you smile more often than i imagined.

Is that you?? I pictured an oversized hoody...

Fair enough. that was the first thing I found on a quick google search. But the particulars of this particular paper are wrong. That CEPR or Cato have a political orientation, even an ideological orientation does not affect whether an empirical study is right or wrong. And neither of these centers have the market cornered when it comes to ideologypotentially impacting research

The argument you quoted seemed to argue that in theory unemployment goes up when you raise the min. wage because the amount of money available to pay wages is then divided up amongst fewer people. My point was that there is no guarantee that the 100 dollars that could theoretically be devoted to paying wages is currently going to wages--that employment will only be affected if a particular business cannot afford to allocate any more resources to paying people more. This may be true for some businesses. For others probably not.

And whether or not a particular employer (perhaps one who employs a number of min. wage employees) has to cut back on hiring is less important than the overall impact the law has on the particular community. perhaps the extra money that low wage workers now have to spend increases hiring and demand throughout the rest of the community. That is what it sounds like those studies I linked were arguing. Were they wrong? Has anyone refuted them as incorrect or challenged their methodology?




why are you not convinced by empirical arguments that reach that conclusion? Where do they go wrong? Or are the empirical arguments rejected because they do not line up with theoretical commitments?




This is also 30 years old. Perhaps it is time to rely on newer data. Certainly there USED to be a consensus about the impact of min. wage laws on employment, but the little bit that i've read seems to argue that this consensus is now being called into question. Perhaps not amongst the economists you prefer, but certainly within the larger field. Which is why, before you so categorically reject someone's arguments on the ground that it does not line up with your own ideological economic commitments, you offer up a good empirical reason for why it is incorrect




that shouldn't matter though, should it. What the min. wage is is less important for your purposes than the fact that a min. wage exists, right? It could be $3 dollars. it could be $5 dollars. It could be the $1.25 that littlewing thinks we should offer in this country make the US competitive. What matters is the fact that the min. that workers are being paid is increasing, thus impacting the amount of people that a company can hire given a fixed budget for labor costs. Is that wrong?



Fair enough. Obviously the more thorough the study the data. Does min. wage surpress economic growth? My understanding is that it doesn't have to. For instance: http://ceg.berkeley.edu/research_99_1742168676.pdf

There seems to be little consensus in the field about this. And that's not necessarily surprising given both how ideologically loaded the question is for both sides, and that it represents a challenge to received economic wisdom. But I certainly don't see anything here to justify a casual dismissal of Baker's argument.






are you making the assumption that growth is impossible?

Growth of what? The supply of money? Printing money so business can hire more people with higher wages? That only leads to inflation and distortion of expectations. The Phillips Curve has been ridiculed by quite some time.

If you mean real growth of productivity, this will naturally raise wages in accordance with the market.

Deus Vult

Inflation has been fairly steady in the US for many years, has it not, even though we've expanded the money supply? is this one of those 'if every year I predict the end of the world I'm bound to be right when it happens' things?

I posed this question to one of my economist colleagues, who will obviously be far more familiar with this stuff than I am.

The truth is that raising the minimum wage has no effect on employment or the unemployment rate. True, raising the minimum wage increases the cost of using the labor input, but at the same time, lower wage workers have more income to spend, which they do, which increases output and employment at firms where they spend their increased earnings. There's an old adage, "Money earned on one side of the street is spent on the other side of the street." That adage is certainly appropriate here.

Luckily, there exist a few ideal, laboratory-like, real world experiments where the minimum wage has been raised, and there was not a shred of evidence that unemployment increased afterwards. A number of States have state minimum wages that are higher than the federal minimum wage. There have been cases where a state has raised its minimum wage substantially, and there was no loss of employment to contiguous states.

So Stip, why did those cities stop raising their minimum wages if it worked so well? Why doesn't Obama make a $20 minimum wage? Recession solved right?

I honestly think you don't realize the circular arguments you are making, I also don't think you understand the implications and mechanisms that have resulted in steady inflationary policy.

When you examine a minimum wage you have to control for the minimum wage. As such, you have to control for the money supply. If you keep the money supply static, and raise the lowest wage, that introduces itself as a real cost to the business owner. I think it's a little bit simplistic to analyze the situation as "I have more labor costs to spend on the same amount of people, so I must fire someone." I think what's important is to examine marginal rate of return on any aspect of the company. You're betting that the employer will be able to cut costs elsewhere in lieu of cutting employees. But in making cost cutting savings elsewhere, they're reducing their purchases from somewhere else, or potentially making a worse product. In the face of increased wages, perhaps it becomes more profitable to install an automated machine and get rid of the employees altogether.

When you state that the employer just won't cut employees you make some big assumptions.

It is my opinion that primary policy thrust of a minimum wage is that business owners and administrators will cut their own pay and syphon it down to the lower workers. That, and I think policy makers know, by design, that it will lead to increasing unemployment. But with modern social welfare apparatus, and an artificially high minimum wage, it doesn't matter if you have high unemployment. If rich people don't sacrifice and increase pay at the bottom, you just tax them and artificially support that minimum, or living wage, or whatever the fiat wage is, to redistribute wealth.

The bottom line is that there is no free lunch. Currency supply is fiat. The value of currency is fiat. And that MV=PQ is boss. Sure, you can cripple an economy with deflationary measures, but the bottom line is that economies are predicated on what we're capable of doing for one another, and willing to do for another. And when you impose artificially high minimum wages you ignore economic signals within the economy. You take away the incentive to pursue a career that is of the most value, and artificially incentivize the people on the bottom. How do you think someone who's a low skilled worker, or a no-skilled worker with five years experience, feels when wages are raised by fiat and they are suddenly worth only what a kid off the street is worth?

Why is it that in North Dakota you can make fifteen bucks an hour with benefits at McDonalds?

i posted a response to that MV=PQ equation in that apple thread before I went away. No one responded to it so I'll repost it here (where it makes more sense, anyway)




How would you respond to that?

I'm happy to agree that at a certain point a min. wage would become distorting to a point where it is counter productive, especially if it is above the base threshold for a living wage. We do want incentives for people to pursue better jobs.


This is theoretical. That this may be logical in theory does not mean it would play out that way in practice since there might be benefits to offset the costs. That's why I'm interested in case studies for this stuff.

As far as your last point (at what point does it become cheaper to install a machine or move production overseas, etc) that's a fair concern, and one that needs to be balanced against higher wages--but to just surrender to the possibility that you can always get someone else to do a job for cheaper (which is not just an issue with low skill/low wage labor anymore) consigns everyone who does not control capital to a race to the bottom, which isn't an acceptable position. Part of this may come down to what you think an economy is for. is it for

A: making the individuals who participate in it as wealthy as possible
B: making sure the material needs of society are met in as efficient and just a way as possible

Obviously the answer is both. The question is whether you want A to be a consequence of pursuing B or vice versa. I think B. You think A. But if you think B, as I do, the way you get around this problem is to figure out ways to more make sure the benefits of what society produces are more equitably shared throughout that society. Maybe you need more generous welfare benefits in a country where there is simply no longer a need for everyone to work. Maybe you pursue a model where people work less and labor is shared. regardless you may need to be in a position where the benefits of productivity are shared more equitably amongst all involved, rather than fully expropriated by whoever happens to own the enterprise. I know you disagree with that.



That's fine with me. And I prefer a min. national income over a min. wage since a min wage can distort what people are worth at the levels beyond a min. wage.

If you're going to say that at a certain point a minimum wage would become distorting to the point where it is counter productive then you at least have to qualitatively define that point. If you can imagine that a minimum wage would distort an economy in a harmful at point X, then you have to be prepared to explain why those same outputs don't occur at X minus whatever the fiat wage is.



Of course it's theoretical, it's ALL theoretical. Even the idea that it won't have an impact is theoretical. The point to take away is that the business owner functions on the same basis as everyone else. Work versus reward. There is a certain measure of reward that the business owner must achieve to continue his business. When you impose additional costs, you impose more work against his reward. If you push past this threshold he will look to optimize return, or he'll get out. In optimizing return people are ALWAYS looking for means of more efficiently, and productively operating their business. It's what an economy is! It's where value comes from! It is not just theoretically, but empirically impossible to control for a minimum wage, raise it, and not have a negative effect felt somewhere in the economy. The only way a case study on this stuff matters is if you have a means of controlling for the wage itself. It's why I ask, "why does a job at McDonalds in North Dakota pay $15 an hour?" Williston North Dakota just - absolutely CRUSHES your absurd notion that without a minimum wage you end up getting in a race to the bottom. It ignores work versus reward. It ignores the very precepts of value. It treats an economy as a static figure. It ignores the idea that people like Mitt Romney, who control capital, made millions of dollars by investing in people who had no capital, that capital is fluid, and that it will flow towards areas where society demands it most.

You're suggestion that an economy is to making people rich and making sure the material needs of society are met in as efficient way as possible is like some sort of inverted false dichotomy. This a terrible macro-fallacy. Economies are built upon a summation of individual free transactions that are conducted by free individuals. When you look at economies it's not the economy that matters, but the individuals who compose it. The economy is function of what those people CAN do, and what they are WILLING to do. When you establish this false dichotomy you make, you open the door to all kinds of dystopian disasters where we're trying to make people as wealthy as possible at all costsvqnevmaking sure society has whatever subjective material possessions the governing board sees fit. Well, what if I just wanna relax? What if I wanna be Amish?

And don't put words in my mouth. I don't think A, and I don't think B. I think people should do whatever their little heart desires so long as they're not bothering anybody else in a direct negative way. Wanna be a couch potatoe? I have no problem with that. Wanna burn yourself out? Whatever. Wanna be filthy fucking rich? That's cool. Wanna be a Wal*MArt greater? I don't care. When you establish this purpose of an economy to some ideal, you then force everyone to pursue your subjective end and unnecessarily crush their liberty to be fat slobs, or fundamentalist Mormons, or lawyers that study Tarot cards in their spare time.

The only time you can possibly justify using the force of government to more equitably redistribute productivity is if no viable mutually exclusive alternatives exist - period.

This is why I've been referring to (and asking about) actual studies where this happened and people analyzed the result. This is something economists have tested, and even done so recently.


There will always be negative effects whenever an economy is changed or not changed. NOT raising the min. wage has a tremendous negative impact, for instance, on the millions of americans who work at or below the min. wage as well as the businesses that depend on them spending money. having a negative impact is not the issue. The question is the size of that impact, where it is felt, and whether it is offset by sufficent benefits.



That's your notion too, LWing. Recall your earlier post about how raising the min wage drives jobs away. ND is a small oil town in a tiny, empty state. I'm not sure it is a great model for the rest of the country. But perhaps there are dynamics there that have raised the wage floor. Great. They will find themselves not very affected by a change in min wage laws and I'm glad Mcdonalds workers there can earn a living wage.



No, I did not say they have a dichotomous relationship. I said that you will end up making policy that privileges one of those approaches or the other, but they are not mutually exclusive.





Individuals who live in, react to, game, author, and change the rules that constrain their behaviors. Using the word free is misleading. No modern economy, ever, has been free, insofar as freedom is an absence of external restraints. Nor will one.





ohhhhkay. I'm not sure who you are arguing against here, but I hope you win.

For what it's worth, what you are describing applies to every modern western economy. Somehow we have managed to endure our dystopian nightmare. One can only hope we continue to endure.




no, you think A. It's just that some people don't care that much about money, or aren't good at making it. I thought the meaning behind A was clear. Perhaps not. The choice is whether you want to privilege (not in a dichotomous way, remember) the individual over the community. the people who have unambitious or self-contained aspirations tend to not really be that important. The question is what happens when an individuals pursuit of personal wealth ends up impacting the opportunities for wealth of others in a particular community. Who do you privilege?


That's a moral claim, not an economic claim.

Print like Weimar and shall have Weimar inflation. Create credit out of thin air and will always cause a bubble. Stop believing that central banks have magical powers, it's all only smoke and mirrors, manipulation of expectaction.

except of course the United States had a long series of bubbles and crashes long before there was a Fed. And again, when have we had Weimer inflation. I understand that your religion requires that this be the case, but the US has been printing money for decades and it hasn't happened. Perhaps this should be cause to revisit some of your assumptions.

It's funny you would post this, I am wondering about a lot of economic dogma recently. Fiat currency is worth whatever the government says it's worth, so what does it really matter how much of it there is? The government will simply distort the market to keep prices at a low level of inflation, so why bother worrying?

Fiat currency isn't worth what government says it's worth. It's worth what we say it's worth.

Has it ever occurred to you that this printing of money with purposeful inflationary policies to encourage the accumulation of debt is precisely why we're now experiencing a protracted economic malaise before another stiff recession, perhaps a depression, and led to the wealth maldistribution you decry so often around here?

And now with the Fed the bubbles and crashes only get more monumental and long lasting. Determining what rates and supplies should by decree won't stop the market from applying the correction, it can only delay and make it more painful. I understand your religion promises that the bureaucrats in DC have magical powers, but they really don't. Everything they do has a side effect, creates a new issue, it's pretty much the 2nd law of thermodynamics.

And the US never printed money in the same rate of the Weimar republic, so there won't be a Weimar inflation. But in about a century the dollar has be devalued by 95%. Of course they can devalue a bit more til the 16 trillions of debt don't seem like a big deal, but that will fuck up with everybody, specially the poor. The poor folks are always the last to receive the new money, when everybody has realized the scam and adjuted the prices accordingly.

sure. Then I dismissed it. My simple single factor analysis draws on the economic distribution of increased productivity. Also we're not taxing hollowpoint bullets enough.


There are no doubt many factors that have lead to our current economic problems. But if I was to rank them in some fashion the expansion of the money supply would be waaayyy down towards the bottom. If it even made the list.