THE idea of a higher minimum wage (along with a citizen's income) is getting more momentum, as governments grapple with the rise in inequality over recent decades. Britain introduces a "living wage"* of £7.20 an hour today (around $10.30) for those aged over 25 while Democratic Presidential Candidate Bernie Sanders supports a rise in the minimum wage to $15 an hour, phased in over seven years (the federal minimum wage is currently $7.25 but many states have higher requirements). Economists have been grappling for decades with whether (and by how much) a higher minimum wage affects employment. A paper by David Neumark of the University of California (on the very useful IZA World of Labor's website) summarizes the literature. Most studies show there is an impact with a 10% rise in the minimum wage causing around a 2% drop in employment for affected workers (normally the young and low-skilled). This is not the same as saying that overall employment will fall by the same amount.

The paper also shows that a higher minimum wage may not be as effective in tackling poverty as many hope. Low-wage workers don't all belong to low-income families. Mr Neumark notes that, in 2008

Only 12.7% of workers earning a wage of less than $7.25 an hour were in poor households, while 44.6%—or nearly half, most of whom were probably teenagers or other secondary workers—were in households with incomes three times the poverty line (or approximately $63,000 in 2008 for a family of four) or higher. Thus, if the benefits of the minimum wage were spread equally across all affected low-wage workers, only 12.7% of the benefits would go to poor households, and nearly half would go to households in the top half of the household income distribution.

adding that

Another reason minimum wages may fail to help low-income families is that many low income families have no workers. Of families whose head was below age 65 in 2010, 52% of families below the poverty line had no labour income, while only 6% of families above the poverty line had none.

Still there are other potential impacts of higher minimum wages; one is higher productivity. Some British companies that voluntarily shifted to a higher living wage found that staff absenteeism and turnover rates reduced, and productivity improved. It is hard to disentangle cause and effect here; are better-paid staff better motivated or are employers forced to become more efficient to absorb the cost of higher wages?

This issue is also very topical because of the apparent slowness of productivity growth, despite the excitement over new technology. One explanation could be the sluggishness of wage growth; labour is so cheap that employers have less incentive to replace it with capital.

Over time, one would expect higher productivity to lead to higher wages. Robert Gordon's monumental economic history "The Rise and Fall of American Growth" points out that the US experienced a "great leap forward" in productivity growth between 1928 and 1950, despite the Great Depression. In the second half of this period, there was a very big increase in real wages per hour. Some of this may be down to a tendency to substitute capital for labour; some of it may be down to the spread of earlier innovation such as the electrification of factories. Sheer necessity forced American business to get more innovative during the Second World War to churn out the armaments that America needed; those lessons were then carried over into peacetime production.

Mr Gordon concludes that

World War II saved the US economy from secular stagnation and a hypothetical scenario of economic growth after 1939 that does not include the war looks dismal at best

Since we can hardly hope for a war, might there be other positive impacts? Higher minimum wages could stimulate the economy and boost wages, for example. Or if employers focus on high-skilled workers in the short term, that could boost productivity and the economy in the long term, eventually providing jobs for the low skilled.

Alas, another paper on the IZA website, from Joseph Sabia of San Diego University, is not encouraging on this score. He does find evidence that higher minimum wages redistribute productivity from low-skilled to high-skilled jobs. But

In studies of OECD countries, the literature provides relatively little evidence that increases in minimum wages raise aggregate GDP.

However, Mr Sabia admits that

More sophisticated empirical evidence on the effects of minimum wages on aggregate productivity is relatively new. This literature has faced a number of challenges, including: (i) how to measure overall and industry-specific productivity; (ii) disentangling the effects of minimum wage increases from other concurrently implemented economic policies or economic trends; and (iii) accounting for spillover effects of the minimum wage on productivity in “control” regions.

It would be nice to think that a higher minimum wage had very positive macroeconomic effects but the evidence to date isn't encouraging. Of course it is good news for those workers who receive it, and the legislation may discourage the "sweatshop" conditions still seen in developing countries. And it is understandable that politicians are tempted by the idea; it is a policy with no revenue implications for the government, just for the private sector. Indeed, in the July 2015 Budget, Britain's government used the good news of a higher minimum wage to offset the bad news of benefit cuts. The Institute for Fiscal Studies points out that those who lose from the second won't necessarily gain from the first

Our scenario suggests that only around 13% (£150 per year) of the losses due to tax and benefit changes (£1,090 per year) of all working age households currently entitled to benefits and tax credits – including non-working households – will be offset by the NLW, on average.

When it comes to helping the poor, the issues are much more complex than simple slogans might suggest. But this is the era of simple slogans.

* This is a renamed version of the minimum wage. Prior to the May 2015 election, the Labour party was campaigning for a "living wage" and the Conservatives neatly nicked their slogan