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Minimum wage is now $6.55

According to Tony Pugh, the federal minimal wage rose yesterday to $6.55 (It has been in the $5 range for over a decade).

Robert Reich thinks the problem lies in depressed worker productivity:

But there’s also a limit to how many hours Americans can put into work, so Americans turned to a third coping mechanism. They began to borrow. With housing prices rising briskly through the 1990s and even faster from 2002 to 2006, they turned their homes into piggy banks by refinancing home mortgages and taking out home-equity loans. But this third strategy also had a built-in limit. And now, with the bursting of the housing bubble, the piggy banks are closing. Americans are reaching the end of their ability to borrow and lenders have reached the end of their capacity to lend. Credit-card debt, meanwhile, has reached dangerous proportions. Banks are now pulling back.

As a result, typical Americans have run out of coping mechanisms to keep up their standard of living. That means there’s not enough purhasing power in the economy to buy all the goods and services it’s producing. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth.

Stephen Dubner interviews an agricultural economist Daniel Sumner:

Farm subsidies that lower prices hurt farmers in poor countries by helping consumers in these countries. My best estimate in the case of cotton is that the world cotton price would be about 10 percent higher if U.S. farm subsidies for cotton were eliminated. The impact is likely smaller for most other commodities. So the impacts would be a modest improvement of farm incomes, but as we show in our paper for Oxfam, cited in my introduction, even most improvement of farm prices can make a measurable difference to the living standards of the very poor.

{ 2 comments… add one }
  • Jennifer B 8/12/2008, 4:27 pm

    Interesting post… but ugghh, I don’t know if a rise in minimum wage is best for the economy. Currently a lot of people are having trouble getting jobs with the unemployment rate increasing, and a rise in min. wage is just going to make it worse for the people getting those low-paid jobs. I mean, this is fine for the people who currently HAVE the jobs, but businesses will most likely cut back on hiring, which could make things worse.

  • Charles 8/13/2008, 2:38 am

    I’m writing mostly about the Stephen Dubner article quote.

    Interesting. I’ve been doing a lot of research into the Ag Economics lately.

    It’s tricky to balance what commodities are necessary to preserve national security. After all, corn, cotton, wheat when grown elsewhere provide a foreign policy effect in that our ‘national interest’ becomes more entwined in the producing country / countries.

    The large farm theory works just as well. If we are to compete on a global market, the small individual family farmer is not able to do so as well as a larger corporate structured farm.

    So subsidies help the smaller farmer more than the larger farmer but at the same time the larger farmer is more well equipped to compete globally.

    Thoughts? I’d love to get you to look at the UC Davis info I just read… By the way, I surfed over here from Tom Johnson’s IRBW site.

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