The real minimum wage in dollar terms is zero. Everything else is determined by the market participants. If you place the limit for certain jobs above what the employers are willing to pay, they’ll hire fewer people - hence, more unemployment. It’s really quite obvious, you don’t need any studies to know it.
It’s especially true in case of young and unskilled workers and various ethnical and religious minorities. Thomas Sowell points out that prior to 1950s unemployment of black laborers wasn’t higher than that of whites despite well-known prejudice and lack of the anti-discrimination laws. Most employers simply couldn’t afford turning away qualified blacks as this would mean holding a job position unfilled for longer and incurring more losses as a result. However, when they started to jack up minimum wage in late 1940s black unemployment started to rise since now it didn’t cost anything to employers to discriminate against minorities. Government “help” only makes the situation worse for the recipients of such “generosity”.
Since the retail industry has ballooned due to the credit expansion policy it’s stupid to use the retail industry as the base industry to find a coorelation of un-employment.
America’s top industry is retail right now, this is directly because of our monetary policy. We encourage people to buy crap rather then save money. With walmart up in the fortune 500 list and other retail shops pulling in big numbers why would you use that sector as your basis to find un-employment?
Ceteris paribus, it is impossible for a raise in price to increase demand. One of the uses of economic reasoning is to enable us to perceive whether or not any of the given possible explanations for historical facts is plausible or possible. Employment can increase simultaneously with raises in minimum wage, but it is untenable to attribute this rise to an increase in minimum wage. Such an increase must lower the demand for wage-labor, to the extent it does anything whatsoever. Whether other effects increase demand is another question altogether.
Clearly wrong, as shown by the evidence into poverty reduction effects from the minimum wage (plus those employment gains you cannot reject, given both theory and empirical evidence supports it existence)
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It’s really quite obvious, you don’t need any studies to know it.
Actually the only way that you can use supply and demand to support your position is by making two ludicrous assumptions. First, you have to assume zero job search frictions (and therefore no monopsony). Second, you have to assume that the employment of labour involves a purely technical relationship (thus ending all issues of efficiency wages). Quite ludicrous of course!
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…it didn’t cost anything to employers to discriminate against minorities
You’re on a loser with this one too. For example, the biggest aspect of discrimination applicable to the minimum wage is gender orientated. And guess what? The minimum wage is found to reduce inefficient gender wage differentials.
Since the retail industry has ballooned due to the credit expansion policy it’s stupid to use the retail industry as the base industry to find a coorelation of un-employment.
You’ve already been educated in the explanation of focusing on the retail industry: the high % of minimum wage workers should maximise the chances of finding any significant effects. Concerns over credit expansion are nonsense, given the panel technique controls for these sort of time variant factors. You’ve already been told that, so no excuses for peddling more mistakes!
You’re still running full pelt from content. Perhaps you’d like to offer a critique of either the monopsony or efficiency wage explanations for the ‘positive employment’ finding?
Still no content? Perhaps you’d like to refer to the work by Burdett and Mortensen (1998, Wage differentials, employer size, and unemployment. International Economic Review)? Here, we only have to acknowledge that workers are heterogeneous with regards their opportunity costs of employment (i.e. value leisure differently) for the minimum wage to raise employment
The study doesn’t claim it’s dealing with a monopsony, does it? It just throws it out there at the end. It doesn’t seem like a plausible explanation, and they make no attempt to argue it.
As for efficiency wages, how does that lead to higher employment from a minimum wage? I’m asking because I’m not familiar with the theoretical argument (I know what efficiency wages are)
I’m going to respond despite my fear of sounding ignorant as I don’t know if I understood one word of what you just said.
Are you trying to say the balooon in the retail industry and our now consumer based economy has nothing to do with credit expansion?
Also minimum wage laws are used by various large business’s to disrupt and stifle less effecient competition. They gain political support by the people for their compassion and eradicate marginal competition. It is competition however that wuold have survived and offered an economic alternative had the governments hand of force not intervened in the first place. Larger businss’s lobby for things which promote them and hinder competition.
Some retail shops, like walmart, will encourage minimum wage laws to rise. This will hurt less effecient competitors and further create a monopoly like condition that would not exist without the brute force of the state.
My point is if your looking for a coorelation between minimum wage laws and employment why would you use a ballooned industry? It immediately discredits your proof. It was ballooned just like the real-estate market, what did you expect to find? The statistics are erroneous when the industry has been effected by an entirely different economic phenomina, such as a business cycle
My understanding is that the study attempted to control for the business cycle by using the unemployment rate, but isn’t this a crude measure? The problem is whether the control variables are good enough to rule out other explanations. Without a good theoretical explanation – and the authors defer to others for this – then it’s not very convincing, especially when you’ve got a small effect.
Ceteris paribus, it is impossible for a raise in price to increase demand.
Only in a case of a good. The labour market is quite different, given monopsony and efficiency wage criteria. The former in forms us that the profit motive will lead to a result where employment is deliberately (and inefficiently) restricted. The latter tells us that a wage increase does not necessarily translate into an unit labour cost increase.
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One of the uses of economic reasoning is to enable us to perceive whether or not any of the given possible explanations for historical facts is plausible or possible.
The use of monopsony and efficiency wages reflects the inability of the naive supply & demand approach to understand empirical phenomena
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Employment can increase simultaneously with raises in minimum wage, but it is untenable to attribute this rise to an increase in minimum wage.
This is nonsense. The paper controls for other variables that impact on employment. It isolates the minimum wage effect and supports the labour theory
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Such an increase must lower the demand for wage-labor, to the extent it does anything whatsoever.
A reduction in labour demand is reliant on those two unrealistic assumptions: (1) zero labour market frictions, (2) a purely technical relationship where human beings are understood in the same terms as inanimate objects
Things don’t randomly happen, there is a reason. Just because y ou’ve used a mathamatical approach with limited variables which forces your scope of view down doesn’t mean your going to discover the reason of the phenomena. If you open your scope up wide again the causes of these phenomena’s become apparent again as other factors play a roll. It’s impossible to isolate a true replicatory model in a single industry. It’s almost quiet impossible to replicate the eocnomic model of the life of a single man. The whole study is fallacious, it’s like a bull rider trying to analyze why he can’t stay on the bull. The whole thing is much bigger then your very isolated study which does not and can not account for all variables.
No, all it proved is that the retail industry ballooned just like the real-estate industry. As it ballooned demand for labor increased in those industries, even as the minimum wage was raised they were able to eat that expense as that particular industry was in high demand by consumers. Your scope again is too narrow and does not take into account external variables. You have effectively made all other economic phenomona, such as business cycles, an externalities.
Right and since labor is a good we are in agreement. Follow the logic. If the minimum wage was $100 an hour would we have an unemployment problem or not? Only those individuals whos economic value is worth that rate will retain their job, the rest will be fired.