A $22-per-hour Minimum Wage?

Yesterday, during a hearing of the Senate Committee on Health, Education, Labor and Pensions, Elizabeth Warren cited a study that found the minimum wage would be $22 today if it had kept up with productivity. I’m not sure what the implication of this is suppose to be. I see it as a sort of a non-point; since the late 1970’s wages in general have deviated from gains in productivity, a phenomenon that has been much studied in economics. Indeed, if wages had kept up with productivity there would be no need for a $22-per-hour wage floor since businesses would willing pay that wage to employees anyway. However, also note that productivity is not evenly distributed among the workforce. One reason (the only reason?) lower-skilled workers are paid less is precisely because they are less productive.

Maybe I’m confused, but I don’t see the underlying economic purpose to this hearing. Political purpose? Sure. Democrats want to suggest that the minimum wage is way too low, perhaps way to low. But economic purpose? No. I suspect even the most liberal labor economist would predict huge negative distortions to the labor market and a large spike in unemployment of unskilled workers if a $22 wage floor were instituted. As for the political message, I suspect it is something along the lines of:

“The minimum wage should be $22. But the current minimum wage is just one-third (!!) of this natural rate. We all know the Republicans will never allow legislation to pass that restores the minimum wage to this level, and at any rate perhaps such an increase is drastic. But surely we can all agree on the sensible step of raising the minimum wage of hard working Americans by a modest $2 an hour.”




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