Bloomberg Businessweek’s six-cover story

This week’s edition of Bloomberg Businessweek rolled out with six different covers each featuring a low-paid worker in a story about raising the minimum wage.

Peter Coy wrote the story:

Raising the minimum wage is certain to be a wedge issue for Democrats in the midterm elections because it’s the rare redistributive measure that enjoys broad popular support. A Washington Post-ABC News poll in December found that two-thirds of Americans support a minimum wage increase. But to opponents, it smacks of Big Government heavy-handedness. That explains why politicians on both sides are loudly reminding their constituents of their ideologies. The back and forth, however, fails to address the real issues: What’s the right minimum wage? And what’s the fairest way for the world’s largest economy—historically a beacon of social mobility—to arrive at it?

The first question is a bit easier to answer. The original minimum wage, 25¢ an hour, was born in 1938 under similar conditions of economic hardship and class resentment. Labor Secretary Frances Perkins and President Franklin Roosevelt had fought for it for five years. The night before signing the Fair Labor Standards Act, in a radio fireside chat, Roosevelt said, “Do not let any calamity-howling executive with an income of $1,000 a day … tell you … that a wage of $11 a week is going to have a disastrous effect on all American industry.”

Coy goes on to talk about the argument against government setting pricing standards and why some free-market advocates dislike the interference. He then examines research debunking the notion that raising wages contributes to higher unemployment.

The Card-Krueger study touched off an econometric arms race as labor economists on opposite sides of the argument topped one another with increasingly sophisticated analyses. The net result has been to soften the economics profession’s traditional skepticism about minimum wages. If there are negative effects on total employment, the most recent studies show, they appear to be small. Higher wages reduce turnover by increasing job satisfaction, so at any given moment there are fewer unfilled openings. Within reasonable ranges of a minimum wage, the churn-reducing effect seems to offset whatever staff reductions occur because of higher labor costs. Also, some businesses manage to pass along the costs to customers without harming sales.

Writing for the Huffington Post, Jillian Berman’s headline said the story makes “a terrific argument for raising the minimum wage”:

The magazine made six covers featuring low-wage workers. Each person is seen holding up an answer to one of the following questions: “What is your biggest financial fear?” “What do you think you should earn?” and “What do you do?”

“I’m a cashier. I make people smile,” one sign reads. “I worry that the more time I spend working, the less time I have raising my children,” another one states.

The story accompanying the cover delves into how different stake-holders make the economic case for raising the minimum wage or keeping it the same (the federal minimum wage is a measly $7.25). Democratic lawmakers have proposed raising the minimum wage to $10.10 an hour (with President Obama’s backing), but the provision is stalled in Congress.

The affects of a minimum wage increase on the economy is one of the most hotly debated issues in economic research. Conservatives argue that a boost in the minimum wage would actually be worse for workers because it would make businesses more hesitant to hire. Six hundred economists, including seven nobel laureates, signed a letter last month backing a $10.10 minimum wage. The letter states that the “weight of evidence” shows that “increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market.”

The timing of the story coincides with President Obama signing an executive order to raise the rate, Elena Schneider reported in the New York Times:

President Obama signed an executive order on Wednesday to raise the minimum wage to $10.10 an hour from $7.25 an hour for federal contract workers starting in 2015, a promise he made in his State of the Union address last month.

“We are a nation that believes in rewarding honest work with honest wages,” Mr. Obama said Wednesday in a letter announcing the move. “And America deserves a raise.”

As Coy points out, the debate is one of economics, and also politics and elections. There are many sides and special interests that get factored into the discussion and decisions, but people need to make more money to survive. And that’s what the president is saying by issuing his executive order. The Bloomberg Businessweek piece is a comprehensive look at the politics and debate over the minimum wage and worth the read.