Linking the Minimum Wage to Productivity

Oren M. Levin-Waldman
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Oren M. Levin-Waldman: The Jerome Levy Economics Institute

Macroeconomics from University Library of Munich, Germany

Abstract: One of the principal problems with the minimum wage is that adjustments to it must be voted on by Congress. Although recent congressional action solves the immediate problem of restoring value to a wage that has otherwise failed to keep pace with inflation it has not removed the issue from the political agenda. Every time Congress acts, it does so amidst debate about the legitimacy of the wage. When Congress does act, it is usually too little and too late. Therefore, it might be preferable to create an automatic mechanism for adjusting the minimum wage that would not only assume the value of a wage floor to society, but be tied to levels of productivity. Such an approach would accomplish two objectives. First, it would be in keeping with the economic argument that an artificial wage floor can lead to greater productivity, rather than to the disemployment effect assumed in traditional economic textbooks. Second, because increases to the wage would be regular and expected, unlike the shocks attendant to sporadic increases. In the end such a plan might not only lead to less political opposition, but to greater efficiency.

JEL-codes: E (search for similar items in EconPapers)
Pages: 36 pages
Date: 1998-02-10
New Economics Papers: this item is included in nep-pbe, nep-pke and nep-pub
Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on PostScript; pages: 36; figures: included
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:9802015

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