WHEN IS A GOOD TIME TO RAISE THE MINIMUM WAGE?

摘要

I analyze changes in the target efficiency of the federal minimum wage over the past 25 years. Using static simulation methods I find that minimum wage target efficiency is currently close to its 25-year peak-of the total monetary benefits generated by a 12% increase in the federal minimum wage, 16.8% would flow to workers in poverty. This exceeds the least target efficient year over this period by 4.7 percentage points and is only 0.6 percentage points below the peak. Furthermore, I find a very strong positive relationship between minimum wage target efficiency and the real federal minimum wage. The implication is that, from an efficiency standpoint, a good time to raise the minimum wage is when it is already high. This discovery raises the possibility that the minimum wage increases the employment of low-skilled poor individuals relative to the employment of low-skilled non-poor individuals. Moreover, this discovery may bolster the rationale for an indexed minimum wage whereby it is prevented from falling to less efficient levels.