4 ms·

What do the models say? I'm not an economist but I always feel like decisions and debates like this are based mostly on people's limited ability to reason abou

What do the models say? I'm not an economist but I always feel like decisions and debates like this are based mostly on people's limited ability to reason about a very complex system (and probably more so, their biases and personal interests). A minimum wage is likely to have a complex and unexpected impact. So what can be modelled? What experiments have been done where we can simply observe the impact? Also what are the goals and how are they prioritized? Do the rights of wealthy individuals to keep every penny of their earnings outweigh (I hate that I can't use 'trump' anymore) a societal goal of eliminating poverty or making sure the poor have a decent standard of living (health care, education, safety, etc)? Obviously everyone wants both these things (right?) but how are the weighted? Aaagghhh!! (Our world is so far away from anything sane I just can't stand it this morning.)

Mikeb85 9y ago
The models say that a rising minimum wage would decrease demand for labour. Of course, how much it affects actual unemployment depends on how much labour was previously demanded and supplied. The thinking of course is that aggregate income among low earners makes up for the increased unemployment, and the extra spending power they have improves the economy as a whole, leading to less unemployment than a linear relationship between minimum wage and unemployment would suggest. Edit - at the very end I should add, "assuming the demand for labour actually increases aggregate income for those workers affected". If a min wage hike is too severe or unemployment already too high, you might not be better off in the end.
eagsalazar2 9y ago
More fundamentally, I wonder if this just boils down to an oversupply of inexpensive labor (or shortage of low skill work depending on your perspective)? Would be interesting to see what the models predicted if we removed a huge portion of cheap latino laborers that currently occupy almost all minimum wage jobs in every state I've lived in (CA and WA) in service and agriculture. BTW, for people who are economists, are there models out there that are freely available where people can tweak variables like that? Would be fun as hell to play around with. (Just to be clear, I am not a Trump supporter in general. Heh.)

Mikeb85 9y ago

The models say that a rising minimum wage would decrease demand for labour. Of course, how much it affects actual unemployment depends on how much labour was previously demanded and supplied. The thinking of course is that aggregate income among low earners makes up for the increased unemployment, and the extra spending power they have improves the economy as a whole, leading to less unemployment than a linear relationship between minimum wage and unemployment would suggest. Edit - at the very end I should add, "assuming the demand for labour actually increases aggregate income for those workers affected". If a min wage hike is too severe or unemployment already too high, you might not be better off in the end.

eagsalazar2 9y ago

More fundamentally, I wonder if this just boils down to an oversupply of inexpensive labor (or shortage of low skill work depending on your perspective)? Would be interesting to see what the models predicted if we removed a huge portion of cheap latino laborers that currently occupy almost all minimum wage jobs in every state I've lived in (CA and WA) in service and agriculture. BTW, for people who are economists, are there models out there that are freely available where people can tweak variables like that? Would be fun as hell to play around with. (Just to be clear, I am not a Trump supporter in general. Heh.)