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My summary of the article would be: If supply and demand were working, a minimum wage increase would cause a loss of jobs. We studies minimum wage increases an

My summary of the article would be: If supply and demand were working, a minimum wage increase would cause a loss of jobs. We studies minimum wage increases and jobs were not loss. The conclusion was therefore that Supply and demand were broken. Then then want on to say how they found a link between having a small number of employers in a field and lower wages.

randomdata 9y ago
> The conclusion was therefore that Supply and demand were broken. Which seems like a rather bizarre conclusion. Minimum wage is a form of supply management. You do not have to lose any jobs, but you have eliminated the competition, at least on factors of price, as it is illegal for someone else to do the job for less. With a smaller labor supply, effectively speaking, price is able to rise.
- forkLding 9y ago
  Sounds informally like a logical contradiction at work, thus the assumptions must be wrong
- TheCoelacanth 9y ago
  That's a rather bizarre interpretation of supply and demand. A minimum wage would not decrease labor supply. No one is going to say "I was willing to work for $6/hour but not for $7/hour". If anything you would expect more people to be willing to work at $7/hour than at $6/hour. You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. Lower demand for labor should lead to fewer jobs, if it doesn't that indicates that there are more factors at play than a monotonic supply and demand curve.
  - randomdata 9y ago
    > No one is going to say "I was willing to work for $6/hour but not for $7/hour". I am not sure this is a correct interpretation of what supply actually means. For all intents and purposes, supply is the people willing to do job for less. If minimum wage is $7/hour, there is nobody going to say "I will do it for $6". If you, a business owner, want to pay less than $7/hour in this scenario, what supply do you think you are turning to? There isn't any! You have already hit equilibrium (where supply meets demand) at the level of minimum wage. Someone who wants $12/hr. for a minimum wage job is not supply in that market. Supply isn't all people who are willing to work just as demand isn't all people who want something. If you have $100 in your pocket and say you want to buy a new Ferrari with it does not mean you demand a Ferrari. Demand requires that you be willing and able to offer a price that actually gets what you want. > You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. That can be true, but minimum wage work is often providing an inelastic service. People aren't going to stop eating because minimum wage for agricultural workers went up. They'll just accept the higher price. What choice do they really have? Eating is somewhat essential. It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand.
    - TheCoelacanth 9y ago
      > It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand. That is exactly the point I was trying to make and I think the article was trying to do the same. Unless you make the assumption that demand for labor is perfectly inelastic or is one of the very rare goods, like Veblen goods, that have a positive price elasticity of demand, raising the minimum wage would be expected to decrease the amount of labor demanded. If it doesn't, then one of those assumptions must be incorrect. Either labor has perfect or positive elasticity of demand (unlikely because very few things do, even things that most people would describe as absolute necessities) or there are more factors at play than just the law of demand.

randomdata 9y ago

> The conclusion was therefore that Supply and demand were broken. Which seems like a rather bizarre conclusion. Minimum wage is a form of supply management. You do not have to lose any jobs, but you have eliminated the competition, at least on factors of price, as it is illegal for someone else to do the job for less. With a smaller labor supply, effectively speaking, price is able to rise.

forkLding 9y ago
Sounds informally like a logical contradiction at work, thus the assumptions must be wrong
TheCoelacanth 9y ago
That's a rather bizarre interpretation of supply and demand. A minimum wage would not decrease labor supply. No one is going to say "I was willing to work for $6/hour but not for $7/hour". If anything you would expect more people to be willing to work at $7/hour than at $6/hour. You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. Lower demand for labor should lead to fewer jobs, if it doesn't that indicates that there are more factors at play than a monotonic supply and demand curve.
- randomdata 9y ago
  > No one is going to say "I was willing to work for $6/hour but not for $7/hour". I am not sure this is a correct interpretation of what supply actually means. For all intents and purposes, supply is the people willing to do job for less. If minimum wage is $7/hour, there is nobody going to say "I will do it for $6". If you, a business owner, want to pay less than $7/hour in this scenario, what supply do you think you are turning to? There isn't any! You have already hit equilibrium (where supply meets demand) at the level of minimum wage. Someone who wants $12/hr. for a minimum wage job is not supply in that market. Supply isn't all people who are willing to work just as demand isn't all people who want something. If you have $100 in your pocket and say you want to buy a new Ferrari with it does not mean you demand a Ferrari. Demand requires that you be willing and able to offer a price that actually gets what you want. > You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. That can be true, but minimum wage work is often providing an inelastic service. People aren't going to stop eating because minimum wage for agricultural workers went up. They'll just accept the higher price. What choice do they really have? Eating is somewhat essential. It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand.
  - TheCoelacanth 9y ago
    > It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand. That is exactly the point I was trying to make and I think the article was trying to do the same. Unless you make the assumption that demand for labor is perfectly inelastic or is one of the very rare goods, like Veblen goods, that have a positive price elasticity of demand, raising the minimum wage would be expected to decrease the amount of labor demanded. If it doesn't, then one of those assumptions must be incorrect. Either labor has perfect or positive elasticity of demand (unlikely because very few things do, even things that most people would describe as absolute necessities) or there are more factors at play than just the law of demand.