Sweet Home Alabama

Writing for al.com, Prof. Art Caden of Samford University writes carefully about to an issue out of Birmingham, specifically the City Council voting to increase the city’s minimum wage to $10.10 over the next two years.

I think this will be an interesting municipality to watch.  As you may know, I theorized a little while ago minimum wage hikes tend not to show large increases in unemployment because the new wages is set below the market wage.  This may be a good place to test this theory.  According to the BLS, the median wage for many low-skilled jobs in Alabama is approximately $8.74/hr.  The new minimum wage puts the wage floor above the effective equilibrium wage.  If my hypothesis is correct, this would mean Birmingham would likely see greater negative effects from the minimum wage hike than other municipalities.  I will be watching this event with close interest.

HT: Don Boudreaux