5 ms·

Minimum wage only causes unemployment if the labor market is competitive. This is not currently the case in the US as a few big companies (Walmart, McDonald's)

by zeteo 9y ago

Minimum wage only causes unemployment if the labor market is competitive. This is not currently the case in the US as a few big companies (Walmart, McDonald's) have disproportionate market power, and most economic sectors are becoming even more concentrated. Under such oligopsony conditions, increases in minimum wage will generally come out of profits (which are at historically high levels of the GDP [1]). Since wages are spent locally, but profits not as much, minimum wage regulations should generally help the local economy. [1] https://fred.stlouisfed.org/graph/?g=1Pik https://fred.stlouisfed.org/graph/?g=1Pik

Shivetya 9y ago
but they don't. studies have shown that increases in minimum wage laws tend to benefit those who are in not poor families and a 10% increase in minimum wage can cause prices in the local area to increase four percent. throw in that even as recently as 2011 President Obama had to sign into law a bill postponing minimum wage laws and increases in America Samoa because it was literally destroying their economy after being force to accept such in 2007 and 2009. It isn't just competitive labor markets but mobility of those who can fill the jobs that exist. then throw a likelihood of employers to increase work loads to compensate, penalties for tardiness, and such, it does not always turn out to be a boon. with regards to Puerto Rico, this is simply an example of politicians selling out their populace to retain power and actually being around to be there when the hammer falls. it has happened in a few American cities and there are some states with very excessive and dangerous pension obligations that will be forced to vacate them or seriously reduce them . Puerto Rico should stand as a warning to anyone who sees politicians promising the moon.
- zeteo 9y ago
  I'm not familiar with American Samoa, but generally states and countries with high minimum wages are doing pretty well economically, see e.g. [1]. States that have recently increased the minimum wage have seen higher economic growth than those that haven't [2]. [1] http://www.scholarsstrategynetwork.org/brief/evidence-higher-minimum-wages-improve-economic-wellbeing http://www.scholarsstrategynetwork.org/brief/evidence-higher... [2] http://www.npr.org/sections/thetwo-way/2014/07/19/332879409/states-that-raised-minimum-wage-see-faster-job-growth-report-says http://www.npr.org/sections/thetwo-way/2014/07/19/332879409/...
  - seanmcdirmid 9y ago
    I'm pro minimum wage, but states that have higher minimum wages tend to already have their heads on straighter economically. E.g. Washington state invests heavily in education and caters to high tech more than other states, while California has of course always been a gold mine. Correlation is not causation.
    - dangerlibrary 9y ago
      The classic paper on minimum wage hikes and employment rates is Card and Krueger. On April 1, 1992 New Jersey's minimum wage increased from $4.25 to $5.05 per hour. To evaluate the impact of the law we surveyed 410 fast food restaurants in New Jersey and Pennsylvania before and after the rise in the minimum. Comparisons of the changes in wages, employment, and prices at stores in New Jersey relative to stores in Pennsylvania (where the minimum wage remained fixed at $4.25 per hour) yield simple estimates of the effect of the higher minimum wage. Our empirical findings challenge the prediction that a rise in the minimum reduces employment. Relative to stores in Pennsylvania, fast food restaurants in New Jersey increased employment by 13 percent. We also compare employment growth at stores in New Jersey that were initially paying high wages (and were unaffected by the new law) to employment changes at lower-wage stores. Stores that were unaffected by the minimum wage had the same employment growth as stores in Pennsylvania, while stores that had to increase their wages increased their employment. http://www.nber.org/papers/w4509 http://www.nber.org/papers/w4509
      - Bartweiss 9y ago
        There's a criticism of Card and Kreuger that seems devastating, though. They assessed Full Time Employment (FTE), a statistic which counts full time work as 1 'unit' and part time work as 0.5 'units'. That's really alarming, because we want to assess hours worked, and they used a metric that can't differentiate 30 hours / week from 10 hours / week. It's even worse because cutting hours while hiring more workers is a known way to reduce benefit costs and increase flexibility. Neumark and Wascher redo the analysis using hours worked, and find a nonsignificant downward trend instead. I don't think this settles the minimum wage question, but I've never heard a defense of Card and Krueger's result against this charge. http://www.nber.org/papers/w5224 http://www.nber.org/papers/w5224
jpttsn 9y ago
> Minimum wage only causes unemployment if the labor market is competitive. Where did you hear that?
- frgtpsswrdlame 9y ago
  Probably someplace like this: The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage. http://cepr.net/documents/publications/min-wage-2013-02.pdf http://cepr.net/documents/publications/min-wage-2013-02.pdf
  - jpttsn 9y ago
    Some of the same words are indeed found in there
jeffbax 9y ago
"minimum wage regulations should generally help the local economy." I would not say that with such certainty… http://www.sciencedirect.com/science/article/pii/S0166046216301156 http://www.sciencedirect.com/science/article/pii/S0166046216... https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2951110 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2951110

by zeteo 9y ago

Shivetya 9y ago

but they don't. studies have shown that increases in minimum wage laws tend to benefit those who are in not poor families and a 10% increase in minimum wage can cause prices in the local area to increase four percent. throw in that even as recently as 2011 President Obama had to sign into law a bill postponing minimum wage laws and increases in America Samoa because it was literally destroying their economy after being force to accept such in 2007 and 2009. It isn't just competitive labor markets but mobility of those who can fill the jobs that exist. then throw a likelihood of employers to increase work loads to compensate, penalties for tardiness, and such, it does not always turn out to be a boon. with regards to Puerto Rico, this is simply an example of politicians selling out their populace to retain power and actually being around to be there when the hammer falls. it has happened in a few American cities and there are some states with very excessive and dangerous pension obligations that will be forced to vacate them or seriously reduce them . Puerto Rico should stand as a warning to anyone who sees politicians promising the moon.

zeteo 9y ago
I'm not familiar with American Samoa, but generally states and countries with high minimum wages are doing pretty well economically, see e.g. [1]. States that have recently increased the minimum wage have seen higher economic growth than those that haven't [2]. [1] http://www.scholarsstrategynetwork.org/brief/evidence-higher-minimum-wages-improve-economic-wellbeing http://www.scholarsstrategynetwork.org/brief/evidence-higher... [2] http://www.npr.org/sections/thetwo-way/2014/07/19/332879409/states-that-raised-minimum-wage-see-faster-job-growth-report-says http://www.npr.org/sections/thetwo-way/2014/07/19/332879409/...
- seanmcdirmid 9y ago
  I'm pro minimum wage, but states that have higher minimum wages tend to already have their heads on straighter economically. E.g. Washington state invests heavily in education and caters to high tech more than other states, while California has of course always been a gold mine. Correlation is not causation.
  - dangerlibrary 9y ago
    The classic paper on minimum wage hikes and employment rates is Card and Krueger. On April 1, 1992 New Jersey's minimum wage increased from $4.25 to $5.05 per hour. To evaluate the impact of the law we surveyed 410 fast food restaurants in New Jersey and Pennsylvania before and after the rise in the minimum. Comparisons of the changes in wages, employment, and prices at stores in New Jersey relative to stores in Pennsylvania (where the minimum wage remained fixed at $4.25 per hour) yield simple estimates of the effect of the higher minimum wage. Our empirical findings challenge the prediction that a rise in the minimum reduces employment. Relative to stores in Pennsylvania, fast food restaurants in New Jersey increased employment by 13 percent. We also compare employment growth at stores in New Jersey that were initially paying high wages (and were unaffected by the new law) to employment changes at lower-wage stores. Stores that were unaffected by the minimum wage had the same employment growth as stores in Pennsylvania, while stores that had to increase their wages increased their employment. http://www.nber.org/papers/w4509 http://www.nber.org/papers/w4509
    - Bartweiss 9y ago
      There's a criticism of Card and Kreuger that seems devastating, though. They assessed Full Time Employment (FTE), a statistic which counts full time work as 1 'unit' and part time work as 0.5 'units'. That's really alarming, because we want to assess hours worked, and they used a metric that can't differentiate 30 hours / week from 10 hours / week. It's even worse because cutting hours while hiring more workers is a known way to reduce benefit costs and increase flexibility. Neumark and Wascher redo the analysis using hours worked, and find a nonsignificant downward trend instead. I don't think this settles the minimum wage question, but I've never heard a defense of Card and Krueger's result against this charge. http://www.nber.org/papers/w5224 http://www.nber.org/papers/w5224

jpttsn 9y ago

> Minimum wage only causes unemployment if the labor market is competitive. Where did you hear that?

frgtpsswrdlame 9y ago
Probably someplace like this: The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage. http://cepr.net/documents/publications/min-wage-2013-02.pdf http://cepr.net/documents/publications/min-wage-2013-02.pdf
- jpttsn 9y ago
  Some of the same words are indeed found in there

jeffbax 9y ago

"minimum wage regulations should generally help the local economy." I would not say that with such certainty… http://www.sciencedirect.com/science/article/pii/S0166046216301156 http://www.sciencedirect.com/science/article/pii/S0166046216... https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2951110 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2951110