Impact of Minimum Wages on Other Wages, Employment, and Family Incomes

Edward M. Gramlich

EMG

Edward M. Gramlich University of Michigan

Discussants: Michael L. Wachter and

MLW

Michael L. Wachter University of Pennsylvania

Robert J. Flanagan

RJF

Robert J. Flanagan Brookings Institution and Stanford University

ONE OF THE ISSUES that has traditionally split politicians from economists, and now splits radical economists from traditional economists, is the minimum wage. As the passage of the Fair Labor Standards Act in 1938 testified, many politicians have seen the minimum wage as a direct means of reducing poverty and providing decent living standards to low wage workers. In this belief they have recently been joined by economists asserting that higher wages will prod firms to create better and more productive jobs for workers, that the marginal product of labor is basically unmeasurable anyway, or that labor demand is simply quite inelastic. Other economists have objected strenuously to such ideas, insisting that the long-run distortions and disemployment effects of minimum wages far outweigh any supposed short-run benefits