The crumbling orthodoxy: arguments for low minimum wages

Abstract

For decades, economists have told policymakers about the inevitable employment losses from higher minimum wages. Intense debate is traced back to Roosevelt’s reforms and counter-assertions by economists Stigler and Friedman about the disastrous impact of wage regulation. The chapter argues that a ‘policy monopoly’ of low minimum wages formed, one reinforced by fears about globalisation and technology. Liberals and social liberals approached the poverty consequences of low wages through social policy designed around negative income tax ideas associated with Friedman. The policy monopoly has, however, been weakened by improved evidence arising from the economics profession itself, which, in turn, has emboldened activists and policymakers to lift workers’ wages. But debate and conflict over living wage reforms will almost certainly continue in the turbulent 2020s.