shows higher pay doesn’t lead to fewer jobs.
Past increases in hourly pay have had “little or no negative effect on the employment of minimum wage workers, even during times of weakness in the labor market,” the economists wrote. “A minimum wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings.”
Nobel Prize winners Kenneth Arrow, Peter Diamond, Eric Maskin, Thomas Schelling, Robert Solow, Michael Spence and Joseph Stiglitz were among signatories of the letter, which was released by the Economic Policy Institute, a Washington research group funded in part by labor unions.
Eugene Fama, Lars Peter Hansen and Robert Shiller, last year’s laureates, were among those who didn’t sign the letter.
“I am against the concept of a mandated minimum wage,” Fama said in an e-mail. “Wages should be determined in the open market, without government interference.”
Christopher Sims, who shared the prize in 2011, said research shows “very small, if any, negative effects on employment,” especially when real wages are low. And the impact on worker incomes can be “substantial,” he said.
“Certainly a high enough minimum wage would have damaging effects, but it seems to me unlikely that $10.10 is high enough to have widespread bad effects,” Sims said in an e-mail.
The minimum wage debate is perhaps more a matter of politics than economics. Fewer than 5 percent of hourly U.S. workers made the federal minimum wage or less in 2012, according to Commerce Department data.
That’s a drop from 5.2 percent in 2011 and the share is likely to shrink further as more states and localities adopt their own, higher wage floors. Twenty-one states and Washington, D.C. have minimum wages higher than the federal rate, with 13 approving additional increases beginning Jan. 1. Legislators in several more, including South Dakota and Maryland, will consider establishing their own minimum wages this year.
While President Barack Obama has endorsed an increase in the wage, legislation is stalled in Congress. A Dec. 12-15 ABC News/Washington Post poll found 66 percent of Americans supporting an increase in the minimum wage. Thirty-one percent oppose an increase, which they say could lead some businesses to cut jobs.