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There's no solid evidence that increasing the minimum wage will create fewer jobs. From Paul Krugman's review of Robert Reich's new book > Other evidence point
by ptc 11y ago
There's no solid evidence that increasing the minimum wage will create fewer jobs. From Paul Krugman's review of Robert Reich's new book
> Other evidence points indirectly to a strong role of market power. At this point, for example, there is an extensive empirical literature on the effects of changes in the minimum wage. Conventional supply-and-demand analysis says that raising the minimum wage should reduce employment, but as Reich notes, we now have a number of what amount to controlled experiments, in which employment in counties whose states have hiked the minimum wage can be compared with employment in neighboring counties across the state line. And there is no hint in the data of the supposed negative employment effect.
> Why not? One leading hypothesis is that firms employing low-wage workers—such as fast-food chains—have significant monopsony power in the labor market; that is, they are the principal purchasers of low-wage labor in a particular job market. And a monopsonist facing a price floor doesn’t necessarily buy less, just as a monopolist facing a price ceiling doesn’t necessarily sell less and may sell more.
http://www.nybooks.com/articles/2015/12/17/robert-reich-challenging-oligarchy/ http://www.nybooks.com/articles/2015/12/17/robert-reich-chal...
There's also something similar to your subsidy idea today called the Earned Income Tax Credit [https://en.wikipedia.org/wiki/Earned_income_tax_credit https://en.wikipedia.org/wiki/Earned_income_tax_credit]. Guaranteeing a minimum income does seem like a promising idea, but it will probably have to be tried elsewhere before the U.S. will adopt it (if ever).
- PantaloonFlames 11y ago> a monopsonist facing a price floor doesn’t necessarily buy less, just as a monopolist facing a price ceiling doesn’t necessarily sell less and may sell more. The theory is that the buyers of labor in these cases will simply buy alternatives - specifically low-labor alternatives, like automation. Think of automated checkout stands at retail stores, but applied to fast food. Time was, fuel filling stations all had attendants. Drivers didn't get out of their cars when they purchased gas. They drove up and were greeted by an attendant who operated the pump and took payment. We don't do that anymore - now that attendant job doesn't exist. There's nothing stopping that same kind of transition for many other service jobs.
- thedufer 11y agoThis doesn't really affect your point, but gas station attendants aren't completely gone - in New Jersey, it's illegal for a motorist to pump their own gas. The purpose, of course, is to keep those minimum-wage jobs around.
- nommm-nommm 11y agoIts also illegal to pump your own gas in Oregon too. Both states are considering legislation allowing self serve pumps.
- prostoalex 11y agoWith so many exemptions to minimum wage laws (self-employed are exempted, family-owned businesses are exempted, waiters are exempted unless their tipping income does not put them over minimum, anybody working under 1099 is exempted) the comparisons become a bit muddled - a minimum wage worker who lost his position and decided to get some moving gigs or drive a few hours for Uber/Lyft certainly has "a job" for survey purposes, someone whose hours were cut certainly still has "a job", but the definitions have changed in-between.
- Pyxl101 11y agoWaiters and tipped employees are not exempt from minimum wage. They must be paid a wage greater than or equal to minimum wage for every hour they work. Tips can take that wage above minimum, but an absence of tips cannot drop their wage below. https://en.m.wikipedia.org/wiki/Tipped_wage_in_the_United_States https://en.m.wikipedia.org/wiki/Tipped_wage_in_the_United_St...
- prostoalex 11y agoI'm aware of the mechanics, I am questioning the reasoning behind introduction of a special class of income. What's the economical argument against letting them earn minimum wage and tips?