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February 19, 2015

University professors joust in debate over the minimum wage

University professors debated the United States’s minimum wage at an event hosted by the Chicago Society last Tuesday. Economics professor Casey Mulligan, who specializes in economic policy, debated Harris School professor Ioana Marinescu, who specializes in labor and public economics.

Mulligan argued against raising the minimum wage, claiming that a small minimum wage fixes prices rather than affects the quantity of available labor in the market. “Economic theory, especially if you tell me that it’s gonna work through non-priced competition, doesn’t necessarily predict a change in the quantity of labor,” he said.

What minimum wage does do, he argued, is emphasize subjective forms of competition, known as non-priced competition. Non-priced forms of competition have nothing to do with the value of a worker, but concern the superficial ways in which he or she is presented to an employer.

When discussing the value employees and employers gain from jobs and hires, Mulligan asked, “Are you chosen on the basis of you being the white guy? Or are you chosen on some other basis?... When you have a minimum wage you’re going to have competition on [non-priced] dimensions,” he said. “In the old days it was the white guys who won those contests.”

Marinescu agreed with most of Mulligan’s argument that changes in the minimum wage don’t always affect employment levels.

“[T]he minimum wage does seem to have some negative impact on employment. It is not very large in most cases. And there are some cases where there is no effect. There are cases in which—which is what [Mulligan] also said—where there is an increase in the minimum wage and you see absolutely no change in employment,” she said.

She argued that a positive consequence of increasing the minimum wage is that wages would increase at all levels of an organization.

“You have a trickle-up effect on the minimum wage, and through that mechanism the minimum wage decreases wage inequality,” she said. She added that it has other positive benefits such as “a productivity increase, both because workers care now again about keeping their job that pays more, and potentially employers are trying to make up for the higher price of labor by trying to see if they could reorganize.”

Second-year Diego Loyo said he appreciated the debaters’ ability to look at the issue from multiple perspectives.

“[They were] the perfect people to bring because, even though Professor Mulligan didn’t quite seem to agree with raising the minimum wage, and Professor Marinescu said out loud that she agreed with raising the minimum wage, they both were considering that the other option was equally valid,” he said.

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