7 ms·

- Raise the minimum wage If we raise the minimum wage, that would surely increase unemployment. Even a minimum wage job is hard to get for an uneducated, unski

- Raise the minimum wage If we raise the minimum wage, that would surely increase unemployment. Even a minimum wage job is hard to get for an uneducated, unskilled person, so how would it be easier for them to get a job at a rate employers are even less willing to pay?

scottea17 9y ago
Raising the minimum wage doesn't necessarily mean an increase in unemployment. Following the introduction of the minimum wage in the UK in 1999, a large body of research (a lot done by the Low Pay Commission) has been carried out which shows that the minimum wage has had a very small or no effect on unemployment. The same has been seen in research carried out in Australia and in the USA.
- lawrencewu 9y ago
  It also doesn't mean a decrease in unemployment, which is what this report claims. I'm also still unclear on _how_ a minimum wage would have no effect on unemployment, which is what the law of supply and demand predicts.
  - pm90 9y ago
    Law of supply and demand... lets just say its never very straightforward.
  - kingbirdy 9y ago
    Because minimum-wage type labor demand is inelastic relative to the actual wage, e.g. regardless of the minimum wage, McDonalds needs at least a few employees on staff at all times - there's a point where they can't cut labor any more, but their revenue is still high enough that the increase in wage payments wont put them out of business, just lower profits.
    - lawrencewu 9y ago
      I agree with that. However, nothing is perfectly inelastic, and so increasing the minimum wage would still increase unemployment, even if only by a little amount.
      - TheCoelacanth 9y ago
        Then let's assume it's just highly inelastic. If raising the minimum wage causes a small decrease in employment, but the raise is high enough that there is still an increase in the total wages for all workers in the economy, that puts more money in the hands of consumers, which potentially results in companies needing to hire more workers to meet the demand resulting in a overall increase in employment.
      - crdoconnor 9y ago
        It also creates a countervailing force that increases employment: people on minimum wage spend their money which creates demand, which creates minimum wage jobs.
  - frgtpsswrdlame 9y ago
    I see this a lot here and if you believe there is basically any market where the simple supply and demand model is relevant you're probably mistaken. The other thing is that this graph: http://i.investopedia.com/inv/tutorials/site/economics/economics5.gif http://i.investopedia.com/inv/tutorials/site/economics/econo... is not a free market model! Not at all! It is a "perfectly competitive" model and has several very specific assumptions: 1) All firms sell an identical product 2) All firms are price takers - they cannot control the market price of their product 3) All firms have a relatively small market share 4) Buyers have complete information about the product being sold and the prices charged by each firm 5) The industry is characterized by freedom of entry and exit. I'm not sure the labor market actually meets any single one of those criteria. Furthermore, if you are interested in how minimum wage actually effects employment I would check out the following report(here's a good quote). 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
    - mason240 9y ago
      The argument that because no market is the theoretical, textbook prefect market means we can ignore market forces and supply and demand is dubious.
      - frgtpsswrdlame 9y ago
        That's not what I'm saying. Our understanding of supply and demand is shaped by the model we place them in. In this case if your understanding of supply and demand is that regardless of any of the 5 factors I listed above, supply and demand will converge to a pretty equilibrium like two lines on a graph with only two lines then you're wrong. And if you look at the empirical evidence and it strongly contradicts what your model says should happen then your model needs an update. In this case the perfectly competitive model is absolutely the wrong way to understand the labor market. The paper I linked mentions a dynamic monopsony model and also 11 different channels through which adjustment is possible. Basically the market is lots and lots of different forces (not just supply and demand) all originating from (not always rational) people, in this case we need a model which more accurately models this. If you'd like to read more about how the proliferation of the basic supply and demand model has really hurt the layman's understanding of the economy there's a great book that came out recently called "Economism." Here's a short article which can give you a bird's eye view: https://www.theatlantic.com/business/archive/2017/01/economism-and-the-minimum-wage/513155/ https://www.theatlantic.com/business/archive/2017/01/economi...
  - crdoconnor 9y ago
    "I'm also still unclear on _how_ a minimum wage would have no effect on unemployment," There's three things that can give: 1) Unemployment (workers eat shit) 2) Inflation (customers eat shit) 3) Profits (owners eat shit) I'll give you a clue which group takes the brunt of minimum wage increases. Take a wild guess who paid for this expensive times sq advert: https://pbs.twimg.com/media/CNsVNeGWUAE3T7p.png https://pbs.twimg.com/media/CNsVNeGWUAE3T7p.png The low pay commission study actually found no effect on employment and no effect on prices except for a very slight non-commensurate rise in one industry (canteen services i think).
- BearGoesChirp 9y ago
  I'm not sure the amount of automation possible in 1999 is at all close to the amount of automation possible in 2017. That we have things like automated cashiers that need far fewer employees to run seems like something that would invalidate these past comparisons.
  - mason55 9y ago
    The automated cashiers are only going to get better and cheaper. I think if that's your argument against raising the minimum wage then you're only delaying the inevitable. Now, if the argument was "don't raise the minimum wage because we want people to keep their jobs temporarily while we spin up xyz programs to help for when then inevitably lose them to automation" then, OK, that seems reasonable. There's a plan to move forward from the inevitable.
    - BearGoesChirp 9y ago
      My argument is that maybe we shouldn't judge the impact of raising minimum wages in late 2010s using data from raising the minimum wage in 1999 because there have been significant advances in automation. I am not making an argument on if we should or shouldn't raise the minimum wage, only commenting of the relevance of data someone used.
creaghpatr 9y ago
Even if it didn't, it would increase inflation and decimate the middle class even further.
- ch4s3 9y ago
  If you care to do some reading[1] there are a lot of studies that contradict your point. For example this study [2] finds that price pass through is not very sticky, and ends to last only through the fiscal quarter in which the new wage comes into effect. Remember, price increases can lower demand, and products and services that already charge the maximum that the market will bear. In reality wage increases usually just lower profits, they are in effect redistributive, and in a very direct way that doesn't involve the overhead of government handling the money. [1]https://scholar.google.ca/scholar?hl=en&q=minimum+wage+increase+inflation&as_sdt=1%2C33&as_sdtp=&oq=minimum+wage+increase+ https://scholar.google.ca/scholar?hl=en&q=minimum+wage+incre... [2] http://www.mitpressjournals.org/doi/abs/10.1162/003465301750160126 http://www.mitpressjournals.org/doi/abs/10.1162/003465301750...
kevinnk 9y ago
There's a reasonably large body of evidence that a (small) increase in the minimum wage to e.g. 40% of median local income doesn't have many negative employment effects (or if it does, they are very small). That being said, minimum wage is not a particularly good way to decrease inequality since it's not very well targeted and the negative effects it does have (higher prices, less employer training, etc) seem to mostly hurt the poor. A much better policy would be increasing the EITC.

scottea17 9y ago

Raising the minimum wage doesn't necessarily mean an increase in unemployment. Following the introduction of the minimum wage in the UK in 1999, a large body of research (a lot done by the Low Pay Commission) has been carried out which shows that the minimum wage has had a very small or no effect on unemployment. The same has been seen in research carried out in Australia and in the USA.

lawrencewu 9y ago
It also doesn't mean a decrease in unemployment, which is what this report claims. I'm also still unclear on _how_ a minimum wage would have no effect on unemployment, which is what the law of supply and demand predicts.
- pm90 9y ago
  Law of supply and demand... lets just say its never very straightforward.
- kingbirdy 9y ago
  Because minimum-wage type labor demand is inelastic relative to the actual wage, e.g. regardless of the minimum wage, McDonalds needs at least a few employees on staff at all times - there's a point where they can't cut labor any more, but their revenue is still high enough that the increase in wage payments wont put them out of business, just lower profits.
  - lawrencewu 9y ago
    I agree with that. However, nothing is perfectly inelastic, and so increasing the minimum wage would still increase unemployment, even if only by a little amount.
    - TheCoelacanth 9y ago
      Then let's assume it's just highly inelastic. If raising the minimum wage causes a small decrease in employment, but the raise is high enough that there is still an increase in the total wages for all workers in the economy, that puts more money in the hands of consumers, which potentially results in companies needing to hire more workers to meet the demand resulting in a overall increase in employment.
    - crdoconnor 9y ago
      It also creates a countervailing force that increases employment: people on minimum wage spend their money which creates demand, which creates minimum wage jobs.
- frgtpsswrdlame 9y ago
  I see this a lot here and if you believe there is basically any market where the simple supply and demand model is relevant you're probably mistaken. The other thing is that this graph: http://i.investopedia.com/inv/tutorials/site/economics/economics5.gif http://i.investopedia.com/inv/tutorials/site/economics/econo... is not a free market model! Not at all! It is a "perfectly competitive" model and has several very specific assumptions: 1) All firms sell an identical product 2) All firms are price takers - they cannot control the market price of their product 3) All firms have a relatively small market share 4) Buyers have complete information about the product being sold and the prices charged by each firm 5) The industry is characterized by freedom of entry and exit. I'm not sure the labor market actually meets any single one of those criteria. Furthermore, if you are interested in how minimum wage actually effects employment I would check out the following report(here's a good quote). 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
  - mason240 9y ago
    The argument that because no market is the theoretical, textbook prefect market means we can ignore market forces and supply and demand is dubious.
    - frgtpsswrdlame 9y ago
      That's not what I'm saying. Our understanding of supply and demand is shaped by the model we place them in. In this case if your understanding of supply and demand is that regardless of any of the 5 factors I listed above, supply and demand will converge to a pretty equilibrium like two lines on a graph with only two lines then you're wrong. And if you look at the empirical evidence and it strongly contradicts what your model says should happen then your model needs an update. In this case the perfectly competitive model is absolutely the wrong way to understand the labor market. The paper I linked mentions a dynamic monopsony model and also 11 different channels through which adjustment is possible. Basically the market is lots and lots of different forces (not just supply and demand) all originating from (not always rational) people, in this case we need a model which more accurately models this. If you'd like to read more about how the proliferation of the basic supply and demand model has really hurt the layman's understanding of the economy there's a great book that came out recently called "Economism." Here's a short article which can give you a bird's eye view: https://www.theatlantic.com/business/archive/2017/01/economism-and-the-minimum-wage/513155/ https://www.theatlantic.com/business/archive/2017/01/economi...
- crdoconnor 9y ago
  "I'm also still unclear on _how_ a minimum wage would have no effect on unemployment," There's three things that can give: 1) Unemployment (workers eat shit) 2) Inflation (customers eat shit) 3) Profits (owners eat shit) I'll give you a clue which group takes the brunt of minimum wage increases. Take a wild guess who paid for this expensive times sq advert: https://pbs.twimg.com/media/CNsVNeGWUAE3T7p.png https://pbs.twimg.com/media/CNsVNeGWUAE3T7p.png The low pay commission study actually found no effect on employment and no effect on prices except for a very slight non-commensurate rise in one industry (canteen services i think).
BearGoesChirp 9y ago
I'm not sure the amount of automation possible in 1999 is at all close to the amount of automation possible in 2017. That we have things like automated cashiers that need far fewer employees to run seems like something that would invalidate these past comparisons.
- mason55 9y ago
  The automated cashiers are only going to get better and cheaper. I think if that's your argument against raising the minimum wage then you're only delaying the inevitable. Now, if the argument was "don't raise the minimum wage because we want people to keep their jobs temporarily while we spin up xyz programs to help for when then inevitably lose them to automation" then, OK, that seems reasonable. There's a plan to move forward from the inevitable.
  - BearGoesChirp 9y ago
    My argument is that maybe we shouldn't judge the impact of raising minimum wages in late 2010s using data from raising the minimum wage in 1999 because there have been significant advances in automation. I am not making an argument on if we should or shouldn't raise the minimum wage, only commenting of the relevance of data someone used.

creaghpatr 9y ago

Even if it didn't, it would increase inflation and decimate the middle class even further.

ch4s3 9y ago
If you care to do some reading[1] there are a lot of studies that contradict your point. For example this study [2] finds that price pass through is not very sticky, and ends to last only through the fiscal quarter in which the new wage comes into effect. Remember, price increases can lower demand, and products and services that already charge the maximum that the market will bear. In reality wage increases usually just lower profits, they are in effect redistributive, and in a very direct way that doesn't involve the overhead of government handling the money. [1]https://scholar.google.ca/scholar?hl=en&q=minimum+wage+increase+inflation&as_sdt=1%2C33&as_sdtp=&oq=minimum+wage+increase+ https://scholar.google.ca/scholar?hl=en&q=minimum+wage+incre... [2] http://www.mitpressjournals.org/doi/abs/10.1162/003465301750160126 http://www.mitpressjournals.org/doi/abs/10.1162/003465301750...

kevinnk 9y ago

There's a reasonably large body of evidence that a (small) increase in the minimum wage to e.g. 40% of median local income doesn't have many negative employment effects (or if it does, they are very small). That being said, minimum wage is not a particularly good way to decrease inequality since it's not very well targeted and the negative effects it does have (higher prices, less employer training, etc) seem to mostly hurt the poor. A much better policy would be increasing the EITC.