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Hundreds of Economists Say: Raise the Minimum Wage
- Thread starter LAM
- Start date
18FEB2013
Even More Thoughts on the Minimum WageI am still in a mild state of shock that so many professional economists apparently doubt that demand curves slope downward. I admit upfront that I have not spent more than an hour or so looking through the latest literature reviews on the topic. Nonetheless, I remain unrepentant: I think increasing the price of unskilled labor by 24% will make employers hire fewer labor hours. The burden of proof is on the doubters to show why this isn?t so.
In addition to the compelling logic of ?demand curves slope downward,? we also have the casual empiricism of my last post, and now we?ve also got the below chart (brought to my attention by John S in the comments), taken from an AEI blog post but not sure who the original creator is:
Wow, look at that. It?s almost as if employers respond to incentives on the margin.It?s true, there are papers that look at ?natural experiments? and somehow throw away logic and evidence such as the above chart. Let me run through some issues quickly:
Monopsony. One claim is that the Econ 101 logic breaks down because employers have market power. But hang on a second. If you want to tell me that the wages of, say, brain surgeons are below the competitive equilibrium, since there are only a few employers who can form a cartel, then OK I?ll at least give you a few moments to make your case. But you?re telling me there is a cartel of employers who are willing to hire unskilled labor?! That is literally the most non-specific factor of production on planet Earth. You need labor for everything, and by definition, unskilled labor is not suited for one occupation more than another.
I think the reason this might initially sound plausible to people, is that there aren?t a lot of teenagers working all over the place. You just see them concentrated in a few areas, like fast-food restaurants. But do you know why? Because of the ()#%$#$ minimum wage (and school attendance laws)!
You actually do see young people in various professional businesses and halls of government. They?re calledinterns. So we?ve got lots of young people finding employers willing to take them on at $0/hour, and yet apparently there is this ?indeterminate bargaining zone? where employers? quantity of labor demanded is the same between 1 cent and $7.25 (or $9). Does this range also count as a ?modest increase?? Or does even Krugman admit that getting rid of the minimum wage altogether would help reduce the 25%+ teen unemployment rate, while increasing it from $7.25 to $9 would be negligible in the other direction?
Studies look at employment growth, not unemployment rates. Apparently the standard thing to do in these studies is look at how much the absolute amount of employment or labor hours changes, rather than looking at the unemployment percentage. The idea (I gather) is that a high minimum wage can draw people into the labor market who can?t find a job, but these people wouldn?t have had a job anyway, so it?s not a strike against the system. Only if employers actually reduce the quantity demanded, can we say (some) workers are hurt. But even on its own terms, this argument fails. The most desperate, vulnerable people are the ones who will work for, say, $5/hour. At that rate, fewer middle-class college kids will enter the labor market. But bump up the wage rate to $7.25, and now a bunch of suburban white kids take a part time job at Pizza Hut to make a little extra money. Even if the total payroll and hours worked doesn?t change, it still means these kids bump out the new immigrant who barely speaks English and needs to get his foot in the door to establish a work history.
Studies correct employment growth for broader trends. My very quick reading of the literature suggested that the empirical studies in the olden days did find a strong connection between a minimum wage hike, and reduced hiring among teens. But, the newer wave of studies disputes that finding. One of the ?corrections? the new studies make, is to adjust the change in teen hiring compared to the broader labor market, which presumably isn?t affected by a minimum wage hike. Yet hang on a second. Even in the ?natural? experiments, I would imagine a state legislature that jacks up the minimum wage is also more likely to do other ?progressive? things that hurt employment growth. So things still move in the same direction, but now you?re not going to get as clear a signal; it?s hard to disentanglewhy the teenagers in California can?t get a job?is it because of the minimum wage hike, or because of their outrageously progressive income tax code?
Studies focus on fast-food employment across county or state lines. Again, I am not claiming to be an expert on this stuff, but it looked like a lot of the really ?compelling? studies looked at natural experiments where you had similar conditions except a chain of restaurants fell in one jurisdiction that raised its minimum wage, while the other restaurants in the chain fell in an adjacent jurisdiction that didn?t. Seems like a perfect laboratory test right? But hang on. If the minimum wage in one state makes it profitable for the restaurant to bite the bullet and install a bunch of labor-saving machinery (like the drink dispensers that you put the cup under and hit a button and walk away, unlike what they used to do when I was growing up where you had to hold the cup in place on the nozzle), then it would be pretty easy for that restaurant chain to use the same, new design when opening up new locations in other states with the original minimum wage. By the same token, even longitudinally looking at the same actual restaurant, once they redesign the place to be run by (say) 4 responsible teenagers and a manager, instead of (say) 9 goof-off teenagers and a manager, then even if that state later abolishes its higher-than-federal minimum wage, the damage is done; the restaurant isn?t going back to the old model.
How does this square with the Keynesian story about monetary stimulus? Finally, how the heck does this whole minimum wage digression line up with Krugman et al. constantly telling us that the problem in Europe and elsewhere, is that wages are too high relative to the price level? They tell us that if we engage in a currency war, we?ll all be better off because prices will rise, making it profitable for employers to hire once again. So, are they saying prices will need to rise by more than 24 percent, in order for the teen unemployment rate to budge?
I?m sorry, I just get the feeling that the story changes to fit the progressive policy of the day. And again, I am not burying my head in the sand and refusing to accept something obvious: On the contrary, I am saying demand curves slope downward, and I can point to all sorts of obvious evidence to back that up. Indeed, the Keynesians themselves think employers follow the same logic I?m talking about, when it comes to their proposals for monetary stimulus.
Yet somehow, the old empirical consensus on the minimum wage has been overturned by a wave of new studies of ?natural experiments,? so I?m giving reasons in this post why those studies might be missing the obvious conclusion staring us all in the face: Making teenagers 24% more expensive in the middle of a depression is not the way to help teenagers.
Even More Thoughts on the Minimum Wage
and?
learn about inflation then you can call me an idiot, retard...LOL
and who's the one that doesn't have to work anymore...the idiot or you?
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Hey, man, he's got a point. He's older and retired...after working for decades at the behest of the evil corporations his entire life. I mean, he has to know what he's talking about...or he's a cut-and-paste, raging hypocrite.
Hmmm. you may have a point.
ILO Global Wage Report 2010/2011
http://www.ilo.org/wcmsp5/groups/pu...---publ/documents/publication/wcms_145265.pdf
* the ILO report above explains in plain english how the US lags behind other wealthy industrialized country's in the OECD and why. no economic theory here just good old comparative economics using empirical data.
http://www.ilo.org/wcmsp5/groups/pu...---publ/documents/publication/wcms_145265.pdf
* the ILO report above explains in plain english how the US lags behind other wealthy industrialized country's in the OECD and why. no economic theory here just good old comparative economics using empirical data.
Global Wage Report 2008 / 09 Minimum wages and collective bargaining....
http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_100786.pdf
http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_100786.pdf
Why not raise it, you are paying for those people anyway? Example: Wal-mart doesn't pay enough for a working mother of 2 or 3 to raise kids. They go on SNAP and get assistance through your tax dollars. Why not put the onus on Wal-mart rather than the taxpayer? I don't buy the, "They'll cut hours" argument. This would be based on the assumption that Wal-mart has overhired and has hours to cut. Wal-mart is about thin margins, they really don't have hours to cut.
One thing to keep in mind is that 95% of working people make ABOVE minimum wage. only small amount of people make minimum wage. it's about 5% of the work force. Another fact is that higher wages leads to higher teen unemployment. Every time the minimum wage was raised teen unemployment has gone up.
"3.8 million workers with wages at or below the Federal minimum made up 5.2 percent of all hourly-paid workers"
Characteristics of Minimum Wage Workers: 2011
"3.8 million workers with wages at or below the Federal minimum made up 5.2 percent of all hourly-paid workers"
Characteristics of Minimum Wage Workers: 2011
And how big a percentage of the work force are "teens"? That's the worst argument I have heard yet against it. Raising the minimum wage has the potential to raise all other wages as its upward pressure on all other wages which is a GOOD thing.
i'm just stating the facts, if you don't like them then that's your prerogative.
The work force of teens is low, and one reason is because they keep raising the minimum wage. Minimum wage jobs are for unskilled workers. It's not meant to be a career job or to raise a family on.
I am not questioning the fact(s) you presented, it is the validity that specific fact(s) brings to the argument against raising minimum wage. I'm sorry but any half ass educated person that pays attention at the grocery store can see prices keep going up, we call this inflation, and wages that don't raise with them are paying less every year. At some point maybe you can figure this out and realize that if wages keep staying the same and prices KEEP going up, your consumption based economy will come to an end because there is no money left in the system to spend because all is needed just to put a roof over people's heads and feed them. I used to buy into the BS rhetoric from the GOP, business owners and many others that continue to ignore this fact but I actually started to educate myself and facts are facts, things have to change or this unsustainable path we are on will fall off a cliff.
I know what inflation does and it's destroying the middle class and is major factor in the income inequality. its like a hidden tax on the poor and middle class. who do you think is responsible for it? yep, our lovely govt, the federal reserve. most of our economic problems is a direct result of the fed.
The government which is controlled by corporations and the wealthy. You're like a cat that gets sprayed with water for being on the countertop. You're afraid of the water bottle because you're not bright enough to realize who is actually doing the spraying.
LOL you don't blame the govt one bit. don't ya?
the govt is controlled by corporations by choice. the govt chooses to be corrupt, don't you get that? If the govt didn't give in to the big corps we wouldn't have most of the major problems we currently have in our economy. But then again i don't expect you to understand that because you love big govt and it's policies.
really show the facts? because wage increases haven't cost price inflation in the other wealthy industrialized country's in the OECD.
where is the empirical data and not simply your opinion?
actually your not stating "facts" the workforce of teens is so low because US adults have been forced to stay in the workforce longer. it's one of the main drivers of the high percentage of the US youth attending various schools right now even though the graduation rates from those schools are low.
Older Workers Staying On The Job - Forbes
http://www.census.gov/prod/2013pubs/acsbr11-09.pdf
http://www.bls.gov/opub/mlr/2012/01/art3full.pdf
right because money is value neutral...don't you get tired of being wrong about everything?
These are just random numbers I'am putting in a situation. If it cost $1.00 (.50 for mats, .30 for labor and .20 for overhead) to make a hamburger they sell for 1.05, thats a 5% profit. Lets say the minimum wage has just been increased by 10%, your labor now costs .33. Now you only make 2% profit. What do you do? You raise the price to 1.08 or 1.09 to keep the profit percentage.
And a beer in Norway is $12 euro, min wage is over $20 euro.
And a beer in Norway is $12 euro, min wage is over $20 euro.
Raising the minimum wage increases the number of people eligible for welfare because as the min wage goes up it makes more and more people closer to the bottom of the income bracket. The government has to recalculate all of its numbers and base incomes and guess what even more people are now eligible which is what they want... you know the people who want to control us... yeah they want the min wage raised, it speeds along their agenda. WAKE UP PEOPLE It does not help people make more money it makes people stay stuck on poor longer, if you come into a job making 7 dollars then the minimum wage increases but during that time you got a raise for good performance to 8.5 but now the min wage went up to 8.00 your at the bottom and all the people who were hired after you and start at the 8.00 mark well you feel frustrated because you busted you ass for that raise and they stepped right into it. And if you think the boss is going to feel bad for you and pay you more because it's unfair then you need to wake up dumbass
lam never ran a company or had to make payroll. he doesn't understand how businesses operate.
+1
food prices are higher all over the EU compared to the US because they do not subsidize their industry's anywhere near the point as that in the US because the dollar is a worthless piece of shit.
if not for government subsidy in the US the vast majority of those in the lowest 2 income quintiles couldn't afford the basic necessities with out major assistance from the gov.
