Book/Article Reviews

The Minimum Wage Increases Employment, Totes Magotes!

For real, people, it does. See this article here.

My goodness, the article I link to above is a almost a parody of ideological claptrap. It makes it sound as though only “conservative” economists think the minimum wage cause unemployment. It has a “People who hate the minimum wage” horror slide show. And then it presents a non-peer-reviewed study published a leftwing think tank as the received word of Christ.

Incidentally, here’s a peer-reviewed piece in a leading journal about why some people shouldn’t be allowed to vote.

 

  • Jerome Bigge

    It depends upon how badly the employee is needed by the employer. If the employer’s need is “marginal”, that is, adding an employee is pretty much optional one way or another, most likely the higher minimum wage might make the employer decide that the individual in question isn’t worth hiring.

  • You’d think that journalists would stop mentioning that productivity argument for a higher minimum wage — marginal productivity v. productivity and all that.

    • TheBrett

      They don’t really seem to realize that the “efficiency wage” thing only works if your wages are relatively high. Raise the minimum wage, and the new wage floor simply becomes the new normal.

  • TheBrett

    Eh, peer review in economics isn’t as impressive as it is in physics or biology.

    I honestly doubt a minimum wage level would have significant effects on unemployment at the levels we’re talking about ($10-15/hr). The $15/hr minimum wage doesn’t really seem to be increasing unemployment in Australia, or at the very least it’s being swamped by other factors. The effective $19/hr minimum wage in Denmark doesn’t seem to have greatly reduced employment either – it’s just passed on as a cost increase to customers.

    • adrianratnapala

      Well those minimum wages don’t seem to change employment because they don’t give any evidence of anything. In Oz the minimum wage has been much higher than in the US since they days when I was earning it and before. For most of that time, Australia had higher unemployment than the US.

      Is that the fault of the minimum wage? I doubt it. Is it because US was the land of rampant greedy capitalism? Probably.

      • Les Kyle Nearhood

        It certainly did add to the higher relative unemployment. Just as cities with high minimum wage in the US, like New York and DC have much more chronic unemployment than Houston and Dallas.
        .
        I have often wondered why people are willing to believe that wages magically bypass the basic laws of supply and demand. When the Min wage goes up, most of the cost is simply passed on and leads to wage based inflation, but it makes the marginally productive worker harder to employ. Thus the increase in youth and in particular minority youth unemployment.
        ,
        Did you know that back in the bad old days of overt racial discrimination, but before widespread minimum wage laws in the USA, Black youth had employment rates comparable to white youngsters.

        • Sean II

          I often like to remind people of that very thing. These days everybody is well accustomed to the idea that young black male = unemployed.

          But then you go and read about, say, Malcolm X and find out he spent his teenage years walking into and out of jobs like it was no big deal, like jobs weren’t hard to find. One of his positions – Pullman car porter – was considered quite a good one at the time.

          I’m amazed more people don’t notice this, and wonder why, what’s changed, etc.

          • genemarsh

            Self-awareness level = -5

          • Sean II

            To be fair, you deserve some credit for that Bullingdon line, which I somehow failed to noticed earlier.

          • genemarsh

            Sleeping car porter? He was a shoeshine boy and then a sandwich slinger on a train (“I couldn’t quite believe all that I’d heard and seen that night as I lugged my shoulder-strap sandwich box and that heavy five-gallon aluminum coffee pot up and down the aisles of the “Yankee Clipper” back to Boston”) during World War II: “In those wartime days such jobs as I could aspire to were going begging…I went bellowing up and down those train aisles. I sold sandwiches, coffee, candy, cake, and ice cream as fast as the railroad’s commissary department could supply them. It didn’t take me a week to learn that all you had to do was give white people a show and they’d buy anything you offered them. It was like popping your shoeshine rag. The dining car waiters and Pullman porters knew it too, and they faked their Uncle tomming to get bigger tips. We were in that world of Negroes who are both servants and psychologists, aware that white people are so obsessed with their own importance that they will pay liberally, even dearly, for the impression of being catered to and entertained.” -Malcom X

            “The theorist who starts with a false theory and then sees everything as making it come true is the most dangerous enemy of human reason.” -Chesterton

          • Sean II

            Thanks for the trivial correction, fucko. You can go away now.

        • adrianratnapala

          I should expand on my last sentence.

          Yes, I think US had lower unemployment mostly because it had more flexible labour laws. In practice that amounts to being less generous to incumbents, while making it easer for the Malcom X’s of the world. That’s the virtue of “rampant greedy capitalism”.

          But the minimum wage is only a small part of that structure, and probably makes little difference on its own. It makes close to zero difference if the wage is low enough.

          • Les Kyle Nearhood

            That is only because the amounts of the increases are usually so small they don’t even keep up with actual inflation. A few jurisdictions have now approved a pretty big jump in minimum wages. It will be instructive to see what actually happens.

        • genemarsh

          Good point. Employment levels for black teens were near 100% in right-to-work states. Old times there are not forgotten!

      • TheBrett

        That’s the point I’ve made – even if the minimum wage does increase unemployment, it’s usually swamped by other factors. It would be ludicrous to say that it increases employment, but the unemployment increasing effect is small at best.

      • Damien S.

        Australia greatly increased their minimum wage a few years ago. It’s not just that they’re higher, it’s that there was a big jump. So if there’s a big employment effect it’s a prime place to look.

    • Sol Logic

      Wouldn’t that “passing on as a cost” have a much greater effect with exports since they have to compete in a global market against countries that don’t have those costs? And wouldn’t that encourage companies that export to relocate?

      • TheBrett

        That’s only if they’re competing in an import-vulnerable industry, earning the minimum wage. Most of the jobs that earn the minimum wage now are places like restaurants and service work, which can’t be exported or outsourced to another country.

  • Sean II

    You’re wrong Brennan. Far from being “a near-parody of ideological claptrap”, that article was informative and incredibly well-timed.

    Next week, millions of us will endure hours of awkward conversation with people we would never trouble to see outside of holiday season: partially estranged family members, socially maladroit in-laws, former friends, pseudo-friends, etc.

    That article beautifully captures the level of discussion we can expect from these folks, after we’ve used up the low-hanging fruit of exchanging personal updates we already exchanged with social media…in that terrible moment when everyone realizes it’s better to talk about politics than nothing at all.

    Thanks HuffPo, for helping to make me ready for christmas!

  • Peter Boettke

    And don’t forget the implicit argument that they are making about the cumulative effects of inflation on real wages … http://www.coordinationproblem.org/2013/12/inflation-no-big-deal-until-its-a-big-deal.html

    BTW, don’t understand a lot of basic economics … from the marginal productivity theory of factor pricing (including labor) to the relationship between price floors and market clearing prices to what purpose efficiency wages actually serve in an economic system and why employers would sometimes be wiling to pay them.

    Economics as a discipline has failed the public once again with our inability to communicate basic economics to eradicate economic ignorance. Instead, we too often help in promoting that ignorance. Read the textbooks analysis of issues like rent control, minimum wage, trade protectionism, etc. by folks like Stiglitz, Krugman, etc., is doesn’t significantly deviate from what you read in Mankiw, Gwartney and Stroup, or Cowen and Tabarrok. Yet, in the hands of the journalists it appears that there is all this ambiguity about even low hanging fruit in public policy. There isn’t. There is ambiguity at refined levels of theory and remote applications to public policy — such as optimal policy response by monetary and fiscal authorities in a crisis (though there they seem to think there is an overwhelming consensus).

    • Sean II

      “Yet, in the hands of the journalists it appears that there is all this ambiguity about even low hanging fruit in public policy.”

      You mean journalists like…Paul Krugman?

      • Peter Boettke

        Yes, Sean, there are at least 2 Krugman’s — Krugman the economists who actually sounds a lot more like Mankiw than not, and Krugman the NYT journalists who sounds a lot more like a political speech writer for democratic congressman. People have posted in multiple places Krugman versus Krugman on everything from price controls to protectionism. It seems to most in the public discourse that the Krugman of the NYT is the Krugman of his scientific work. That was true of Milton Friedman (right), and it was true of JK Galbraith (left), but it is certainly NOT true of Krugman. His scientific work gave him access to public consciousness, and now he has used that to promote a lot of ideas which at a different stage of his life he actually gave reasonable arguments about the trade-offs faced. See his Peddling Prosperity book, e.g., for an excellent discussion of where journalists and policy wonks go awry with a little bit of economic knowledge (or perhaps no economic knowledge).

        • Sean II

          What he’s doing is really awful, when you think about it.

          If life were a novel or a comic book, Krugman would be that especially loathsome type of villain: starts out with a sincere desire to acquire knowledge and fight ignorance, ends up deciding that ignorance is something to be harnessed rather than fought.

          • Andrew F.

            When you put it that way… the tone of his writing does remind me a lot more of my Sunday school teachers than any economics professors I’ve had. “Now children, good folk like us all know the true merits of a single payer system. But the sad fact is the world is filled with knaves, fools, and greed…”

          • SimpleMachine88

            Honestly, I don’t mind Krugman so much. At least Krugman is a competent economist. To be fair to him, he would never have written that article. I mean, he would have said exactly the same thing, but he would have given an intelligent wrong answer.

            Any person, either with some basic level of education or some moderate level of reflection, can give you the right answer to common economic questions. And economist is simply someone who can give you the wrong answer convincingly as well.

            Reading Krugman is really frustrating for the basic disrespect for intellectual honesty and objectivity, but at it’s interesting to have to think through precisely how the argument is wrong. It’s good to have to confront intelligent wrong answers.

            Reading articles like that in HuffPo though are like sitting there watching someone eating paint chips and grinning at you. It just fills me with despair.

        • Les Kyle Nearhood

          I think that Krugman discovered about 15 years ago that he could make more money and get invited to the best parties if he just became a spokesman for a particular political camp.

          • Andrew F.

            I don’t think he does it for the money. He certainly started making more after anointing himself the spokesperson for the left’s conscious, but he could have cashed out much higher and still made it into some pretty nice parties working for a bank or a number of other options. I suspect his politics today are roughly what they were when he came out of college, and he just got tired of thinking critically about it. And the influence!

    • Les Kyle Nearhood

      Peter, this is in the journalists best interest. At the risk of sounding like a wild eyed right winger I must point out that most establishment journalists come from the left of center area of politics. Things they have a vested interest in promoting are often at odds with sound economic theory. So even if 80% of the economists are certain that minimum wages cause unemployment, it is in their interest to highlight the 20% who disagree.

    • JW

      Isn’t the ‘coordination problem’ PRECISELY why the minimum wage SHOULD be raised? I.e., that the minimum wage has nowhere NEAR the buying power it had 45 years ago, so it should keep up?

    • genemarsh

      Your neoclassical price theory is suitable for teaching Econ 101, but away from the blackboard and off campus, labor markets don’t work like commodity markets. If they did we would see what neoclassical price theory predicts. But we do not and never have.

      Between municipal, state and federal legislation we have experienced hundreds of minimum wage increases by now. Add other countries into the bargain and i’d dare say thousands of minimum wage increases. There must be hundreds of economic catastrophes for you to cite? Five or ten will do. Just name the location and the year…

      If they existed every Rotary member, talk radio host, and CNBC shill would know them all by heart; like a litany of infamous floods and hurricanes to be rattled off any time talk of doing something to reverse income inequality, improve worker safety, protect overtime pay or increase the minimum wage so much as made a stir in the malls of government where only the rich and powerful can afford to shop.

      This is important: Stigler did economics at a time before economists c/would gather and interpret empirical evidence from real life. His famous paper even admits “no precise estimate of the effects of the minimum wage upon aggregate employment is possible.” And that’s where things end for your argument. In 1946. Over thirty years before testing of these theories even got off the ground (and even then the first decade and a half’s studies were shown to have been completely marred by publication bias).

      When we learn about gravity in physics, we find out that heavy things fall at the same rate as lighter things. This goes against common sense. Until we learn that the theory on the blackboard assumes a vacuum. In the world things are different. There is wind and wind resistance, humidity and air pressure.

      I think that’s a good analogy. Embedded in the price theory are a number of false assumptions that constrain the predictive ability of that theory.

      Even Friedman said predictive accuracy is all that really matters. When empirical work finally got off the ground in the late eighties and nineties, the evidence looked nothing like what neoclassical theory had been saying for 150 years.

      In the last ten years the evidence has totally gutted it. If you’re interested in what the opposing argument actually is you should read this:

      http://www.cepr.net/documents/publications/min-wage-2013-02.pdf

      I doubt you’ll be swayed but it might encourage you to seek out the corporate-funded economists’ contemporary rebuttal to the minimum wage proponents’ arguments. Maybe it’ll get you out of College Town for stretch; see a little bit of the world.

  • genemarsh

    The U. of Chicago Initiative on Global Markets Forum, polling a panel of 50+ distinguished economists, splits right down the middle on whether a $9.00 minimum wage would make it “noticeably harder for low-skilled workers to find employment”.
    Libertarians have lost track of the continual erosion of all that big business-funded evidence that formerly vindicated their point of view. Consider the huge sample of non-catastrophic city and state minimum wage increases that have shown to have no significant disemployment effects over the last two decades.
    Of course these effects, to the degree they exist at all, are typically inflated and then sadly or hysterically announced via the suddenly and suspiciously worker-sympathetic republican or libertarian, as if they constituted a conversation-ender, as if tradeoffs weren’t a thing to be weighed, as if the cost-benefit comparison couldn’t possibly still favor the worker. As if it couldn’t favor even the prospective laid off employee who might (happily!) take her chances of getting re-hired somewhere else for the shot to earn an extra hundred dollars a week. I’ve been there. My friends and relatives are their today-this morning.
    If bleeding heart libertarians refuse to look at the evidence that says the nightmare they purportedly wish to save the worker from has little substance; if he isn’t happy to discover that this move can be rfisked, and that those on the bottom can perhaps see some small benefit, one can only conclude the b.h.l. is more interested in protecting the viability of the vision of the nightmare as a weapon for conjuring FUD in the workforce, than in his stated motivating concern for the worker’s well-being. That’s ideology. Veiled by hypocrisy. At its worst. That’s a cheap ideology that costs you nothing and shoves the costs on those you’re claiming to care about. Think of the “optics”. It’s what Gingrich does. It’s what the Chamber of Commerce does. For libertarians not to see how phoney it looks-it requires extraordinarily low levels of self-awareness. Low empathy and low-self-awareness combined with poorly performed make-believe concern leads to all kinds of self-congratulatory David Henderson-esque foolishness. The silly fellow’s inability to resist self-vaunting heroplay vis a vis the minimum wage has ruined the issue for all libertarians.
    Thought Experiment: If you knew that 99 out of 100 low wage workers would desperately like for you to get the hell out of the way of their chance at an extra 4-500 dollars a month, a chance to pay their own bills, maybe work 56 instead of 72 hours a week, would you stand clear? Would you end the pretense that you are somehow speaking on their behalf, with their best interests in mind, if you knew they were willing to face your ECON 101 worst-case scenario of having to search for another sh-t job, knowing they’ll likely need/want to move on anyway, within six or twelve months, raise or no raise?
    As long as you pridefully claim to be supporting low-skilled workers by (paradoxically) standing in their way, you come off looking about terribly insincere. So stop posturing as if you’re doing advocacy for people you have so little acquaintance with, people you have no right to speak for in the first place.
    Why not argue against the minimum wage according to your authentic beliefs about an employer’s rights to set his own wages or your possible blanket opposition to government interference of any kind.
    The amount of belief that has to be suspended for someone to take your crocodile tears for reals- the psycho-political technology- just isn’t there yet.

    • Peter Boettke

      Look at my comment — to discuss this people have to at least understand the relationship between the price floor and market clearing wage — that matters for the empirical point that is being made. Big business didn’t fund minimum wage research, the point that is being made follows from basic price theory. Why not look at Stiglitz’s discussion of price controls in his Economics and also look at the multiple margins on which employers respond to price controls that result in the case of minimum wages (that are binding that is) in a variety of forms of disemployment.

      • Andrew F.

        ‘Big business didn’t fund minimum wage research…’

        Not to begin with, but they were funding it by the time the debate started. http://www.epionline.org

    • SimpleMachine88

      Bull. Actually read that and you’ll see them saying “well if you only raise wages a little, unemployment will only go up a little”, or “not that many people are at the minimum anyway”. It’s just mumbling, not actually debating “raise prices, reduce quantity demanded”, because saying otherwise really is completely one hundred percent established as idiotic.

      All it shows you is that academic economists allow their politics to get in the way of their honesty. Everyone in economics knows the statements made by the President holding forth on the minimum wage are false, they just don’t come right out and say it.

      “Well, he kinda, sorta, maybe, like what he meant was…”. No.

      • JW

        When has encouraging a wage race to the bottom WORKED for the average laborer?

        • Eric H

          Accepting your premise, probably never, but it always works for the marginal laborer. Screw him/her, huh? However, I don’t accept your premise.

          • JW

            Without a minimum wage, what’s to keep a desperate person from offering to accept, say $5/hr, instead of $7.25 as currently required? Then someone else out-bidding him to $3/hr? Then someone else for $1? SimpleMachine88’s premise seems to be that you simply lower wages and there will be more than enough jobs to make up for the lowered earnings of the people who would have been hired anyway, but it would have been at the minimum wage rate (currently $7.25/hr). All he seems to see is the “seen and unseen” to borrow from Bastiat, of increased unemployment (still unproven, as I trust the Economic Policies Institute FAR more than libertarian-based thinktanks) in marginal workers. If you, idk, READ all the links from the Huffington Post article that the author hand-waves away, you might see that.

      • genemarsh

        If an opinion contrary to your own makes you angry, that is a sign that you are subconsciously aware of having no good reason for thinking as you do. If some one maintains that two and two are five, or that Iceland is on the equator, you feel pity rather than anger, unless you know so little of arithmetic or geography that his opinion shakes your own contrary conviction. … So whenever you find yourself getting angry about a difference of opinion, be on your guard; you will probably find, on examination, that your belief is going beyond what the evidence warrants.
        -bertrand russell

        DON’T BE A SHMUCK. CHECK THE EVIDENCE:

        http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_br0IEq5a9E77NMV

    • Damien S.

      Yeah, and investment banks bet their money on Keynesian macro, but sshhh.

  • stevenjohnson2

    Part of being a competent voter means the ability to understand and usefully debate opponents’ arguments on public policy issues. The minimum wage issue is brought up as a test case.

    First, the opponents’ case for raising minimum wage.

    If excessive wage labor costs cause unemployment, then declining wage labor costs should have increased employment, which is not the case. But, real wages have declined, while unemployment has not. (There is a contrary argument by opponents of minimum wage that the total real wage labor cost is determined by other government regulations, but this is self-refuting in the sense that you cannot simultaneously claim wage labor rates are determinative of employment and that other things are determinative.)

    The rest is the argument that redistributing income to poorer people by raising minimum wage will increase spending. The implicit argument is that rich people are, at least for the present, hoarding, retarding overall production and consumption. The arguments against this notion are pretty much the same kind of arguments proving the impossibility of a “general glut of commodities.” Bank lending is down while reserves are up. Corporations prefer stock buybacks to investment. At this point the burden of proof that there is no hoarding is really on the conservatives.

    Second, the critique of this is argument, is apparently that opposing a minimum wage increase is not necessarily “conservative.” And that the article names prominent opponents of minimum wage and increase. And that the minimum wage increasers are stupidass teenies who use moron phrases like “totes magotes.”

    Conclusion: Jason Brennan, in an amazing act of self-criticism, has proven that libertarians should not be allowed to vote.

    • Sean II

      “this is self-refuting in the sense that you cannot simultaneously claim wage labor rates are determinative of employment and that other things are determinative.”

      Let me rock your world, buddy.

      Genetics are determinative of height. Except…cutting someone in half with a machete is also determinative of height (provided you don’t cut vertically).

      Tell me Steven Johnson: did I just now prove that genetics are NOT determinative of height?

      • SimpleMachine88

        Please be careful. That statement could become a progressive agenda for cutting unemployment in half, if left lying around.

      • stevenjohnson2

        I did not notice this was phrased as a question. But since you ask, go ahead and perform your libertarian experiment in determining height non-genetically and cut your person in half. Horizontally of course. Then stand your victim of libertarianism on the standard doctors’ office scale and prove with measurement precisely how much non-genetics have determined the height.

        Better yet, don’t try this at home. I can tell you now that the “height” of a corpse is not even an issue. I do find this kind of nonsense a fine example of libertarian thinking.

        Shocking as it may seems, it is not a matter of fact that libertarian notions of economics are sane, much less correct. The real issue in the original post was the claim that it is justified to limit the franchise to competent voters, while at the very same moment displaying incomprehension or dishonesty in treating opposing views.

        • genemarsh

          If the rabble were halved, libertarians would no longer have to wait in line for amusement park rides. Though I wonder, what do libertarians do with their powdered wigs when they ride the rollercoasters?

    • M S

      A couple of things. First, what exactly do you think “hoarding” consists of? Given that you think that a corporation that pays out dividends to its stock holders is somehow hoarding something (the paper the share certificates are printed on?), I really don’t understand what definition you are working with.

      Second, a minimum wage doesn’t “redistribute income,” at least not necessarily. All it does is force managers and shareholders to pay their workers more. But if the reason managers and owners weren’t paying their workers was because they were greedy jerks and wanted to take all the profits for themselves, an increase to the minimum wage law isn’t going to make them suddenly wake up like Scrooge on Christmas morning and realize how terrible they’ve been. They’re going to keep acting like greedy jerks and make sure that any increase in labor costs comes out of someone else’s pocket before it comes out of their own. Maybe they’ll fire workers. Maybe they’ll raise prices and inflate the wage gains away. But they certainly aren’t going to cut salaries or accept a lower return on their capital.

      Personally, I don’t buy the “greedy jerks” explanation for why some people’s wages are low, at least not across the board. But to the extent that you do, why do you think an increase in the minimum wage will stop the jerks from being so greedy, especially when it has totally failed to do so in the past?

      • Les Kyle Nearhood

        Most people who go with the greedy jerk hypothesis are want to counter it with the big government theorem. Because we all know that no one in government could ever be either greedy or a jerk.

  • SimpleMachine88

    So I was going to post this on HuffPo, but then they were all like “make an account”, “have facebook”, so they no get my Wisdom. But if anyone needs a per-written post on why this argument is idiotic, here ya go

    The “economics” of this is so wrong, and if you sit down and think it through for half a minute, the reasons are obvious.

    When you pass a price floor, like a minimum wage, two things directly happen. For some workers the business is willing to keep them on the payroll at a higher wage, and for some workers the business isn’t. And similarly, as it pertains to hiring. So, directly, wages go up, and employment goes down. Those saying otherwise are just flat wrong, this is “The Law of Demand”, and if you aren’t dealing with it you’re not doing economics.

    What we study is whether the increase in wages outweighs the decrease in employment for workers, as total compensation. And remember we’re just studying whether it’s good for minimum wage workers, it’s clearly bad for the employer, and remember that increasing wages for some and unemploying others is increasing inequality.

    Now, the argument this article is trying to make, I think, is that after these direct effects, there’s a secondary effect: if the total compensation is higher, consumption and therefore employment will be higher. This is total bunk.

    Aside from it depending on total compensation increasing, which, again, is skipped over, it’s also completely ignoring decreasing surplus for the employer. And employers do consume. Whether or not worker compensation goes up, economic surplus altogether definitely goes down whenever you pass a price floor.

    And it’s ignoring increasing price of things from increasing labor costs, causing real wages to decline.

    This is all very basic economics, and like most economics is actually quite simple and obvious if you just step back and think about it for a minute. Anyone with even a rudimentary level of economic literacy will tear your article apart.

    Now we can get into more sophisticated levels of economics, like the effect on the velocity of money, but these are relatively minor effects or situational, like being below optimal output, and there are other relatively minor effects on the other side too, like the bias towards domestic consumption with higher income. But first you have to come to terms with the basics.

    It is truly disturbing how basically false statements are repeated as if they have anything to do with actual economics. I really want to be clear about this, skipping over the law of demand, or the theory of comparative advantage is at exactly the same level as those calling the theory of evolution “just a theory”. This level of willful ignorance as it pertains to public policy is absolutely unacceptable.

    And finally, the idea that the labor market is completely failing to function, which is what you’re trying to say with the difference between productivity and real wages would be quite surprising. And it isn’t, because it’s false. Labor costs have been rising in line with productivity, as any economist could predict. It is simply that more of it consists of healthcare costs (remember how you already talked about that when defending Obamacare) and compliance costs.

    “raising the minimum wage could actually hurt the working poor by making employers hesitant to hire more workers. (A notion that’s been proven wrong by some economists and remains hotly debated.)”

    False. Not only has it definitely not been proven wrong, it is completely established as true. And the Law of Demand is not a “notion”. This requires the immediate retraction of this article.

    • Les Kyle Nearhood

      You are correct because the fallacious argument that there is an overall increase in economic activity totally ignores opportunity cost. (actually most economic myths are directly due to ignoring or misunderstanding opportunity costs.)

    • Jay_Z

      Wikipedia sums up the issue better than I can:

      “Various groups have great ideological, political, financial, and emotional investments in issues surrounding minimum wage laws. For example, agencies that administer the laws have a vested interest in showing that ‘their’ laws do not create unemployment, as do labour unions, whose members’ jobs are protected by minimum wage laws. On the other side of the issue, low-wage employers such as restaurants finance the Employment Policies Institute, which has released numerous studies opposing the minimum wage.[63][64] The presence of these powerful groups and factors means that the debate on the issue is not always based on dispassionate analysis. Additionally, it is extraordinarily difficult to separate the effects of minimum wage from all the other variables that affect employment.[12]”

      • SimpleMachine88

        You are conflating two very different things.

        Price floors raise prices and cause unemployment. The costs may or may not outweigh the benefits to workers, and therefore you may or may not think that this is an advisable policy.

        But, saying there aren’t costs, that unemployment doesn’t increase at all, ignoring the basic principles of supply and demand is false, and it’s not economics.

        It isn’t at all difficult to prove the law of demand, it’s very very difficult to do empirical controlled tests of the labor market are a combination of impossible and unethical. But the law of demand is established.

        Just like how you can’t test whether removing the sun will change the direction of the earth’s movement, and yet you can be one hundred percent certain it will, and in what way. Nor do we need to talk about the weak nuclear force.

        Calculating the size of the effect is very difficult, but can be done with some accuracy. And we can get into a discussion about the magnitude of it, and the methods for establishing it, but it is definitely there. Getting into that depends on people first freaking acknowledging that.

  • Dean

    While I do appreciate and enjoy (and learn from) economic discussions regarding minimum wage, I’m always left thinking that they overlook a more fundamental point. Something that I rarely see even libertarians bring up. People should be free to enter into any voluntary contract they so desire. Especially one which clearly does not harm others. No person, or groups of people have any legitimate right to dictate any of the terms of that contract. If I want to “sell” my time to someone for $.01 an hour, I should be free to do so. End of story.
    Again, I do respect the economic arguments, but in terms of the simple principle of non-aggression, the entire idea of minimum wage is unjust. If I’m missing something here, please let me know.

    • Les Kyle Nearhood

      You are absolutely correct. And libertarians should always begin with this argument. The Liberty argument. However, in as much as many people do not agree with it. It is then necessary to also attack such laws on consequentialist grounds.

  • Joshua Chandler

    Because nothing says “liberty” like restrictions on voting rights based on bureaucrats’ judgments of who qualifies as informed

  • Eric H

    The best part of the linked article is the tacit endorsement of trickle-down theory: “These workers would take home about $35 billion in additional wages and
    they would probably spend it, as low-income people living with little
    financial cushion tend to do.” Or, in this case, trickle-sideways theory. In other contexts, I suspect this journalist and the source for the article would have a conniption over similar comments about trickling.

    In general, I would rather see fewer shackles on unions (and less compulsion, too) instead of minimum wages[1], but given the unlikelihood of that, would prefer to see:
    * a tie to inflation (quibble with CPI if you must, but given a preference for some minimum wage, a fixed min wage makes no sense)
    * a differential for experience (people should be able to bargain lower wages to gain initial experience, thus letting the air out of the differential effect on teen unemployment)

    Unfortunately, this becomes a game of wonkism, where we add 25 knobs to the policy mix in the (probably false) hope that we can precisely adjust this for total spiritual creaminess while avoiding the chewy chunks of inflation, unemployment, donor anger, and electoral failure.

    [1] Why? In part, because of the experience of Germany, where wages are relatively high, unemployment is relatively low, and there is no minimum wage. Of course, it is difficult to import a single policy out of context.