AltInst: Productivity-indexed minimum wage

From: Robin Hanson <>
Date: Mon Aug 10 1998 - 12:22:23 PDT

     "Linking the Minimum Wage to Productivity"

            The Jerome Levy Economics Institute at Bard College

     SSRN Electronic Document Delivery:

          Paper ID: Levy Economics Institute Working Paper No. 219
          Date: 1997

          Contact: Triveni Kuchi
          Postal: The Jerome Levy Economics Institute, Bard
                    College, Blithewood, Annandale-on-Hudson, New
                    York 12504 USA
          Phone: (914) 758-7729
          Fax: (914) 758-1149

     HARD COPY PAPER REQUESTS: Please contact Triveni Kuchi, Postal: Information Specialist, The
     Jerome Levy Economics Institute, Bard College, Blithewood,
     Annandale-on-Hudson, NY 12504. Phone: (914) 758-7729.
     Fax: (914) 758-1149.

     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, 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 Classification: J31, J38

Robin Hanson
RWJF Health Policy Scholar, Sch. of Public Health 510-643-1884
140 Warren Hall, UC Berkeley, CA 94720-7360 FAX: 510-643-2627

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Received on Mon Aug 10 19:40:09 1998

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