Mostly Economics Podcast 38: More Money, Less Problems with Arindrajit Dube
Why It Matters
Higher minimum wages can close the productivity‑wage gap, lift consumer spending, and reduce inequality without sacrificing jobs, reshaping labor markets for businesses and workers alike.
Key Takeaways
- •Federal minimum wage stagnant for 18 years, widening wage gap.
- •State-level hikes create natural experiments comparing 30 vs 20 states.
- •Research shows modest wage increases rarely reduce employment.
- •Historical productivity-linked wages suggest today’s minimum could be $25/hr.
- •Institutional factors, like outsourcing, drive wage disparities beyond skill levels.
Summary
In this episode of Mostly Economics, Dean Baker talks with Arindrajit Dube, professor of economics at UMass, about his new book *The Wage Standard* and the broader story of America’s stagnant minimum wage. Dube traces how the federal floor has not risen in nearly two decades, while productivity and median wages have surged, leaving most workers far behind. The conversation highlights three research pillars: the historical tie between wages and productivity in the 1950‑60s, the natural‑experiment evidence from state‑level minimum‑wage hikes (30 states versus 20 with a $7.25 floor), and the seminal Card‑Krueger study that found no job loss after New Jersey raised its minimum. Subsequent work using administrative data across counties confirms those findings and shows modest wage gains can coexist with healthy employment. Dube illustrates the human side with the story of Frank, a Harvard janitor whose wage rose after a union campaign, and points to the 1980s shift toward outsourcing that created pay gaps for identical jobs within the same firm. He argues that wages are not determined solely by market forces; institutional choices matter and can be reshaped. The takeaway for policymakers and business leaders is clear: raising the minimum wage to reflect productivity—potentially $18‑$25 per hour—could boost consumer demand without the feared employment collapse, while addressing entrenched inequities caused by outsourcing and non‑union labor.
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