Quote :

"As if the recession hasn’t been rough enough on those near the bottom of the economic food chain, fresh bad news is on the way. Beginning July 24 (two weeks from today), the federal government will be making it more difficult for employers to hire low-skilled and unskilled American workers. Thanks to an ill-advised law enacted with bipartisan support in 2007, the cost of providing an entry-level job to individuals with few skills or minimal experience will be going up by more than 10 percent. Those who cannot find a job paying at least $7.25 an hour will not be permitted to work. Welcome to the latest chapter of America’s minimum-wage folly. Those who press for a higher minimum wage often claim that making entry-level jobs more expensive won’t reduce the number of entry-level jobs. Were the government to compel a 41 percent increase (see graph above showing the 41% increase in the minimum wage from $5.15 in 2006 to $7.25 this year) in the price of gasoline or movie tickets or steel, every rational observer would expect a drop in the demand for gasoline, movie tickets, or steel. Yet when it comes to the minimum wage, politicians and journalists somehow persuade themselves that making workers more expensive won’t reduce the demand for workers. But that’s exactly what it does. Artificial price floors - mandatory minimum prices set higher than what the market will bear - generate surpluses. Minimum-wage laws are no exception. The price floor imposed by the government on the supply of low-skilled labor results in a labor surplus, which is just another way of saying higher unemployment. The laws of supply and demand are not optional. They weren’t enacted by Congress and Congress can’t override them. Minimum-wage laws don’t make low- and unskilled Americans more productive, more experienced, or more desirable. They merely make them more expensive - and more likely, therefore, to be unemployed. It is bad enough that Congress and the president would deliberately price so many workers out of the market. What is worse is that they claim to be helping the poor when they do so (see cartoons below, both by Henry Payne of the Detroit News). "

http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2009/07/08/minimum_wage_folly/



[Edited on July 10, 2009 at 2:51 PM. Reason : .]

7/10/2009 2:50:34 PM

Someone should tell that guy that the real world is usually more complex than his EC 101 level of analysis.

7/10/2009 2:58:51 PM

Do tell

7/10/2009 3:03:08 PM

i am in Brazil that has minimum wage at about $2/hour and they have giant slums everywhere with people that actually work, not just freeloading people so it got me thinking there might be something to minimum wage laws(not saying higher minimum wage would fix slums just comparing). i have to agree with the second post the word doesn't always fit the EC 101 thinking

[Edited on July 10, 2009 at 3:14 PM. Reason : .]

7/10/2009 3:13:08 PM

I bet the H-1b Visa lobby is getting cranked up

[Edited on July 10, 2009 at 3:19 PM. Reason : maybe this will increase the price of a Big mac and offset the obesity epidemic?]

7/10/2009 3:15:45 PM

Where is his data? He sites some speculative studies (and the people who speculated 6 months ago on how things were going to be were completely wrong), but doesn't look at the past trends (even though he noted a specific past incident).



This chart doesn't compare this to the overall job market trend (that shows younger people less likely to seek out jobs, as well as an overall decline in available jobs across all levels), but there is not a significant reduction in minimum wage employment across the "41% hike" he notes over the same time span. The fact is that there are other forces at work that are clearly much more influential than simple job market supply/demand.

The article lacks any real facts or evidence, and comes of, to me, as pedantic economic drivel.

7/10/2009 3:17:13 PM

If you do not agree with the economic theory (which has been empirically tested), please explain why it does not apply.

7/10/2009 3:19:08 PM

^^ because the bulk of the increase does not show up in the data you posted



[Edited on July 10, 2009 at 3:22 PM. Reason : .]

7/10/2009 3:22:05 PM

What outcomes exist other than:

1. hiring less people
2. charging more
3. making less profit (and therefore lowering incentive to operate the venture in the first place)

It seems to me that increasing min wage will cause price increases in the very products that disproportionately affect lower wage earners the most, effectively wiping out much the benefit of the increase in the first place....Aka what good is it to make an extra 30 bucks a week, if it takes $30 more to feed your family that week?

7/10/2009 3:22:54 PM

i think he did.

Quote :

"The fact is that there are other forces at work that are clearly much more influential than simple job market supply/demand."

7/10/2009 3:27:13 PM

^^^ uhh... that graph merely shows the minimum wage level. Not the theorized plummeting of jobs that would result from raising the minimum wage.

And calling economic theory "empirically tested" is a bit of a stretch, especially considering recent circumstances.

You're saying that B must follow A because that's how it is, and i'm showing you that B didn't follow A when A happened. You are trying to impose a very generalized theory of economics on to a situation where it doesn't make sense to do so.

[Edited on July 10, 2009 at 3:27 PM. Reason : ]

7/10/2009 3:27:45 PM

^ By "empirically tested," I am referring to the overall effects of minimum wage laws. (e.g. see: http://www.nber.org/papers/w10656) I did not mean to imply the recent hikes have been empirically tested. Given what we know (again, not just theoretically, but also empirically) the recent hikes are very, very likely to have adverse effects on teenage unemployment. If you disagree, I am interested to hear your reasoning.

Simply stating that the argument does not hold water because it is based on theory is not useful. With that reasoning, you can argue that raising milk prices will not lead to a decrease in demand because the basis for such reasoning rests on economic theory. This is why I brought up empirical analysis.

[Edited on July 10, 2009 at 3:57 PM. Reason : .]

7/10/2009 3:52:23 PM

^ i'm not saying it doesn't hold water because it's "based in theory" (whatever that means), i'm saying it doesn't hold water, because in the cited past instance of the wage hike, there was no clear causal pathway with reduced minimum wage jobs.

And that paper you posted has absolutely nothing to do with the theory of supply and demand in the wage market. ha...

Quote :

"Abstract Building upon a continuous-time model of search with Nash bargaining in a stationary environment, we analyze the effect of changes in minimum wages on labor market outcomes and welfare.While minimum wage increases may or may not lead to increases in unemployment in our model, they can be welfare-improving to labor market participants on both the supply and demand sides of the labor market. Key determinants of the welfare impact of a minimum wage increase is the Nash bargaining power parameter and the matching function. We discuss identification of this model using Current Population Survey data on accepted wages and unemployment durations, and demonstrate that the bargaining power parameter is not identified when the distribution of match values belongs to a location-scale family. By incorporating a limited amount of information from the demand side of the market, we are able to obtain credible and precise estimates of all primitive parameters, including bargaining power and estimable parameters characterizing the matching function. We show that an efficient level of the minimum wage in September 1996 would have been approximately twice its then current level of $4.25. When we allow for endogenous contact rates, the efficient minimum wage would have been $3.36. However, we find no empirical evidence to support the hypothesis that contact rates were impacted by minimum wage changes observed over this period, casting some doubt on the advisability of reductions in the minimum wage."

http://www.nyu.edu/econ/user/flinnc/papers/mw-flinn.pdf

[Edited on July 10, 2009 at 4:54 PM. Reason : ]

7/10/2009 4:48:05 PM

I think its dumb to raise the minimum wage. If you can't find a job for more than $6/hr than your probably deserve that amount of pay.

Also, a lot of jobs that pay minimum wage are those in which the employee receives the majority of their income through tips (i.e car washes)

7/10/2009 5:01:44 PM

Quote :

"^^ because the bulk of the increase does not show up in the data you posted"

And you didn't show the 10 years prior to the increase where it didn't go up at all.

7/10/2009 5:03:54 PM

^^^

Quote :

"^ i'm not saying it doesn't hold water because it's "based in theory" (whatever that means), i'm saying it doesn't hold water, because in the cited past instance of the wage hike, there was no clear causal pathway with reduced minimum wage jobs."

A third of the 41% hike occurred last week, so the impact will obviously not be in the data. Secondly, your analysis of just looking at aggregate employment numbers across time is too imprecise to form conclusions either way.

I'm curious to hear why you think the classic economic argument against minimum wage laws does not hold in the real world.

7/10/2009 6:18:09 PM

Minimum wage effects in the "real world"

Quote :

" ALBEMARLE, N.C. — Minimum wage is set to rise in North Carolina next month but the effects are already being felt at summer camps around the state. The wage hike’s strain on some already tight budgets could mean fewer counselors to look after the children. “It is harder when there are less counselors to get things done,” said Toni Watson, a college student and third-year counselor at the Stanly County Family YMCA. “It’s a lot easier when there are more of us to help with the kids.” In the past year and a half, minimum wage in North Carolina has increased by $1.10, from $6.15 in January 2007 to $7.25 in July 2009. Following that increase, North Carolina will have the 13th highest minimum wage standard in the country. Some camps have already cut field trips to save money. “We just find fun activities for them to do to keep them involved and hopefully they have a good summer,” Watson said. And now they must try to get by with fewer counselors."

http://www.news14.com/content/local_news/charlotte/610713/minimum-wage-hike-could-mean-fewer-summer-counselors/Default.aspx

[Edited on July 10, 2009 at 6:43 PM. Reason : ,]

7/10/2009 6:41:46 PM

Quote :

"Following that increase, North Carolina will have the 13th highest minimum wage standard in the country."

along with 37 other states

7/10/2009 6:58:20 PM

I just wanted an excuse to post this:

http://vids.myspace.com/index.cfm?fuseaction=vids.individual&videoid=18358311

Someone plz2embedkthxbye.

7/10/2009 8:04:47 PM

so if there was no minimum wage and the camp thought it would be a good idea to pay the camp counselors 3 dollars and hour what would happen?

the people who would be camp couselors would go looking for jobs that payed 6 dollars ( already not a living wage by any means unless you live with your parents) an hour and the only people applying for the camp jobs would be people who wanted to fuck kids.

gg

7/10/2009 11:19:43 PM

nvrmd

[Edited on July 11, 2009 at 9:56 AM. Reason : -]

7/11/2009 9:52:57 AM

^^ If minimum wage did not exist, companies would not be able to pay anything they wanted just as they are not able to charge any price they want for their products. In your example, if the company only paid $3, few counselors would be willing to work at that wage and the camp would not be able to retain a sufficient number of counselors. Therefore, they would have to raise their wage until they can attract their desired number of counselors.

For those who do not believe minimum wage laws affect the demand for labor and thus unemployment, is it fair to say you would not oppose increasing the minimum wage to $40, since doing so has no affect on employment?

[Edited on July 11, 2009 at 10:02 AM. Reason : .]

7/11/2009 9:56:52 AM

Why not let the market decide what a job is worth instead of some politician trying to gain favor with labor unions?

Smart employers will lay off those workers who aren't worth the new minimum. People will always continue to pursue their own self-interests-even in a totalitarian state.

7/11/2009 10:05:43 AM

the market still decides what a job is worth.

the minimum wage in NYC is 7.25 I believe. I have yet to come across a job that pays that much, even mcdonalds pays more than that.

also Hunt you're arguement is silly.

7/11/2009 10:15:42 AM

Quote :

"the market still decides what a job is worth."

You're just pointing that the jobs that are worth over $7.25 are still around.

What about the jobs that are only worth $4 or $5 an hour to some employer. Gov't has forbidden those jobs and denied employment to the people who would take those jobs.

7/11/2009 10:29:14 AM

the only people who would take those jobs are illegals and you know it.

but i guess if employers want to save a few bucks and the American public wants more illegals and ex-cons handling their fast food than go for it. Not that this isnt already the case.

7/11/2009 10:34:25 AM

Quote :

"so if there was no minimum wage and the camp thought it would be a good idea to pay the camp counselors 3 dollars and hour what would happen? the people who would be camp couselors would go looking for jobs that payed 6 dollars ( already not a living wage by any means unless you live with your parents) an hour and the only people applying for the camp jobs would be people who wanted to fuck kids. gg"

Camp councilors already make $3/hour worked at stay-over camps.

Day camp councilors should technically be making minimum wage or over... provided they're 14 or over which is the minimum age for non-farm work. However, if I recall from my own memory, I worked at a day camp for $10/day at the very moment I was turning 14.

There are other factors that make this different from ideal-world. Stay over campus don't require a car, increasing their availability to young kids who can't convince their parents to shuttle them back and fourth to the skating rink. And though these expenses are less for that age, a stay over camp does eliminate living expenses - another selling point.

You could pay $1 per hour and there would still be kids doing it, provided all of the other options collapsed. Camp councilors are often found amongst the pool of previous campers anyway. They're also not well educated in other options available. This is a textbook case of a thin market. There was very little effort put into finding perfect matches between employees and employers.

Most young workers could find a better wage with reasonable effort. But they're the least likely to do it because the job simply isn't very important in the grand scheme of their life. Competition plays a much less important role for them than you're giving it credit for.

7/11/2009 11:04:09 AM

Quote :

"If minimum wage did not exist, companies would not be able to pay anything they wanted just as they are not able to charge any price they want for their products."

Given the current recession and unemployment; argubly companies would be more capable to do such.

I feel in the grey area about minimum wage. I think the status quo is sufficient and disagree with the increase in min wage
given the current economic conditions.

Quote :

"Why not let the market decide what a job is worth instead of some politician trying to gain favor with labor unions? "

Arguebly min wage laws, other heartfelt liberal labor regualations, and modern worker safety protections make unions
obsolete. In all liklihood positions effected by this minimum wage increase are not unionized.

You obviously have not been around any unions or heard of the payrate of union employees but let me assure you they are paid way
more than what their market labor is worth. Hence why auto manufacturing jobs for foreign companies like toyota and bmw
are flourishing in the south; yet GM and the mid west are rusting.

Another reason I do not want to see the minimum wage floor removed is that I could see many more people
"being like fuck $4/hr" i'd rather just go collect my welfare check. With the current "welfare state" and expanding
social programs thanks to Pelosi and friends if market wages fell without a minimum wage the free-loader effect would
intensify. The issue is bad enough as it is. A woman my mom knows refuses to get a job even though her 3 kids have progressed
to maturity b.c she would lose her welfare and food stamp monies.

Quote :

"Camp councilors already make $3/hour worked at stay-over camps."

Quote :

"This is a textbook case of a thin market. There was very little effort put into finding perfect matches between employees and employers."

my girlfriend during high school used to work at some jew camp (she's not jewish but there were little job options in the
hamptons that did not have to deal with snooty obnoxious rich people) and they frequently tried to squeeze extra labor hours
out of the teenage/young adule camp counselors while only paying them for the "official" hours the kids were there.

7/11/2009 12:19:17 PM

Quote :

"the only people who would take those jobs are illegals and you know it."

ahahahahahahaHAHAHAHAHAHAHAH!

7/11/2009 12:19:19 PM

Quote :

"Most young workers could find a better wage with reasonable effort. But they're the least likely to do it because the job simply isn't very important in the grand scheme of their life. Competition plays a much less important role for them than you're giving it credit for."

I beg to differ. This is purely anecdotal, but I recall knowing what all my friends were making at other jobs and thus knew what most employers were willing to pay. If it turned out my employer was paying far less, I would either go elsewhere or bargain for higher pay.

[Edited on July 11, 2009 at 12:25 PM. Reason : .]

7/11/2009 12:24:37 PM

Quote :

"Another reason I do not want to see the minimum wage floor removed is that I could see many more people "being like fuck $4/hr" i'd rather just go collect my welfare check"

A solution would be the earned income tax credit (EITC).

7/11/2009 12:28:47 PM

^^ Different people are going to have different propensities to demand a higher wage or go out looking for one. But the relevant question to ask for this discussion is: "are you more or less likely to do so now"

There can be extra good communication between ppl in that age range, so I see your point there. But as an older individual needing the wages to sustain yourself, you are much more motivated to ask around and figure out what the market could be providing you with, and you haven't forgotten the lessons you learned while young either.

Outlook on work varies a great deal by person. But your point isn't solid if you just make that case that young people do seek out better wages, because you don't give that example the yardstick of a similar older individual.

7/11/2009 12:36:11 PM

I could make more money panhandling than working some 4 dollar an hour job.

7/11/2009 4:03:46 PM

Quote :

"You obviously have not been around any unions or heard of the payrate of union employees "

Many Union contracts are tied to minimum wage levels. When the Min. wage goes up, automatic wage increases kick in for Union members. That is why liberal politicians want to keep raising the min. wage..because it garners support from unions.

Highly skilled people get more than the min. wage because employers are competing for them. Poorly educated or inexperienced workers don't get hired because min. wage laws make it too expensive to train them. A truly Fair wage rate is the one agreed upon between worker and employer... not dictated by Nancy Pelosi and Harry Reid.

7/11/2009 11:07:51 PM

For people who don't mind reading peer-reviewed economics papers, the primary researchers who have argued empirically that increases in minimum wage increase employment are David Card and Alan Krueger. Their most famous study on the issue used a difference in differences approach to compare employment outcomes in the fast food sector in New Jersey, where min wage had been increased at the state level, and in comparable areas of adjacent Pennsylvania. They have since done similar studies in different industries, states and time periods, and found similar results that there is generally a positive association between increases in minimum wage and employment in low-paying job sectors.

A copy of the original NJ-PA paper is available here: http://emlab.berkeley.edu/~card/papers/njmin-aer.pdf

The primary critic of Card and Kreuger's work has been David Neumark, although certainly many other economists have also vocally opposed their findings. One direct response from Neumark used actual payroll data from some of the restaurants examined in Card and Krueger's paper (which used data from the Bureau of Labor Statistics) and found an opposite effect (http://ideas.repec.org/p/nbr/nberwo/5224.html). The war has been waging ever since, with each side doing meta-analyses of the literature and then criticizing each other's meta-analyses.

7/11/2009 11:42:09 PM

Quote :

"That is why liberal politicians want to keep raising the min. wage..because it garners support from unions."

I do not doubt liberal politicians want to increase minimum wages for bullshit false fallacy reasons but just as an effort to "gain union support" i find doubtful for the whole; although this could be true for a minority of the supporters.

7/12/2009 2:58:35 AM

^^ I have seen a multitude of studies going both ways, but for what it is worth (which, admittedly, is not much), the overwhelming majority of economists conclude minimum wage is distortionary. As an undergrad, on of my econ professors mentioned that proponents of min wage tend to cherry pick data (which is likely the case with Card/Krueger. See: http://www.econ.jhu.edu/People/Barnow/neumarmw.pdf).

Even if we are entirely uncertain, the most prudent thing to do is to urge on the side of caution and go with a less distortionary earned income tax credit rather than risk the potential of higher unemployment that results from minimum wage laws.

[Edited on July 12, 2009 at 8:13 AM. Reason : .]

7/12/2009 8:11:22 AM

You folks DO realize min wage is just being adjusted for inflation? Relative to inflation, it's the same pay as when it was increased to 5.15 in '96. The value of these jobs hasn't changed, nor the standard of living. Only the value of the dollar.

7/12/2009 11:02:08 AM

^ All that means is that the effects of minimum wage were only less distortionary during periods in which the inflation-adjusted minimum wage declined. (assuming the minimum wage remained above equilibrium throughout)

[Edited on July 12, 2009 at 11:14 AM. Reason : ,]

7/12/2009 11:12:21 AM

..what?

7/13/2009 9:52:48 AM

It never fails to amuse me when people try to make arguments about how something like the minimum wage actually hurts workers. The two sides of this issue are workers want to be paid more and employers want to pay them less.

7/13/2009 9:58:13 AM

Quote :

"The two sides of this issue are... "

THANKS FOR CLEARING THAT UP FOR US (**cough cough either-or-fallacy cough**)

7/13/2009 10:45:30 AM

I'm not creating an either or fallacy. There are lots of issues and side effects that may or may not be captured in this thread. However, the political reality is that there are those two positions. Every other argument is just a smoke screen.

7/13/2009 12:31:45 PM

Quote :

"^ All that means is that the effects of minimum wage were only less distortionary during periods in which the inflation-adjusted minimum wage declined. (assuming the minimum wage remained above equilibrium throughout)"

He's assuming that minimum wage screws things up when it's higher than what the market would otherwise pay for burger flippers. Then he's assuming that minimum wage IS and HAS BEEN higher than the natural pay rate for those lines of work.

Then his bottom line is that minimum wage slowly starts to screw things up less as it stays the same and inflation effectively decreases the value. Why? Because the lower minimum wage the better (always), and higher minimum wages DISTORTIONATE teh markets! Rarr!

Quote :

"It never fails to amuse me when people try to make arguments about how something like the minimum wage actually hurts workers. The two sides of this issue are workers want to be paid more and employers want to pay them less."

Why does it amaze you that someone would claim something in line with textbook economics? I'm not going to argue with your contrary position (it's possible you can defend it well), but your arrogance towards people who believe a well established status-quo position is completely unwarranted.

Surely you don't hold this attitude towards everyone who believes that "the minimum wage actually hurts workers". Maybe you should vent your angst with a blanket statement that anyone who makes any argument here is an uninformed dimwit. Be sure to include yourself.

7/13/2009 1:01:44 PM

Quote :

"Why not let the market decide what a job is worth instead of some politician trying to gain favor with labor unions? "

yes, the powerful camp counselor and fast food unions. do you live in an Ayn Rand book?

7/13/2009 1:46:49 PM

Quote :

"It never fails to amuse me when people try to make arguments about how something like the minimum wage actually hurts workers. The two sides of this issue are workers want to be paid more and employers want to pay them less."

It might not hurt workers that keep their jobs, but it will increase unemployment. When a company has to pay someone twice the market value of their labor, what do you think will happen? Will they hire just as many people as they would have without minimum wage laws? The unskilled workers are the ones that really end up getting hurt from this, because they're much less likely to actually get hired in the first place.

7/13/2009 2:21:53 PM

Quote :

"When a company has to pay someone twice the market value of their labor, what do you think will happen?"

Folks feel more wealthy, thus spending more, thus creating more money velocity, creating more profits for companies, so that they can pay more to their workers?

7/13/2009 2:43:28 PM

Quote :

"Why does it amaze you that someone would claim something in line with textbook economics? I'm not going to argue with your contrary position (it's possible you can defend it well), but your arrogance towards people who believe a well established status-quo position is completely unwarranted."

It doesn't amaze me, it amuses me. I don't deny that minimum wage increases unemployment. What I deny is the implication that we would be better off without the minimum wage. Economic theory is one thing, but realities of politics and public policy are another.

All I'm saying is that arguing against the minimum wage by saying it hurts workers is a political smoke screen.

[Edited on July 13, 2009 at 2:49 PM. Reason : ?]

7/13/2009 2:48:16 PM

Quote :

"Folks feel more wealthy, thus spending more, thus creating more money velocity, creating more profits for companies, so that they can pay more to their workers?"

That's pretty optimistic. Either way, it means that businesses are going to be able buy less labor with the same amount of money.

7/13/2009 4:05:34 PM

Quote :

"He's assuming that minimum wage screws things up when it's higher than what the market would otherwise pay for burger flippers. Then he's assuming that minimum wage IS and HAS BEEN higher than the natural pay rate for those lines of work. Then his bottom line is that minimum wage slowly starts to screw things up less as it stays the same and inflation effectively decreases the value. Why? Because the lower minimum wage the better (always), and higher minimum wages DISTORTIONATE teh markets! Rarr!"

No, lower is not always better. In labor markets where minimum wage creates a floor, yes, lower would be better - until you reach equilibrium. Keeping the wage above equilibrium creates an artificially low demand for labor (i.e. unemployment). Whether the minimum wage is distortionary depends on where equilibrium is, which would depend on the labor market in question (e.g. burger flippers, retail salespersons, ect).

For those proponents of minimum wage, why do you favor it over an EITC?

[Edited on July 13, 2009 at 4:24 PM. Reason : .]

7/13/2009 4:22:44 PM