how many stoplights?

boo-fucking-hoo. Your kids are not entitled to live in Williamsburg.

heh

I think I'm about to become part of the problem!

only five, but the remaining 20 minutes of highway driving... it's tough to see well enough through the watery eyes, doug

So my sister in law owns a business, had a new house built 3 years ago, and generally is doing okay financially, but up and decided to have a (third) kid while on public health medicaid... even though she could afford insurance.


One of her employees just stole a bunch of stuff from her house and I feel pretty happy about it.

*former employees

amirite?

Yeah, but on the plus side, not only did he steal a deposit from her work place, he stole cash from her home.

from a Job Creator/ Mother of 3?!!

i blame chick-fil-a

If the government had done less to prop up housing prices, those young people might've been able to afford nicer homes. Of course there would have been other consequences...

It's not wrong so much as it's incomplete. I'm no consensus monger, but to the extent one is swayed by such things, the consensus is pretty much unequivocal: minimum wages induce unemployment amongst those for whom the policy is most intended. (This link used to be instructive, but it's dead now. Luckily someone captured its contents.) I'm not sure how Baker concludes that the literature has concluded that minimum wages have "no impact on employment." He strikes me as being entirely unacquainted with the literature. But even if that were the empirical reality, it doesn't change the underlying reality: you can't - and don't - get something for nothing. There is no such thing as a free lunch.

Essentially, for price and wage floors to have any impact at all, the price and wage levels imposed thereby must be above the prevailing market-clearing prices and wages. A price floor set below market prices is ineffective (really, what exactly would a mandate that Mercedes sell the CLS class at at least $1250 accomplish?), and a price floor that coincides with market rates is redundant. Thus, it seems reasonable to conclude that ("effective") minimum wages establish wages above that which would prevail absent their imposition. For businesses that employ low-skill, low-wage labor, this represents an increase in direct costs (and, to the extent such businesses provide goods that are used as inputs in the production of other noncompeting goods, it represents for those firms an increase in indirect costs). The relevant question: how do employers respond to increases in such costs?

Unless one wants to make the argument that businesses and entrepreneurs systematically internalize these costs and pay for them out of net profits (which seems entirely illogical: were they so altruistically inclined, they would have been paying higher wages - relative to prevailing wages - in the first place), employers respond to the cost increase so as to maintain existing profit margins one of any number of ways: cutting costs via un- or under-employing any particular subset of employees, increasing output prices, or some combination thereof. In short, employers will always seek to externalize cost increases, and the respective supply and demand elasticities of input and output markets significantly influence post-minimum wage imposition employment and pricing decisions. But low-skilled labor isn't homogenous. That is, it's not the case that all workers possess the same skills and attributes, and to the extent an employer decides to un- or under-employ a certain portion of his workforce, it will be those workers they deem least likely to contribute to firm profitability that will be sacrificed so that those workers they deem most likely to contribute to firm profitability be rewarded with the higher minimum wage. Hence, the higher-skilled benefit at the cost of the lower-skilled. I'll avoid analysis of what happens when firms simply raise prices or decide to mechanize or reduce demand for some other input(s) or employ some other means of cost externalizing. Suffice to say, the above dynamic - the less-capable subsidizing the more-capable - characterizes each of the foregoing methods. I don't find this to be particularly just, and usually find that folks who advocate for such price and wage controls simply don't reason their way through the ultimate economic consequences of such measures.

This is the main argument against minimum wages, though there exist additional relevant criticisms: it enables discrimination by allowing employers with tastes for discrimination to discriminate costlessly, it increases barriers to entry and is used by existing firms as a means to increase market and pricing power, and it inhibits economic development by inducing prospective employers to locate where labor costs are lower. Price and wage controls are nearly universally terrible policies (there is a more subtle - and reasonable - argument for minimum wages in the context of monopsony, but because its generalizability is obviously constrained, I'll ignore it for now), and it reads to me like Dean Baker thinks he can get something for nothing. Which means he isn't worth listening to.

I generally agree, but I don't understand this line: "it enables discrimination by allowing employers with tastes for discrimination to discriminate costlessly,"

Isn't there the cost of increased wages from the minimum wage?

I only had time to give that a quick read, but the premise of that piece was that now you can only spend your 100 dollars on 10 people instead of 20. But that makes the assumption that the person was going to spend 100 dollars on wages, which is groundless. They may. They may not.


Just because you can prove that something is logically possible doesn't mean it is true (in the sense that it exists). You provided an internally consistent theoretical argument for what might happen. Counter theories exist that are also internally consistent. But since you claim in so many other places to be hostile to abstract economics I would like to know what HAS happened? Min wages exist. They go up. We can check this. Can you reject what Baker says on empirical grounds?



It is entirely possible that theoretical job losses could occur. But the better question is whether or not unemployment goes up/down in places where the min. wage is instituted. And even if it goes down, the costs might be offset by the increased quality of life in the people who have jobs. Are potential job losses in some places replaced by job growth in other places because of increased demand? What HAS happened?

there is a link to a study in this piece here that looks at DC, Santa Fe, and San Franscio after they raised a min wage and found no real impact on unemployment.

Not really.

Suppose you have two workers of equal skill, one white and one black, and one employer with a preference for white workers. Say the skill set of each worker is such that they should command a wage of $10.00/hr. Knowing the employer's preference for white employees, the black worker can nonetheless attempt to compete for employment by offering his services at a discount (say, $9.50/hr). The employer now has a choice: indulge his taste for discrimination and forego the $0.50/hr premium associated with employing an equally-skilled black man and face the prospect of a competitor taking advantage of the opportunity afforded by the black employee's willingness to compete in the labor market by reducing his reservation wage. Now, the employer very well may choose the former course. But in so doing, he is ceding contemporaneous profit opportunities and the accepting the longer-run likelihood of being outcompeted on account of competitors enjoying lower input costs (which, assuming output markets are sufficiently competitive, will be reflected in lower output prices). The discriminatory employer thus pays a very real, ongoing price for indulging in non-merit based discrimination.

Now, say there is imposed a minimum wage of $10.00/hr. Such an imposition removes the ability of the equally-skilled black man to compete for employment based on price. That is, it is now illegal for anyone to employ him at $9.50/hr. If the discriminatory employer must pay one of the two men $10.00/hr, he will of course choose to employ the white prospect. He is thus able to indulge his taste for discrimination and not forced to forego the $0.50/hr premium. More importantly, none of his competitors are able to take advantage of his short-sighted willingness to discriminate, and the potential advantage associated with the reduction in operating costs associated with employing the black man at $9.50/hr no longer exists.

The employer pays $10.00/hr for labor regardless of whether the minimum wage exists. But such a decision is not costless in a context where he has the option of accepting a premium for employing a black employee, and, should he decide to pass on accepting such a premium, would confront competitors who are able to leverage the opportunity into a competitive advantage.

Right. Companies offshore jobs because? We have to allow illegals to work at labor rates below the prevailing minimum wage because? Minimum wages do not hinder employment? Great. Why'd they stop at the point where they stopped at?

I don't quite know what you're trying to say here.


Of course. The issue isn't that there are competing theories; it's that the merits of each aren't equal. I'm not convinced by either theoretical or empirical arguments that claim the minimum wage doesn't ultimately impose some type of costs on the most vulnerable of subsets of laborers.


Most of my hostility is leveled at macroeconomists. Microeconomists and empiricists, on the whole, do much more valuable and tractable work.

Yes, I can reject what Baker says on empirical grounds based on consensus of the existing state of the literature, the contexts in which he chooses to concentrate his analysis, and the precise methodologies he employs. I quite literally have no idea how he draws the conclusion that there is no consensus on the disemployment effects of minimum wages. This is the most recent survey/meta-analysis of the effects of minimum wage legislation I could find. The link I provided in the previous posts documents 50 years of research on the topic, and an overwhelming conclusion emerges. Visit Google Scholar and type in "minimum wage" and read whatever suits your fancy. The majority of studies that claim to have found no negative - and even positive - effects associated with the imposition of the minimum wage are set in the context of major metropolitan areas where prevailing wages exceed minimum wages. On account of the cost of living (among other things), prevailing wage rates in New York, Boston, DC, San Francisco are generally higher than that which characterizes the minimum wage. So for the same reason that increasing a price floor on the price of BMWs from $2500 to $2750 would produce ambiguous - or even positive - results, it's not entirely surprising that authors find in high-wage locales such effects of minimum wages. The relative employment effects are dominated by other phenomena (though that doesn't undermine the reality that that cost was somehow borne and externalized, and that the attendant effects escape the scope of analysis). Further, most of these methodologies rely on survey data, and more relevantly, only report results related to employment. The Card-Kreuger paper neglected to mention that post-wage hike prices in the surveyed stores increased. It is a shortcoming of the existing body of literature that analysis is nearly monopolized by employment effects while other ultimately equally deleterious means of externalizing costs are neglected.


I think you mean "even if it goes up" the costs might be offset by the increased quality of life in the people who have jobs. This is both a logical and empirical question. If it can be shown that the quality of life of the more-capable increases as the cost of the quality of life of the less-capable then I fundamentally disagree.


At best, the demand - and employment - effect is a net zero. Increasing the minimum wage can only increase the demand of constituency A to the extent it decreases the demand of constituencies B, C, D, etc. Its zero-sum nature highlights why tracing the compositional and distributional effects is so important.

Leaving aside the particulars of this particular paper, citing studies published by the Center for Economic and Policy Research - that are subsequently picked up Media Matters - is pretty dubious. Goal-seeking is goal-seeking, regardless of whether it's the CEPR or Cato.

remember when we used to have fun around here?