9 ms·

"Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or esca

"Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage, because they lose their jobs or fail to find jobs when they enter the labor force." -Thomas Sowell

tablespoon 6y ago
https://www.theatlantic.com/business/archive/2017/01/economism-and-the-minimum-wage/513155/ https://www.theatlantic.com/business/archive/2017/01/economi... > The argument against increasing the minimum wage often relies on what I call “economism”—the misleading application of basic lessons from Economics 101 to real-world problems, creating the illusion of consensus and reducing a complex topic to a simple, open-and-shut case.... > [discussion of economic research that shows no consensus if increasing minimum wage empirically leads to greater unemployment] > Even if a higher minimum wage does cause some people to lose their jobs, that cost has to be balanced against the benefit of greater earnings for other low-income workers. A study by the Congressional Budget Office (CBO) estimated that a $10.10 minimum would reduce employment by 500,000 jobs but would increase incomes for most poor families, moving 900,000 people above the poverty line. Similarly, a recent paper by the economist Arindrajit Dube finds that a 10 percent raise in the minimum wage should reduce the number of families living in poverty by around 2 percent to 3 percent. The economists polled in the 2013 Chicago Booth study thought that increasing the minimum wage would be a good idea because its potential impact on employment would be outweighed by the benefits to people who were still able to find jobs. Raising the minimum wage would also reduce inequality by narrowing the pay gap between low-income and higher-income workers. > In short, whether the minimum wage should be increased (or eliminated) is a complicated question. The economic research is difficult to parse, and arguments often turn on sophisticated econometric details. Any change in the minimum wage would have different effects on different groups of people, and should also be compared with other policies that could help the working poor—such as the negative income tax (a cash grant to low-income households, similar to today’s Earned Income Tax Credit) favored by Milton Friedman, or the guaranteed minimum income that Friedrich Hayek assumed would exist.
- CryptoPunk 6y ago
  There are limits to what a study can show. It's hard to measure its effects on the unemployment rate due to the mobility of labour. We don't have an experimental control where we can see what unemployment rates are like without a minimum wage anywhere in the world, and that would be the only way to actually provide something approaching proof that minimum wage increases the unemployment rate. But what has been demonstrated suggests that minimum wage decreases job growth: https://web.archive.org/web/20160410035745/http://economics.cornell.edu/sites/default/files/files/events/Meer_West_Minimum_Wage.pdf https://web.archive.org/web/20160410035745/http://economics.... And this is exactly what economic theory would suggest. Basic supply and demand theory tells us that the minimum wage, to the extent that it has an effect, harms wage growth. In the absence of the ability to conduct controlled experiments to prove definitively its effect one way or another, we should opt to trust basic economy theory. >>Dube finds that a 10 percent raise in the minimum wage should reduce the number of families living in poverty by around 2 percent to 3 percent. He hasn't shown anything. These studies are at best suggestive, and based on some amount of conjecture by the study authors. They also have difficulty measuring long-term effects, which in any case of any anti-market intervention that redirects profit for investors, to give workers above market wages, while redirecting private sector income to the larger roll of welfare recipients, will be negative for wage growth. I am not going to believe that a centrally imposed price floor, that is universally considered harmful, and a source of deadweight losses, in economics, just happens to be beneficial in its one application that has been most heavily politicized.
  - tablespoon 6y ago
    > Basic supply and demand theory tells us that the minimum wage, to the extent that it has an effect, harms wage growth. In the absence of the ability to conduct controlled experiments to prove definitively its effect one way or another, we should opt to trust basic economy theory. So trust the 101-level dogma, even though it's not been validated empirically, and it's also quite clear that actual economic and sociological systems are far more complicated than its models? The problem with econ 101 is that it's oversimplified yet so seductively simple that you can give a group of people a 400 page persuasive econ book, a good chunk of them will be confusing the map for the territory by the end of it.
cratermoon 6y ago
Oh yea, Thomas Sowell. The neoliberal/libertarians favorite snake-oil salesman.
- epivosism 6y ago
  How would you engage with his claim, that minimum wages don't actually guarantee wages - they just give employers this choice: Pay minimum living wage Don't hire someone True minimum wage implementations like EITC [0] would get what we both want here! Free hiring at the market price for employers, so they can hire very unskilled people at low wages, for them to gain experience (i.e. hiring homeless guys to pick up cans, which is currently so unprofitable that nobody does it) The government makes up the living wage gap with effectively a "negative income tax" for low wage workers. This satisfies us both, and fulfills the true vision of a "living wage" in ways that don't lock unskilled people out of the labor force. [https://www.wikiwand.com/en/Earned_income_tax_credit https://www.wikiwand.com/en/Earned_income_tax_credit]
  - AstralStorm 6y ago
    How do you convert the current job "market" into an actual market? Legislation to mandate hiring transparency? Some sort of collective bargaining to even out the power discrepancy in wage setting? At the same time avoiding making everyone a gig worker, as would be so seductive and disastrous due to lack of personal stability?
  - cratermoon 6y ago
    > How would you engage with his claim Show me the money (i.e. not a blog post. Something peer-reviewed) Also, how does lowering someone's tax burden help if they aren't being paid a living wage? Plus they have to file for it at the end of the tax year, instead of just having the money to pay bills.

tablespoon 6y ago

https://www.theatlantic.com/business/archive/2017/01/economism-and-the-minimum-wage/513155/ https://www.theatlantic.com/business/archive/2017/01/economi... > The argument against increasing the minimum wage often relies on what I call “economism”—the misleading application of basic lessons from Economics 101 to real-world problems, creating the illusion of consensus and reducing a complex topic to a simple, open-and-shut case.... > [discussion of economic research that shows no consensus if increasing minimum wage empirically leads to greater unemployment] > Even if a higher minimum wage does cause some people to lose their jobs, that cost has to be balanced against the benefit of greater earnings for other low-income workers. A study by the Congressional Budget Office (CBO) estimated that a $10.10 minimum would reduce employment by 500,000 jobs but would increase incomes for most poor families, moving 900,000 people above the poverty line. Similarly, a recent paper by the economist Arindrajit Dube finds that a 10 percent raise in the minimum wage should reduce the number of families living in poverty by around 2 percent to 3 percent. The economists polled in the 2013 Chicago Booth study thought that increasing the minimum wage would be a good idea because its potential impact on employment would be outweighed by the benefits to people who were still able to find jobs. Raising the minimum wage would also reduce inequality by narrowing the pay gap between low-income and higher-income workers. > In short, whether the minimum wage should be increased (or eliminated) is a complicated question. The economic research is difficult to parse, and arguments often turn on sophisticated econometric details. Any change in the minimum wage would have different effects on different groups of people, and should also be compared with other policies that could help the working poor—such as the negative income tax (a cash grant to low-income households, similar to today’s Earned Income Tax Credit) favored by Milton Friedman, or the guaranteed minimum income that Friedrich Hayek assumed would exist.

CryptoPunk 6y ago
There are limits to what a study can show. It's hard to measure its effects on the unemployment rate due to the mobility of labour. We don't have an experimental control where we can see what unemployment rates are like without a minimum wage anywhere in the world, and that would be the only way to actually provide something approaching proof that minimum wage increases the unemployment rate. But what has been demonstrated suggests that minimum wage decreases job growth: https://web.archive.org/web/20160410035745/http://economics.cornell.edu/sites/default/files/files/events/Meer_West_Minimum_Wage.pdf https://web.archive.org/web/20160410035745/http://economics.... And this is exactly what economic theory would suggest. Basic supply and demand theory tells us that the minimum wage, to the extent that it has an effect, harms wage growth. In the absence of the ability to conduct controlled experiments to prove definitively its effect one way or another, we should opt to trust basic economy theory. >>Dube finds that a 10 percent raise in the minimum wage should reduce the number of families living in poverty by around 2 percent to 3 percent. He hasn't shown anything. These studies are at best suggestive, and based on some amount of conjecture by the study authors. They also have difficulty measuring long-term effects, which in any case of any anti-market intervention that redirects profit for investors, to give workers above market wages, while redirecting private sector income to the larger roll of welfare recipients, will be negative for wage growth. I am not going to believe that a centrally imposed price floor, that is universally considered harmful, and a source of deadweight losses, in economics, just happens to be beneficial in its one application that has been most heavily politicized.
- tablespoon 6y ago
  > Basic supply and demand theory tells us that the minimum wage, to the extent that it has an effect, harms wage growth. In the absence of the ability to conduct controlled experiments to prove definitively its effect one way or another, we should opt to trust basic economy theory. So trust the 101-level dogma, even though it's not been validated empirically, and it's also quite clear that actual economic and sociological systems are far more complicated than its models? The problem with econ 101 is that it's oversimplified yet so seductively simple that you can give a group of people a 400 page persuasive econ book, a good chunk of them will be confusing the map for the territory by the end of it.

cratermoon 6y ago

Oh yea, Thomas Sowell. The neoliberal/libertarians favorite snake-oil salesman.

epivosism 6y ago
How would you engage with his claim, that minimum wages don't actually guarantee wages - they just give employers this choice: Pay minimum living wage Don't hire someone True minimum wage implementations like EITC [0] would get what we both want here! Free hiring at the market price for employers, so they can hire very unskilled people at low wages, for them to gain experience (i.e. hiring homeless guys to pick up cans, which is currently so unprofitable that nobody does it) The government makes up the living wage gap with effectively a "negative income tax" for low wage workers. This satisfies us both, and fulfills the true vision of a "living wage" in ways that don't lock unskilled people out of the labor force. [https://www.wikiwand.com/en/Earned_income_tax_credit https://www.wikiwand.com/en/Earned_income_tax_credit]
- AstralStorm 6y ago
  How do you convert the current job "market" into an actual market? Legislation to mandate hiring transparency? Some sort of collective bargaining to even out the power discrepancy in wage setting? At the same time avoiding making everyone a gig worker, as would be so seductive and disastrous due to lack of personal stability?
- cratermoon 6y ago
  > How would you engage with his claim Show me the money (i.e. not a blog post. Something peer-reviewed) Also, how does lowering someone's tax burden help if they aren't being paid a living wage? Plus they have to file for it at the end of the tax year, instead of just having the money to pay bills.