More on the Minimum Wage

On Free Exchange, the blog for The Economist, there is a post that does a good job of summarizing the main issues with the minimum wage. A couple of excerpts:

It is probable that the minimum wage increase will not cost enough jobs to make its effects readily distinguishable from random economic variation...
On the other hand, it also seems probable that much of any benefit that goes to poor families will come out of the pockets of other poor people—very probably even poorer people, such as convicts, who are currently barely hanging onto the fringes of the labour force...
CEO's who support higher minimum wages are not, as the media often casts them, renegade heros speaking truth to power because their inner moral voice bids them be silent no more. They are by and large, like Mr Sinegal, the heads of companies that pay well above the minimum wage. Forcing up the labour costs of their competitors, while simultaneously collecting good PR for "daring" to support a higher minimum, is a terrific business move...

Pennies Are Evil

Right now, there are two US currency problems: (1) The increasing uselessness of the penny, (2) the government currently loses money of producing nickels (the combined losses from making nickels and pennies is estimated to be $40 million). NY Times columnist Austan Goolsbee discusses a solution offered by an economists at the Chicago Fed: eliminate the nickel and make the penny worth 5 cents.

Mr. Velde, in a Chicago Fed Letter issued in February, has come up with a solution that would abolish the penny, solve the excess costs of making nickels, help the poor, keep the Lincoln buffs happy and save hundreds of millions of dollars for taxpayers.

Pennies would then cost a little over 1 cent to make and would be worth a nickel, so the government would again be making a profit on money. We would have plenty of new Lincoln nickels so we could stop minting our current nickels at a heavy loss. The Jefferson nickels would stay in circulation, just as the old wheat pennies do now. Because metal in nickels is valuable, though, they would probably be melted down.

What do you think of this option? The most important benefit of the policy to me is that K-Fed would be happy.