Higher Minimum Wages and Mixed Effects on Health

Yves here. Readers had fun yesterday shellacking an article that argued that war spending, in particular on the Ukraine misadventure, was good for growth. The piece today questions a recent raft of articles pushing for minimum wage increases to improve overall health levels.

The argument that keeping people even poorer than they need to be is not a negative for health is so wildly nonsensical as to require pretty strong proof. Why for instance does the US find it necessary to fund so many lunches for school age children if even low income parents were earning a living wage?

Similarly, Winston Churchill was very proud of his time as Home Secretary in the mid 1920s. In World War I, it was possible to easily see class differences via height. Churchill took steps to improve the incomes and diets of the lower orders. By World War II, soldiers from upper and lower class backgrounds could not be told apart by their stature.

Now there may be ways that raising minimum wages could fail to improve health much. One is if the minimum wage level is still so low that it does not put workers, particularly working parents, at an income level where they can afford basics: decent food, shelter, utilities, health care, transport. Those costs are all so high in the US that many workers need a big pay rise to get their head above water. Second is that a too-low minimum wage won’t do much to lower inequality. As we have been pointing out since the inception of this site, high levels of inequality impose a health cost, even on the rich. High levels of inequality are strongly correlated with poor social indicators, like teen births, infant mortality rates, crime levels, educational attainment, suicide and drug addiction.

By David Neumark, Distinguished Professor of Economics University Of California, Irvine. Originally published at VoxEU

A handful of studies have led influential health advocacy organisations to recommend increasing minimum wages to improve health. This column assesses the emerging body of evidence on minimum-wage effects on health and health-related behaviours to see whether conclusions can be drawn. Raising minimum wage reduces suicides but has mixed effects on overall physical health, a beneficial or no effect on obesity, and an adverse effect on smoking. More rigorous research on minimum wages and health is still needed.

Economic research and policy debate about the minimum wage has focused on economic outcomes, most notably employment and earnings of low-skilled workers and incomes and poverty.  Research has established both pros and cons of higher minimum wages: higher wages for some but – according to most research – job loss for others, and unclear benefits for low-income families in general. For this reason, perhaps, minimum wage policy in the US remains at an impasse. Some states (and localities) have opted for much higher minimum wages, while the federal minimum wage of $7.25, which has not increased since 2009, remains binding in 20 states.

In recent years, researchers have turned to the effects on a multitude of other behaviours and outcomes – mostly health-related. Some studies have led to headlines touting the effects of higher minimum wages in reducing suicides, decreasing smoking, increasing birthweights, lowering depression, improving diet, combatting child neglect, and more (e.g. Cherkis 2021, Gardner 2016, National Employment Law Project 2021, Desmond 2019). If a higher minimum wage delivers these kinds of benefits, then perhaps this evidence should weigh more heavily in the policy debate, offsetting the evidence of job loss from higher minimum wages, and instead supporting substantial increases in the minimum wage.

Read the full article at NakedCapitalism.com

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