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> For example, we predict that if a state has a minimum wage and a neighboring state doesn't, unemployment in the state without minimum wage laws will increase,

> For example, we predict that if a state has a minimum wage and a neighboring state doesn't, unemployment in the state without minimum wage laws will increase, because people will cross the border for the higher salaries. I don't understand the logic behind that prediction. Minimum wage exists because we recognize people won't voluntarily move into the highest paying work possible, often prioritizing other factors like loyalty, enjoyment, fear of the unknown, etc. We impose minimum wage so that workers are forced into more economically productive pursuits in order to remain employed for the betterment of the economy as a whole. If a state didn't have a minimum wage, while the neighbouring one did, we would first question why the one state found minimum wage necessary and would predict that is most likely that the other state suffers from the same problem, therefore realizing that workers in the state without minimum wage would be most likely to stay in the jobs they have, even if low paying. If people were always searching for the highest paying jobs available, minimum wage wouldn't be necessary.

muzani 4y ago
The core of economics is people, not companies or money. People with incentives are quite predictable. You do have a good point there, that you have model it as people. A person doesn't simply leave their city for a better wage; they can be tied down by family, friends, and certain loyalties. In this case, you can model a working class human like you'd model lifestock, always seeking greener pastures, or like a bag of flour, whose price is controlled by regulation instead of supply. I don't think these models are necessarily wrong. And sometimes the more accurate ones tend to dehumanize. But it's useful to have experiments that prove/disprove a theory, instead of assuming everything in papers is true and applicable. I also don't believe you can model tech workers like blue collar workers. The conditions are very different - length to get a job, severance pay, money in the bank, and so on. I would also assume that those in the minimum wage range would always search for higher paying jobs, because the difference between $7/hour and $11/hour is life-changing, whereas there's not a big quality of life difference between $70/hour and $110/hour.
- randomdata 4y ago
  > I would also assume that those in the minimum wage range would always search for higher paying jobs, because the difference between $7/hour and $11/hour is life-changing I would assume they are less likely to. Such a move may be life changing, but change isn't always for the best. If you have a $7/hour job you know what you've got. What if the $11/hour job is unbearable or the employer finds that you're not a good fit? As you point out, chances are you don't have any money in the bank to weather the mistake, making it an incredibly risky move. If you've been making $70/hour you're more likely to be in a position that you can be without work for a few months if things go bad, making a jump to $110/hour not so scary. Someone making $7/hour probably has less time to look for a new job. Not only may they be working more hours to make ends meet, but lower paying jobs tend to be more commanding of your time while on the job. It is unlikely they can browse jobs sites while sitting in a boring meeting like tech can. Not to mention that a tech worker is more likely to have recruiters handing them opportunities. As minimum wage exists as a tool to keep liquidity in the market in the face of workers not staying liquid by their own volition, once you know minimum wage is in the picture, you've already shown that the workers won't seek higher pay by themselves, no matter what their reasons are. If one state faced that problem, it seems likely that a neighbouring state would have the same problem. Cultures tend to be similar within narrow geographic areas. So, I'm not sure I understand the basis of your assumption.

muzani 4y ago

The core of economics is people, not companies or money. People with incentives are quite predictable. You do have a good point there, that you have model it as people. A person doesn't simply leave their city for a better wage; they can be tied down by family, friends, and certain loyalties. In this case, you can model a working class human like you'd model lifestock, always seeking greener pastures, or like a bag of flour, whose price is controlled by regulation instead of supply. I don't think these models are necessarily wrong. And sometimes the more accurate ones tend to dehumanize. But it's useful to have experiments that prove/disprove a theory, instead of assuming everything in papers is true and applicable. I also don't believe you can model tech workers like blue collar workers. The conditions are very different - length to get a job, severance pay, money in the bank, and so on. I would also assume that those in the minimum wage range would always search for higher paying jobs, because the difference between $7/hour and $11/hour is life-changing, whereas there's not a big quality of life difference between $70/hour and $110/hour.

randomdata 4y ago
> I would also assume that those in the minimum wage range would always search for higher paying jobs, because the difference between $7/hour and $11/hour is life-changing I would assume they are less likely to. Such a move may be life changing, but change isn't always for the best. If you have a $7/hour job you know what you've got. What if the $11/hour job is unbearable or the employer finds that you're not a good fit? As you point out, chances are you don't have any money in the bank to weather the mistake, making it an incredibly risky move. If you've been making $70/hour you're more likely to be in a position that you can be without work for a few months if things go bad, making a jump to $110/hour not so scary. Someone making $7/hour probably has less time to look for a new job. Not only may they be working more hours to make ends meet, but lower paying jobs tend to be more commanding of your time while on the job. It is unlikely they can browse jobs sites while sitting in a boring meeting like tech can. Not to mention that a tech worker is more likely to have recruiters handing them opportunities. As minimum wage exists as a tool to keep liquidity in the market in the face of workers not staying liquid by their own volition, once you know minimum wage is in the picture, you've already shown that the workers won't seek higher pay by themselves, no matter what their reasons are. If one state faced that problem, it seems likely that a neighbouring state would have the same problem. Cultures tend to be similar within narrow geographic areas. So, I'm not sure I understand the basis of your assumption.