Should the US raise the minimum wage? (That's not a hook. We actually don't know.) You can't turn a virtual corner this week without tripping over a discussion about the US minimum wage. The case in favour of raising it has been made by Arindrajit Dube, Paul Krugman, Ed Luce, and Kevin Drum. Arguing against have been Tyler Cowen, Scott Winship, and Adam Ozimek. Peter Coy and Susan Berfield are comprehensive but meh on both its costs and benefits. Reluctantly in favour, maybe, if nothing better is possible, is Ryan Avent. And from earlier this year see also Felix Salmon (for), Dylan Matthews (against), and Annie Lowrey (explanatory piece). On Tuesday, Avent rounded up some of the relevant newsy items: AROUND the world, momentum is building for increases in minimum wage rates. SeaTac, Washington, a Seattle suburb that is home to a large metropolitan airport, backed a $15 per hour minimum wage law last week. On Thursday of this week fast-food workers around America will strike for one day, demanding a $15 per hour base rate for the industry. A majority of Americans favour increases (even a majority of Republicans), and President Obama has signalled his support for a bill raising the national minimum wage to $10. Germany's new coalition has backed a national minimum wage of €8.50 ($11.50). Also on Tuesday, the Washington DC Council approved an $11.50 minimum wage (raised from its current $8.25), while in November the White House threw its support behind a bill that would raise the federal minimum to $10. Culled from the posts linked above and a few other places, here are summaries of the arguments in favour and against, as we see them. In favour Contrary to economic theory, a number of economists have found that raising the minimum wage doesn't lead to lower employment in the real world. The UK is one example. This is partly because of search frictions and therefore lower turnover: a higher minimum wage makes it relatively costlier for an employee to quit and seek another job. The minimum wage in the US has declined through the years when adjusted for inflation (so it has been higher during periods of robust employment) and is also one of the lowest minimum wages as a share of the median wage (so it is higher in some countries with labour markets which are in no worse shape than that of the US). Minimum wage workers are very likely to spend their higher wages, and therefore this legislation would provide a macroeconomic stimulative jolt. By not raising the minimum wage, many lower-income workers will have to seek government benefits of some kind anyways, and therefore the cost (so to speak) of not raising the wage will be passed on to the taxpayer. Furthermore, the prevailing economic conditions have eroded the bargaining power of these workers, leaving them vulnerable to exploitation. A minimum wage would restore some of the balance in their relationships with employers. Yes, it would be inflationary, but that's great: broad-based, wage-driven inflation is exactly what the economy needs right now. Against Consistent with economic theory, a number of economists have found that raising the minimum wage leads to lower employment in the real world. Even if search frictions rendered the preceding statement incorrect, it's not at all clear that fewer quits, or lower turnover generally, is a good thing. About the stimulus effect: 1) Economists disagree on this as well, 2) The higher cost would be passed on to customers who use the products of companies paying a higher minimum wage, and who also were likely to have spent that marginal dollar, and 3) There is evidence that in the past, the additional spending brought by the higher wages was fuelled by correspondingly higher indebtedness, which is not to be encouraged. This is not a period of impressively rising wages and productivity generally, and thus employers are less likely to believe that the workers they hire at above-market wages, ie the minimum wage, are likely to grow into their wages. Thus the likelihood of a bigger unemployment effect is higher than it used to be. This is uniquely Tyler Cowen's point. As a boost to lower-income workers, it isn't very cost-effective when compared against other ideas. Matthews writes: "According to a 2007 study by the CBO, an increase in the minimum wage to $7.25, like that eventually passed that year, would increase wages by $11 billion, of which $1.6 billion went to poor families. By contrast, increasing the Earned Income Tax Credit for large families (as happened in the stimulus bill) and for single people would cost $2.4 billion, of which $1.4 billion would go to poor families. We think it's perfectly reasonable to be conflicted about this issue, which is another way of saying that we're conflicted about this issue. That a modest federal wage increase wouldn't have much of an employment effect is entirely believable. And while its stimulative potential is dubious, a higher wage would bring needed relief to struggling low-income workers. Still, we could be wrong, and this kind of intervention is something to be cautious about, even if it would only be a very small lurch in the direction of a more-calcified labour market. It's just not clear to us which of the above sets of arguments is stronger. For the same reasons that a basic minimum income would be an improvement on the patchwork of extant safety-net provisions - less complicated, less likely to bring about unintended consequences, directly targets poverty and inequality rather than treating one of their symptoms - we think that a redistributive, post-outcome transfer mechanism would probably be better than a minimum wage hike. A basic income, wage subsidies, and a more-generous earned income tax credit all seem like superior alternatives. But none of those alternatives is legitimately on the table, while many states continue to raise their minimum wages and general support for the idea is building. So what's the right stand to take on the minimum wage in the absence of a better idea that's politically feasible? Honestly, we don't know.