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Automatic Adjustment of the Minimum Wage, Linking the Minimum Wage to Productivity

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  • Oren M. Levin-Waldman
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    Abstract

    The fact that every change in the minimum wage requires an act of Congress means that debate over the wisdom of having a minimum is repeatedly returned to the political arena. As inflation continues to erode the value of the minimum wage, each legislative delay means that a larger increase is required. The larger the increase the more resistance to its passage, so that by the time Congress acts, the political compromise is an increase that is too little and too late to be of much help in lifting workers out of poverty. Automatic adjustment of the wage, with increases keyed to measures of private-sector productivity, would eliminate this problem. With the institution of a mechanism that provides regular and incremental increases, Congress will no longer be forced to revisit the issue, employers will not be confronted by sudden and large increases, and the value of the wage will be maintained.

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    Paper provided by Levy Economics Institute in its series Economics Public Policy Brief Archive with number ppb_42.

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    Handle: RePEc:lev:levppb:ppb_42

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    1. John Kennan, 1995. "The Elusive Effects of Minimum Wages," Journal of Economic Literature, American Economic Association, vol. 33(4), pages 1950-1965, December.
    2. Dimitri B. Papadimitriou & L. Randall Wray, . "Targeting Inflation, The Effects of Monetary Policy on the CPI and Its Housing Component," Economics Public Policy Brief Archive ppb_27, Levy Economics Institute.
    3. Richard V. Burkhauser & Kenneth A. Couch & David C. Wittenburg, 1996. "Who gets what from minimum wage hikes: A re-estimation of Card and Krueger's distributional analysis in "Myth and Measurement: The New Economics of the Minimum Wage."," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(3), pages 547-552, April.
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