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I'm surprised we haven't heard more arguments for raising the minimum wage over the last few years. The main argument against it is that it leads to inflation,

I'm surprised we haven't heard more arguments for raising the minimum wage over the last few years. The main argument against it is that it leads to inflation, but inflation has been the least of our worries recently.

dantheman 14y ago
One of the biggest arguments against it is that raises unemployment by making more people unemployable. Some people do not generate $10 + overhead cost per hour. Raising the minimum wage hurts the young the most since they need low skill, low value jobs to learn and gain experience. By removing that rung of the ladder we hurt them greatly throughout their life.
- mmanfrin 14y ago
  That sure has happened in Australia. These assessments of minimum wage that end at 'it raises unemployment' are intellectually stunted; it belies a simplistic understanding of economics and either an oversight or refusal to see that rising minimum wage makes for more spenders, which in turn drives demand. The higher-wage:higher-unemployment argument is a go-to in the wheelhouse of supply-side economists.
  - brc 14y ago
    That's why if you go to a restaurant in Australia you have to serve yourself - certainly nobody will be coming to your table to help you unless you're paying at least $50 per head. Whether that is right or wrong depends on the observer. But it is true.
    - ceejayoz 14y ago
      Uh, what? Australian citizen who gets back home every few years here... again, huh?
      - brc 14y ago
        Go into any mid-priced restaurant in Australia where a meal costs about $15-25. See if you get greeted into the restaurant, seated and served at the table, including having your drink refilled, any problems attended to and your bill brought to you. You will not. You will go to a counter, read a menu, order the food and return to your table. At some point you will either be paged, have your number called, or possibly have your food brought to the table. This is because waiting staff are unaffordable below a certain price point on the food.
        Evbn 14y ago
        It costs $25-$35 / diner to pay a server $12/hr?
        jpxxx 14y ago
        Generally, yes.
        pixl97 14y ago
        Restaurants are a burst capacity problem. In a typical restaurant from 11ish to 1sh you have a burst of traffic then from 1ish to 5ish you have low to no traffic. Once the dinner crowd comes in you'll have another burst of traffic that can vary greatly per weekday (monday nights, low traffic - friday nights, high traffic). You run in to the problem were many employees (waiters) want a full time job but you can only afford a few of them. In many food service types they've (as the parent stated) got rid of the waiters all together (increased unemployment) and only kept the staff that would need to be there regardless of traffic amount.
        Nursie 14y ago
        * cough* * bullshit* * cough* Eating out in a lot of Oz can be pricey, but that's just nonsense. Besides which, culturally, many folks from other countries find the US habit of having waiters hovering around constantly to be intensely annoying
        14y ago
  - dmm 14y ago
    Why not set minimum wage to $35/hr and we make everyone middle class?
    - Shivetya 14y ago
      for the same reason offering loans and grants didn't make college affordable, prices adjust to the money available and the costs to create. Are you ready to say all the people you have met or know are worth thirty five bucks and hour in a job? Would you pay them the same to work for you?
      - dmm 14y ago
        ;)
  - jstalin 14y ago
    Then let's raise it to $1000 an hour. We'll all be rich. To respond to the above comment, yes, it does lead to higher unemployment for those with lower skills, particularly in an environment when unemployment is already high. Who would you hire for $12 an hour? A teenager with no experience or someone who was laid off but has 5-10 years of experience? We already see (at least in the United States) that teen unemployment is the highest of all age groups at 23%, when average unemployment amongst all age groups is 7.9%. [1] For comparison, Germany has no statutory minimum wage (except for a few specific employment groups). Not exactly a bastion of poverty and destitution. [2] [1]: http://www.bls.gov/news.release/empsit.a.htm http://www.bls.gov/news.release/empsit.a.htm [2]: http://www.economist.com/node/21536648 http://www.economist.com/node/21536648
    - MartinCron 14y ago
      Then let's raise it to $1000 an hour. We'll all be rich Ridiculous arguments are ridiculous. The rest of your point is more than strong enough to stand on its own without that kind of nonsense.
      - jstalin 14y ago
        That's my point. Obviously, increasing the minimum wage to $1000 is ridiculous. But so is the idea that raising the minimum wage by $1 has no consequence, as some claim. The higher cost you impose on employers for low skill jobs, the more likely it will be that employers will attempt to hire fewer of those workers or reject unskilled candidates. It's simple logic. For instance, the hamburger-making machine will replace teenagers who need a job at McDonald's. [1] Why wouldn't an employer just purchase a machine that will reduce costs, create a consistent product, and not call in sick if it can do so at an equivalent or lower cost than an unskilled teen who would be required to earn $10 or $12 an hour? [1]: http://www.gizmag.com/hamburger-machine/25159/ http://www.gizmag.com/hamburger-machine/25159/ EDIT: 5.2% of US workers earn at or below the minimum wage, 50% of those are under 25: http://www.bls.gov/cps/minwage2011.htm http://www.bls.gov/cps/minwage2011.htm
        avar 14y ago
  - w3pm 14y ago
    Look at heavily unionized industries like hollywood and the writers guild for guidance. They effectively have a "minimum wage" where if you're part of the guild, you must be paid a MINIMUM of $64k for an original screenplay. http://www.wga.org/uploadedFiles/writers_resources/contracts/min2011.pdf http://www.wga.org/uploadedFiles/writers_resources/contracts... Guess how easy it is to get a job writing screenplays as a member of the guild? It's actually incredibly difficult and the vast majority of prospective writers are effectively unemployed, working jobs at coffee shops instead. Putting a price floor on labor creates unemployment, period. The writers guild is just one microcosm of this effect.
    - MartinCron 14y ago
      Hollywood screenwriting is an atypical labor market for all sorts of reasons. The fact that they are heavily unionized is only one small factor.
      - smsm42 14y ago
        Screenwriting may be atypical, but arithmetics that produces this problem is very typical. If you set a minimal price for certain item, that makes anybody holding the same item with lesser value effectively unable to sell it. If you set a minmal price for a car at $20k, you wouldn't be able to sell a used car once its value fell below $20k. Selling one's services abides by the same laws - price floor means excluding items with value less than the floor.
        Evbn 14y ago
        Are you somehow under the impression that Hollywood buys fewer screenplays than it would if producers could pay less? That there are some movies not getting made because of this?
        smsm42 14y ago
        If by "Hollywood" you mean whole movie/TV/entertainment industry, then yes, I think price of the scripts influences decisions. Blockbuster aren't the only movies made.
  - Dove 14y ago
    rising minimum wage makes for more spenders I don't see that at all. Raising the minimum wage results in people at the bottom losing their jobs, hence fewer spenders. I can't imagine why on earth you'd think there would be more. Nor do you explain why you think the idea that it raises unemployment is 'intellectually stunted'. I find the argument that we would expect the minimum wage to increase unemployment, and the data indicating that it historically has done just that, to be persuasive. (A good presentation of the argument; I honestly find this video persuasive) http://www.learnliberty.org/videos/does-minimum-wage-hurt-workers http://www.learnliberty.org/videos/does-minimum-wage-hurt-wo... (Historical data) http://www.learnliberty.org/sites/default/files/Davies_0.pdf http://www.learnliberty.org/sites/default/files/Davies_0.pdf What do you think I'm missing?
    - superuser2 14y ago
      The people who are actually necessary (worth the additional cost) can buy more things, and businesses in turn have more money.
      - Dove 14y ago
        I'll accept the first proposition: the people who were earning below the minimum wage before, who keep their jobs, have more money to spend. (Limitation: I accept the argument that says if they are producing significantly more than they are paid, they will eventually be paid more anyway, so the gain is both temporary and small.) But balance against that against the fact that those who are laid off, whose businesses close down, or who are never hired in the first place, have much less money to spend. Is the first force is bigger than the second, and hence businesses would see more demand? You'd have to prove that to me. I don't have evidence or a strong opinion either way, but I consider it unlikely.
        bluedanieru 14y ago
        >Limitation: I accept the argument that says if they are producing significantly more than they are paid, they will eventually be paid more anyway, so the gain is both temporary and small. Where the flying fuck have you been for the last 30 years?
  - lifeisstillgood 14y ago
    I seem unable to reply to others in this thread but I would like to take a view on the two comments that frame this : basically let's raise the minimum wage to $35 or to $1000 / hour. Now we should reasonably assume that there will not suddenly be an increase in jobs that can afford to pay 35 (or 1000!) - so those jobs will remain steady roughly. And those jobs below will either vanish or will find they can employ peoe at those rates. So there will be an increase in unemployment. But that's not the point - we are seeing a massive structural shift in jobs - technology is displacing at the White collar middle skill level. There are going to be less jobs no matter what. The share of GDP captured by wages is the important measure here - not the individual wage rate but using employment as a means of distributing wealth how do we spread the wealth around. If half the jobs vanish then we may simply find a social balance in women staying at home and men earning double. (nb I am not advocating this back-to-the-50s as a social good, just that minimum wage increases do not have to mean the share of the wealth diopps - we just need to find ways to share it out that we as society think are equitable)
    - Symmetry 14y ago
      Technology has been replacing workers since the tractor was introduced around 1900. But unemployment hasn't kept going up because we keep finding new ways to employ people. But if by some miracle we do finally automate everything minimum wages won't help at all - we're talking about a situation where there's no reason to employ someone in the first place. In that case just tax production and provide everyone a guaranteed minimum income. No need to worry about work disincentives, they weren't working anyways!
      - lifeisstillgood 14y ago
        Maybe. I don't have a good answer for how to equitably distribute the 40% or so of GDP that is currently captured by wage packets. Maybe Sweden will take your approach, but I would be amazed if the US will :-). But some solution will be needed.
      - deleted 14y ago
        [deleted]
  - Symmetry 14y ago
    Your argument assumes that all the increased that all the extra spending from people at the minimum wage goes to good produced by minimum wage workers, which I hope you would agree isn't true. In theory you could find that the minimum wage could raise employment with tenuous assumptions[1], but there's no need to sit back and theorize in your arm chair when you can go out and collect actual data. And most studies show that the rises in the minimum wage do increase unemployment, though there have been a few studies that showed the opposite. But still, the consensus among economists about minimum wage is about as strong as it is among climatologists about global warming. But that isn't the same as saying that a minimum wage is bad for poor people. If many people see their wages rise for every person who loses their job then maybe that's something we want. And the evidence does say that wage gains to the people making the new minimum exceed the wage loses of the people thrown out of work. But since ~90% of the money for those wage gains ends up coming from higher prices, we'd be much better off just raising taxes and handing the money to people earning less than we think they should. That way the costs would fall progressively rather than repressively, and we wouldn't see any increase in unemployment at all. EDIT: And while it's true that Australia has a very high minimum wage and low unemployment, most industries that would be minimum wage in the US have special exceptions from the minimum wage in Australia. The number of people earning 7$ an hour in Australia isn't that different per capita than in the US. [1] That minimum wage industries are monopsomies and have similar cost structures.
    - stretchwithme 14y ago
      Its easy to raise the minimum wage in the middle of an artificial economic boom. The destructive consequences don't show up until there is a drop in demand for labor. I doubt studies are designed to look beyond a few months after the increase for effects. If wages aren't drop when there is a dramatic increase in supply, there's no incentive to create businesses that can hire and train those people. Everyone that worked in the housing industry are now lacking marketable skills. They need retraining. It would be far better for the least valuable workers if we found some way to assist them that doesn't interfere with their ability to get a job. And we'd be doing that if there won't so many that don't understand how markets work. How much we pay in taxes is secondary to the high human costs of government interfering in critical markets like the labor market. The costs of this particular failure are focused entirely on the poorest among us. And most people are blind to how they are doing it to them.
  - stretchwithme 14y ago
    Individual employers are hiring to make a profit, not to make some collectivist understanding of the economy work out. Obviously, any dollars an employer does not give to his employees, he gets to spend or his customers get to spend. Those dollars don't disappear into the ether. There is no increase in overall spending from paying more for a service than it can command in the market place. And no increase in demand.
    - jackowayed 14y ago
      Except that for a lot of businesses, it's actually that any dollars an employer does not give to his employees, it keeps as profit. Then maybe it pays that out as dividends, but those mainly go to rich people who are likely to reinvest them rather than immediately spending them, because that small increase in dividend receipts doesn't make a huge difference on their overall financial situation. Whereas extra dollars going to a minimum wage earner will almost entirely be spent, because people that poor tend to spend nearly all of their income. It's the same reason why tax cuts to the poor are more stimulative than those to the rich.
      - eli_gottlieb 14y ago
        I would argue that dividends feed everyone's retirement and investment accounts, but: * As you pointed out, those are class-biased towards the upper middle class and those richer. * Worse: companies nowadays seem to be paying out pathetically low levels of actual dividends compared to their monumental earnings. It's an unsustainable economic model where earnings are supposed to create a higher stock price rather than a dividend payout, even for absurdly profitable companies like Apple.
      - tsotha 14y ago
        >...but those mainly go to rich people who are likely to reinvest them rather than immediately spending them, because that small increase in dividend receipts doesn't make a huge difference on their overall financial situation. And when they reinvest that money what do you expect happens to it?
      - brc 14y ago
  - robryan 14y ago
    It does have an effect in Australia I think. Many places would rather hire a group of casuals under 18 to cover 1 full time person. They can pay young people youth wages which are well under the minimum wage. Whether that is a bad thing or not I don't know.
    - pixl97 14y ago
      Looking at Spain's 55% youth unemployment, it's probably a good thing. Giving the young jobs is good, you don't learn how to work in a vacuum. Once they are older and have training they'll be able to find better jobs with the experience under their belt.
  - jacalata 14y ago
    'belies' means 'does not give the impression of'. If it 'belies a simplistic understanding' then it gives the impression of a not-simplistic understanding.
  - AJ007 14y ago
    Raising the minimum wage increases the disposable income for the employed. You are making the assumption that an increase in minimum wage does not decrease the employment rate. Your particular country may be benefiting from a commodities export boom, free-money level interest rates, or any number of other internal or external factors, which allow employers to get by fine with raising the minimum wage. Perhaps they had huge margins already, the customers can eat the increase in cost, CEOs are enjoying a stock market boom and don't dare to let their companies growth stall, whatever. In an economic contraction things aren't so rosy. We have a unique situation now where minimum-wage level employees are increasingly competing with machines. Increasing both the minimum wage and labor costs just expedites the progression of this trend.
    - warfangle 14y ago
      To take a line from Bartlett: that's why we need more retraining programs.
  - csomar 14y ago
    You shouldn't be writing this if you have a poor understanding of economics yourself. Raising minimum wages doesn't raise productivity. It redistribute wealth from the rich (investors) to the poor (employees). It does create more spenders in the employees level and less spenders in the investors level. Actually considering the Deadweight loss (http://en.wikipedia.org/wiki/Deadweight_loss http://en.wikipedia.org/wiki/Deadweight_loss), we'll end up with more unemployment and less GDP
  - nathan_long 14y ago
    >> rising minimum wage makes for more spenders Really? John lives near me and is unemployed. My neighbors and I all hate cutting our grass. We'd pay $5 an hour to have someone else do it, and John would prefer $5 an hour to $0. However, it's illegal for us to hire him at that wage. So we cut our own grass and he has no job. There's one less spender. There's also a bunch of hours we could have spent doing something more productive. For instance, I could have worked on my open source project instead of cutting my grass. But I'm producing $5 of economic value that hour instead of $50. So why is "you can't sell labor for less than $X" any more reasonable as a law than "you can't sell oranges for less than $X a pound" would be? Both lead to waste.
    - pixl97 14y ago
      Contract labor for the win. Sell the mowing job as a unit. I will pay you $X to mow lawn, you have one day to complete the task. You separate the speed in which the labor works from the value of the job. In most cases this leads the worker to complete as fast as possible for their own benefit, but does not harm you if the worker decides to take their time.
- MartinCron 14y ago
  That seems to be the effective argument against having a minimum wage at all. Once you establish a social contract that says that human effort should be valued at no less than a particular amount, we just accept that some level of underemployment as a result of that.
  - harryh 14y ago
    Of course. The argument is about where you set the minimum. Everyone agrees that a $100/hr minimum wage wouldn't work because the vast majority of jobs wouldn't support that. So the question is how high can you go before the underunemployment effects outweigh the "human effort should be valued" bit. 7.25? 10? 15? Reasonable people can disagree.
    - MartinCron 14y ago
      It's more than just the underemployment vs. "human effort should be valued" balance, though. There's a meaningful stimulus and multiplier effect to be found when people who pretty much have to spend every single dollar they get to stay afloat get a few more dollars to spend. I'm at a point where if I got a small increase in marginal revenue, it wouldn't really change my spending. I remember a time, however, when a .25/hour increase made a meaningful impact on what I could purchase.
      - harryh 14y ago
        AFAIK there is no empirical research to support that claim.
        MartinCron 14y ago
        A quick Google search found a handful of links to empirical research supporting that idea. Specifically: The authors examine 23 years of household spending data and find that for every dollar increase for a minimum wage worker results in $2,800 in new consumer spending by his or her household over the following year http://raisetheminimumwage.org/pages/stimulus http://raisetheminimumwage.org/pages/stimulus
- danielweber 14y ago
  A conservative economist says to not worry over a raise to $9 an hour: http://mungowitzend.blogspot.com/2013/02/please-to-calm-down-about-minimum-wage.html http://mungowitzend.blogspot.com/2013/02/please-to-calm-down... I do worry that we are eating away at low-pay jobs, which are often necessary steps for mid-pay jobs for the middle class. This is a tiny little step away from that, but probably not too much worth worrying about, given all the other things we have (like huge marginal rates on the poor as they rise out of eligibility for welfare programs).
- lifeisstillgood 14y ago
  I struggle to imagine why a business that cannot employ someone at 10 dollars and hour, is suddenly a Facebook style gangbusters when they pay 7 dollars an hour. If your business model is so thin that 3 dollars cripples you, really you need to re-think. (As an example, do we really think that the Comet/Currys/Circuit City sitting in a big car park miles out of town is running a sustainable business model for buying the latest gadgets? ) And on the demand side, do we think it is likely that the law firm that has five floors in the office block will decide that since all the cleaning companies costs have gone up, they will just leave the bins overflowing and ask the clients to wipe the toilets before use?
  - harryh 14y ago
    You aren't thinking at the margin. In general, you are right, but at the margin you are wrong.
    - lifeisstillgood 14y ago
      I think the margin is the wrong way to view this - yes, there are companies where losing a dollar will make it uneconomic - but I will be amazed if that company is otherwise a strong, scalable and robust business model, instead of a crippled business limping along till something kills it off.
      - cjy 14y ago
        Hiring decisions are made at the margin though. Even strong companies stop hiring when the additional cost of an additional worker is less than the additional value to the business.
  - ImprovedSilence 14y ago
    >> If your business model is so thin that 3 dollars cripples you, really you need to re-think well... that really depends on economy of scale I would say. Wal Mart has 2.2 million employees[1]. Lets assume 1 million of them are min-wage workers (assuming bottom rung has a high turnover, I think this might be conservative) Suddenly that $3/hr becomes $3 milllion/hr. Lets say the average worker works 30hrs/week, and suddenly this "$3" change from a $7 to $10 min-wage is costing Wal Mart 90 mil a week, over 4.5 billion a year! And eating 20% of your profit. [1] http://en.wikipedia.org/wiki/Walmart http://en.wikipedia.org/wiki/Walmart
- dfxm12 14y ago
  What happens is they get paid below minimum wage, and under the table, so they aren't paying taxes on their wages. I don't know if that is good or bad for the economy...
- tibbon 14y ago
  But how is there this weird curve that 40 years ago, there was an equivalent sustainable rate of essentially $24/hr or something- but now that businesses can't sustain it? It seems that companies and the economy keep growing, but for some reason we haven't kept up with the purchasing parity of lower end workers
  - pixl97 14y ago
    Energy costs? Overseas competition? Cost of regulations?
- dxbydt 14y ago
  These sort of thought experiments come from the same place where they say we should tax the unemployed for oxygen inhaled & subsidize oxygen for the employer. i find uchicago-style social-engineering-disguised-as-economics alternately fascinating & repulsive, depending on which end of the table I am sitting at.
  - natrius 14y ago
    What?
    - eli_gottlieb 14y ago
      The idea being that if joblessness has a social cost, we make the jobless pay that cost by taxing their breathing. Whereas if work, any work, is of social benefit, than we subsidize breathing by employers on a per-job basis. The thought experiment is: does working at a job have an intrinsic social value, or unemployment an intrinsic social cost, aside from the wages or lack thereof?
  - deleted 14y ago
    [deleted]
- rodgerd 14y ago
  That's certainly a quasi-religious position of the Boston school; unfortunately, it doesn't appear to jibe too well with reality: http://www.cepr.net/documents/publications/min-wage-2013-02.pdf http://www.cepr.net/documents/publications/min-wage-2013-02.... for example.
- eli_gottlieb 14y ago
  I disagree. Any job that was likely to teach you anything or become a valuable experience for getting later jobs probably already pays more than minimum wage, and is probably more selective about hiring than minimum-wage employers, too.
  - pixl97 14y ago
    You can disagree, doesn't mean you're correct. Right out of high school I worked at a gas station for a few months (needed to pay the bills) before I gained employment at an internet service. People skills, situation control, theft management are just a number of things I picked up there.
- 1123581321 14y ago
  It increases unemployment of low-skilled black men mainly. Other low-skill demographics don't have as much of a problem finding employment when the minimum wage increases. This awkward fact is why lowering the minimum wage is progressive.
  - Evbn 14y ago
    Unemployment doesn't have to be worse than low-wage employment, in a progressive socialized economy.
    - 1123581321 14y ago
      Unemployment is so mentally and physically unhealthy that I do not see how it could ever become better than working a job that creates candidacy for better jobs. An unemployed person isn't a student or a full-time volunteer (unless that person is networking; such people usually are well above minimum wage.)
- chipotle_coyote 14y ago
  This is a common argument, and it makes sense in theory. (I don't mean "in theory" snidely, I mean it in the real sense -- it's a defensible theory.) But here's the thing: there are states across the country that have higher minimum wage than the national minimum, and cities that have higher minimum wage than their states. This has been true for more than a decade in most of these places -- so there's been enough time for us to gauge the effects by now, right? If the theory was correct, most of those localities should have measurably higher unemployment rates in low wage jobs than surrounding localities, and most of those rates should not be able to be linked to other factors beyond the legislated minimum wage. As it turns out, there's no substantive evidence this has happened. California does not, it seems, have a statistically lower number of minimum wage jobs per capita available than other states. That's true even in San Francisco, which has the highest minimum wage in the country. In fact, there have been studies done on this. A lot of them. Generally they show either no effect on employment caused by raising the minimum wage, or at worst case a small negative effect. There's a fair amount about what economists think at this NYT article, including links to a few of those studies: http://economix.blogs.nytimes.com/2013/03/04/what-economists-think-about-raising-the-minimum-wage/?smid=tw-nytimes http://economix.blogs.nytimes.com/2013/03/04/what-economists... While the polled economists are rather evenly split on whether they think raising the wage is likely to be overall negative or positive, there was stronger agreement that "benefits of raising the minimum wage and indexing it to inflation outweighed the costs."
  - pixl97 14y ago
    What about mobility. If a person loses their job, in the U.S. it is easy to move. With the number of people that have left California to other states with lower costs of living, or going to counties with lower costs these things are not easily gathered. http://www.newgeography.com/content/001925-if-california-is-doing-so-great-why-are-so-many-leaving http://www.newgeography.com/content/001925-if-california-is-...
- jeza 14y ago
  This thinking that people should be happy to work at a token wage than not at all worries me a bit. It might be okay for some teenagers who live at home with their parents and have their basic needs covered, but what about people who won't cover their cost of living with such a small amount? Where I live the minimum wage is $15.96 an hour and it is not really even possible to live on that and have any quality of life.
  - tsotha 14y ago
    Ultimately in the absence of government subsidy people are paid what their labor is worth. If your labor is only worth $8/hr and the minimum wage is $15.96/hr, you won't get paid $15.96/hr. Whatever you would have done at $8/hr will be automated.
    - wildgift 14y ago
      You usually get paid less than what your labor is worth. That's how a business builds up its savings account, or pays off its debts.
      - tsotha 14y ago
        Nonsense. If that's the going rate for your labor, that's what it's worth. The fact that your employer can use your labor as part of a system that returns more value than the sum of its parts isn't relevant.
        Evbn 14y ago
        By that same logic, if government raises the rate, negotiating on your behalf, your labor is worth more.
        tsotha 14y ago
        As other have noted we'd all be rich if that were true. No, your labor is still only worth what someone else is willing to pay. Your wages may go up temporarily because it takes time for employers to adjust. In the long run if you can't offer your employer more value than what he's paying you simply won't have a job.
- yarrel 14y ago
  That argument hasn't been supported by actual studies in the UK.
- RyanMcGreal 14y ago
  > One of the biggest arguments against it is that raises unemployment by making more people unemployable. This is a classic a priori economic argument, and the data do not support it. Here are some studies on the effects of minimum wage increases. "The Florida Minimum Wage After One Year" Summary: none of the dire predictions of job losses came true, the Florida economy continued to lead the country in job growth, and the unemployment rate continued to decline steadily, while economic growth accelerated. http://www.risep-fiu.org/reports/Florida_Minimum_Wage_Report.pdf http://www.risep-fiu.org/reports/Florida_Minimum_Wage_Report... "The Economics of the Minimum Wage" Summary: minimum wage increases have little or no impact on employment rates. http://www.progressive-economics.ca/2007/01/27/the-economics-of-the-minimum-wage-again/ http://www.progressive-economics.ca/2007/01/27/the-economics... "Step up, not out: The case for raising the federal minimum wage for workers in every state" Summary: critics argue that, faced with rising labor costs, employers are forced to lay off workers. This claim has been carefully studied by labor economists who have found little evidence that minimum wage increases lead to significant job losses. In fact, the research unequivocally shows that the benefits to low-wage workers and their families far outweigh the costs. http://www.epi.org/content.cfm/issuebriefs_ib149 http://www.epi.org/content.cfm/issuebriefs_ib149 "Myth and Measurement: The New Economics of the Minimum Wage" Summary: recent increases in the minimum wage had no adverse effect on employment. http://www.amazon.ca/Myth-Measurement-Economics-Minimum-Wage/dp/0691048231 http://www.amazon.ca/Myth-Measurement-Economics-Minimum-Wage... "States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth", Fiscal Policy Institute, 2004. http://www.fiscalpolicy.org/FPISmallBusinessMinWage.pdf http://www.fiscalpolicy.org/FPISmallBusinessMinWage.pdf "National Minimum Wage: Low Pay Commission Report 2005." Summary: The National Minimum Wage was introduced on 1 April 1999, with an adult rate of £3.60. Its introduction benefited about one million low-paid workers and had no measurable adverse effects on employment or inflation. http://www.lowpay.gov.uk/lowpay/report/pdf/DTi-Min_Wage.pdf http://www.lowpay.gov.uk/lowpay/report/pdf/DTi-Min_Wage.pdf I recommend Alan Manning's "Monopsony in Motion", which subjects the standard economic assumptions about perfect competition to some rigorous empirical testing. http://press.princeton.edu/titles/7522.html http://press.princeton.edu/titles/7522.html The market for labour is an imperfect market that does not behave in a simplistic manner: * Markets for labour are relatively inflexible - it's difficult and time-consuming to look for a different job, so it's hard for employees to 'vote with their feet' by seeking employment elsewhere - especially those employees making the least money and having to work the longest hours to make ends meet. * Because there are relatively few employers compared to a great many employees, employers have market power - they can force wages below a pure market rate because employees have limited options for alternate employment and limited opportunities to seek out those options. * Higher wages mean lower turnover and hence lower hiring and training costs for employers, which offset the allocative distortion of paying higher than a market rate. * At the same time, higher wages motivate employees to work harder, which raises productivity and can also help to offset the higher cost of labour. * When already-wealthy people make more money, they tend to invest it, but when poor people make more money, they tend to spend it. As a result, a policy that increases income to the poor has a bigger impact on GDP than a policy that increases income to the rich. * When low-income workers make more money, they depend less on government subsidies, which alleviates pressure on public expenditure.
- RougeFemme 14y ago
  In today's US economy, those jobs are not taken by the young anymore. They are being taken by people who have been laid-off/downsized, already have skills of some sort and don't need the experience of the low value jobs.
deleted 14y ago
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protomyth 14y ago
The main argument for me is that it leads to higher unemployment for teenagers and its affects on small businesses trying to get part time workers.
- Evbn 14y ago
  What does part time have to do with hourly wage?
  - protomyth 14y ago
    part time jobs are the most likely to pay the minimum wage
gibsonf1 14y ago
The main argument against it is that many people loose their jobs when the minimum is raised for those who can't provide that much value to their employers. Any interference with the free market never results in a good thing. Note that the most innovative part of the economy, computers/software, is also the least regulated.
- akowala 14y ago
  Because of interference with the free market we have safer air to breath, water to drink, food to eat, and medicines to take. The free market only cares about something when it will affect profit margins positevly and lets be honest most people don't care about how why it's really important to not pollute the ocean. Without government interference we would still have child labor. Correlation doesn't equal causation, my friend. Most would agree the reason software is so successful is because of the ultra low barrier to market entrance because all you need to build software is a $300 computer and cheap Internet connection. I don't have the burden of having to run a physical store and pay all the expenses that go along with that. I can compete with billion dollar companies and win.
  - gibsonf1 14y ago
    Interesting theory - can you explain why, then, that the most regulated economies ever, such as the former Soviet Union or former East Germany, were the most polluted? Interference in the free market causes chaos, such as our current economy and the direction things are going now, unfortunately. Your easy start up example is interesting too, as if there were more regulation, you would have to work through layers and layers of red tape and fees and lawyers to start a company etc which simply reinforces my point. If you were to add 50K+ to the costs of starting a software company due to regulation and fees, the innovation landscape would change dramatically as would the companies we have today.
    - Evbn 14y ago
      Gosh, I wonder if being ruled by a mass murderer dictator might have been a factor?
cjy 14y ago
The main argument against the minimum wage is that it may increase unemployment for unskilled workers. However, recent empirical work suggests that the minimum wage is currently low enough in the U.S. that raising it has quite a small effect on unemployment. Therefore, some economists feel the redistribution effects are worth a small cost in efficiency. Here is a survey of prominent economists on the effects of raising the minimum wage to $9: http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_br0IEq5a9E77NMV http://www.igmchicago.org/igm-economic-experts-panel/poll-re... Many economists would argue that increasing the EITC would be a better way to help the poor.
- seanmcdirmid 14y ago
  But the libertarians don't see it like that. If we give poor people $9, they'll want $25, $100, and then $1000/hour. There is no point in arguing a rise to $9/hour, so use straw man to make the argument against stronger! I like min wage increases vs EITC. A min wage increase pushes up the value of human labor, giving more incentive to innovate and automate, which is where we should be heading anyways. It's actually a hard love approach.
  - emiliobumachar 14y ago
    Remember there's always that cozy alternative to innovate and automate: not starting that business after all.
    - seanmcdirmid 14y ago
      Fortunately we aren't like that. But we still need the pressure valve on at the low end to force us all up the value chain. It's like raising water rates to make you use water more efficiently, do you stop using it? No, you are smarter about how you use it. Human labor is the same thing. I've seen what happens when the bottom is too low...it's not much better than slavery or serfdom.
- Evbn 14y ago
  The problem with EITC (and Medicaid) is that it subsidizes employers like Walmart.
smsm42 14y ago
It's not only inflation. The argument is making more low-skilled youngsters unemployable and thus preventing them from stepping on the lowest step of the skills ladder which eventually would take them to higher wages. It also precludes people that are unable to generate enough value to justify minimum wage from earning any income instead of completely relying on state assistance. Inflation can be counteracting this - since if dollar costs less, eventually the value of it would fall low enough so that value generated by an unskilled worker is worth the dollars state prescribes to pay him - but that'd take time, and getting on the dole is easier than getting off.
- Evbn 14y ago
  Unemployed people can do plenty of things to develop skills, and are often required to do so by welfare programs. What are the main skills acquired by working at Walmart after the first week?
  - pixl97 14y ago
    Assuming Walmart is the only minimum wage employer is your first mistake.
  - smsm42 14y ago
    I don't know, never worked at Walmart (and shopped there maybe twice) but I can guess - people skills? Management skills if one becomes, say, shift supervisor? Plain old "showing up to work on time" skills (for a person who never ever held a steady job that might be a new skill too)? Having a resume that actually shows you can do all of the above so hiring you is lower risk? Developing skills because some law requires you to check the V in the papers and developing skills because you're actually earning your living doing that is a very different thing.
csomar 14y ago
No it doesn't lead to inflation (maybe inflation in products that the $10/hour employees mostly use) but the general rate of inflation should be the same. Raising the minimum wage redistribute the wealth from the rich to the poor. The disadvantage is that it creates a Deadweight loss (http://en.wikipedia.org/wiki/Deadweight_loss http://en.wikipedia.org/wiki/Deadweight_loss) resulting in unemployment and lost economic value. In a perfect, competitive and free market there should be no minimum wages. However, as a liberal capitalist, I think we should keep some standard.
- Evbn 14y ago
  Deadweight loss only occurs if government is incapable of putting people to productive work. government, while imperfect, has some capacity for organizing productive labor.

dantheman 14y ago

One of the biggest arguments against it is that raises unemployment by making more people unemployable. Some people do not generate $10 + overhead cost per hour. Raising the minimum wage hurts the young the most since they need low skill, low value jobs to learn and gain experience. By removing that rung of the ladder we hurt them greatly throughout their life.

mmanfrin 14y ago
That sure has happened in Australia. These assessments of minimum wage that end at 'it raises unemployment' are intellectually stunted; it belies a simplistic understanding of economics and either an oversight or refusal to see that rising minimum wage makes for more spenders, which in turn drives demand. The higher-wage:higher-unemployment argument is a go-to in the wheelhouse of supply-side economists.
- brc 14y ago
  That's why if you go to a restaurant in Australia you have to serve yourself - certainly nobody will be coming to your table to help you unless you're paying at least $50 per head. Whether that is right or wrong depends on the observer. But it is true.
  - ceejayoz 14y ago
    Uh, what? Australian citizen who gets back home every few years here... again, huh?
    - brc 14y ago
      Go into any mid-priced restaurant in Australia where a meal costs about $15-25. See if you get greeted into the restaurant, seated and served at the table, including having your drink refilled, any problems attended to and your bill brought to you. You will not. You will go to a counter, read a menu, order the food and return to your table. At some point you will either be paged, have your number called, or possibly have your food brought to the table. This is because waiting staff are unaffordable below a certain price point on the food.
      - Evbn 14y ago
        It costs $25-$35 / diner to pay a server $12/hr?
        jpxxx 14y ago
        Generally, yes.
        pixl97 14y ago
        Restaurants are a burst capacity problem. In a typical restaurant from 11ish to 1sh you have a burst of traffic then from 1ish to 5ish you have low to no traffic. Once the dinner crowd comes in you'll have another burst of traffic that can vary greatly per weekday (monday nights, low traffic - friday nights, high traffic). You run in to the problem were many employees (waiters) want a full time job but you can only afford a few of them. In many food service types they've (as the parent stated) got rid of the waiters all together (increased unemployment) and only kept the staff that would need to be there regardless of traffic amount.
      - Nursie 14y ago
        * cough* * bullshit* * cough* Eating out in a lot of Oz can be pricey, but that's just nonsense. Besides which, culturally, many folks from other countries find the US habit of having waiters hovering around constantly to be intensely annoying
        14y ago
- dmm 14y ago
  Why not set minimum wage to $35/hr and we make everyone middle class?
  - Shivetya 14y ago
    for the same reason offering loans and grants didn't make college affordable, prices adjust to the money available and the costs to create. Are you ready to say all the people you have met or know are worth thirty five bucks and hour in a job? Would you pay them the same to work for you?
    - dmm 14y ago
      ;)
- jstalin 14y ago
  Then let's raise it to $1000 an hour. We'll all be rich. To respond to the above comment, yes, it does lead to higher unemployment for those with lower skills, particularly in an environment when unemployment is already high. Who would you hire for $12 an hour? A teenager with no experience or someone who was laid off but has 5-10 years of experience? We already see (at least in the United States) that teen unemployment is the highest of all age groups at 23%, when average unemployment amongst all age groups is 7.9%. [1] For comparison, Germany has no statutory minimum wage (except for a few specific employment groups). Not exactly a bastion of poverty and destitution. [2] [1]: http://www.bls.gov/news.release/empsit.a.htm http://www.bls.gov/news.release/empsit.a.htm [2]: http://www.economist.com/node/21536648 http://www.economist.com/node/21536648
  - MartinCron 14y ago
    Then let's raise it to $1000 an hour. We'll all be rich Ridiculous arguments are ridiculous. The rest of your point is more than strong enough to stand on its own without that kind of nonsense.
    - jstalin 14y ago
      That's my point. Obviously, increasing the minimum wage to $1000 is ridiculous. But so is the idea that raising the minimum wage by $1 has no consequence, as some claim. The higher cost you impose on employers for low skill jobs, the more likely it will be that employers will attempt to hire fewer of those workers or reject unskilled candidates. It's simple logic. For instance, the hamburger-making machine will replace teenagers who need a job at McDonald's. [1] Why wouldn't an employer just purchase a machine that will reduce costs, create a consistent product, and not call in sick if it can do so at an equivalent or lower cost than an unskilled teen who would be required to earn $10 or $12 an hour? [1]: http://www.gizmag.com/hamburger-machine/25159/ http://www.gizmag.com/hamburger-machine/25159/ EDIT: 5.2% of US workers earn at or below the minimum wage, 50% of those are under 25: http://www.bls.gov/cps/minwage2011.htm http://www.bls.gov/cps/minwage2011.htm
      - avar 14y ago
- w3pm 14y ago
  Look at heavily unionized industries like hollywood and the writers guild for guidance. They effectively have a "minimum wage" where if you're part of the guild, you must be paid a MINIMUM of $64k for an original screenplay. http://www.wga.org/uploadedFiles/writers_resources/contracts/min2011.pdf http://www.wga.org/uploadedFiles/writers_resources/contracts... Guess how easy it is to get a job writing screenplays as a member of the guild? It's actually incredibly difficult and the vast majority of prospective writers are effectively unemployed, working jobs at coffee shops instead. Putting a price floor on labor creates unemployment, period. The writers guild is just one microcosm of this effect.
  - MartinCron 14y ago
    Hollywood screenwriting is an atypical labor market for all sorts of reasons. The fact that they are heavily unionized is only one small factor.
    - smsm42 14y ago
      Screenwriting may be atypical, but arithmetics that produces this problem is very typical. If you set a minimal price for certain item, that makes anybody holding the same item with lesser value effectively unable to sell it. If you set a minmal price for a car at $20k, you wouldn't be able to sell a used car once its value fell below $20k. Selling one's services abides by the same laws - price floor means excluding items with value less than the floor.
      - Evbn 14y ago
        Are you somehow under the impression that Hollywood buys fewer screenplays than it would if producers could pay less? That there are some movies not getting made because of this?
        smsm42 14y ago
        If by "Hollywood" you mean whole movie/TV/entertainment industry, then yes, I think price of the scripts influences decisions. Blockbuster aren't the only movies made.
- Dove 14y ago
  rising minimum wage makes for more spenders I don't see that at all. Raising the minimum wage results in people at the bottom losing their jobs, hence fewer spenders. I can't imagine why on earth you'd think there would be more. Nor do you explain why you think the idea that it raises unemployment is 'intellectually stunted'. I find the argument that we would expect the minimum wage to increase unemployment, and the data indicating that it historically has done just that, to be persuasive. (A good presentation of the argument; I honestly find this video persuasive) http://www.learnliberty.org/videos/does-minimum-wage-hurt-workers http://www.learnliberty.org/videos/does-minimum-wage-hurt-wo... (Historical data) http://www.learnliberty.org/sites/default/files/Davies_0.pdf http://www.learnliberty.org/sites/default/files/Davies_0.pdf What do you think I'm missing?
  - superuser2 14y ago
    The people who are actually necessary (worth the additional cost) can buy more things, and businesses in turn have more money.
    - Dove 14y ago
      I'll accept the first proposition: the people who were earning below the minimum wage before, who keep their jobs, have more money to spend. (Limitation: I accept the argument that says if they are producing significantly more than they are paid, they will eventually be paid more anyway, so the gain is both temporary and small.) But balance against that against the fact that those who are laid off, whose businesses close down, or who are never hired in the first place, have much less money to spend. Is the first force is bigger than the second, and hence businesses would see more demand? You'd have to prove that to me. I don't have evidence or a strong opinion either way, but I consider it unlikely.
      - bluedanieru 14y ago
        >Limitation: I accept the argument that says if they are producing significantly more than they are paid, they will eventually be paid more anyway, so the gain is both temporary and small. Where the flying fuck have you been for the last 30 years?
- lifeisstillgood 14y ago
  I seem unable to reply to others in this thread but I would like to take a view on the two comments that frame this : basically let's raise the minimum wage to $35 or to $1000 / hour. Now we should reasonably assume that there will not suddenly be an increase in jobs that can afford to pay 35 (or 1000!) - so those jobs will remain steady roughly. And those jobs below will either vanish or will find they can employ peoe at those rates. So there will be an increase in unemployment. But that's not the point - we are seeing a massive structural shift in jobs - technology is displacing at the White collar middle skill level. There are going to be less jobs no matter what. The share of GDP captured by wages is the important measure here - not the individual wage rate but using employment as a means of distributing wealth how do we spread the wealth around. If half the jobs vanish then we may simply find a social balance in women staying at home and men earning double. (nb I am not advocating this back-to-the-50s as a social good, just that minimum wage increases do not have to mean the share of the wealth diopps - we just need to find ways to share it out that we as society think are equitable)
  - Symmetry 14y ago
    Technology has been replacing workers since the tractor was introduced around 1900. But unemployment hasn't kept going up because we keep finding new ways to employ people. But if by some miracle we do finally automate everything minimum wages won't help at all - we're talking about a situation where there's no reason to employ someone in the first place. In that case just tax production and provide everyone a guaranteed minimum income. No need to worry about work disincentives, they weren't working anyways!
    - lifeisstillgood 14y ago
      Maybe. I don't have a good answer for how to equitably distribute the 40% or so of GDP that is currently captured by wage packets. Maybe Sweden will take your approach, but I would be amazed if the US will :-). But some solution will be needed.
    - deleted 14y ago
      [deleted]
- Symmetry 14y ago
  Your argument assumes that all the increased that all the extra spending from people at the minimum wage goes to good produced by minimum wage workers, which I hope you would agree isn't true. In theory you could find that the minimum wage could raise employment with tenuous assumptions[1], but there's no need to sit back and theorize in your arm chair when you can go out and collect actual data. And most studies show that the rises in the minimum wage do increase unemployment, though there have been a few studies that showed the opposite. But still, the consensus among economists about minimum wage is about as strong as it is among climatologists about global warming. But that isn't the same as saying that a minimum wage is bad for poor people. If many people see their wages rise for every person who loses their job then maybe that's something we want. And the evidence does say that wage gains to the people making the new minimum exceed the wage loses of the people thrown out of work. But since ~90% of the money for those wage gains ends up coming from higher prices, we'd be much better off just raising taxes and handing the money to people earning less than we think they should. That way the costs would fall progressively rather than repressively, and we wouldn't see any increase in unemployment at all. EDIT: And while it's true that Australia has a very high minimum wage and low unemployment, most industries that would be minimum wage in the US have special exceptions from the minimum wage in Australia. The number of people earning 7$ an hour in Australia isn't that different per capita than in the US. [1] That minimum wage industries are monopsomies and have similar cost structures.
  - stretchwithme 14y ago
    Its easy to raise the minimum wage in the middle of an artificial economic boom. The destructive consequences don't show up until there is a drop in demand for labor. I doubt studies are designed to look beyond a few months after the increase for effects. If wages aren't drop when there is a dramatic increase in supply, there's no incentive to create businesses that can hire and train those people. Everyone that worked in the housing industry are now lacking marketable skills. They need retraining. It would be far better for the least valuable workers if we found some way to assist them that doesn't interfere with their ability to get a job. And we'd be doing that if there won't so many that don't understand how markets work. How much we pay in taxes is secondary to the high human costs of government interfering in critical markets like the labor market. The costs of this particular failure are focused entirely on the poorest among us. And most people are blind to how they are doing it to them.
- stretchwithme 14y ago
  Individual employers are hiring to make a profit, not to make some collectivist understanding of the economy work out. Obviously, any dollars an employer does not give to his employees, he gets to spend or his customers get to spend. Those dollars don't disappear into the ether. There is no increase in overall spending from paying more for a service than it can command in the market place. And no increase in demand.
  - jackowayed 14y ago
    Except that for a lot of businesses, it's actually that any dollars an employer does not give to his employees, it keeps as profit. Then maybe it pays that out as dividends, but those mainly go to rich people who are likely to reinvest them rather than immediately spending them, because that small increase in dividend receipts doesn't make a huge difference on their overall financial situation. Whereas extra dollars going to a minimum wage earner will almost entirely be spent, because people that poor tend to spend nearly all of their income. It's the same reason why tax cuts to the poor are more stimulative than those to the rich.
    - eli_gottlieb 14y ago
      I would argue that dividends feed everyone's retirement and investment accounts, but: * As you pointed out, those are class-biased towards the upper middle class and those richer. * Worse: companies nowadays seem to be paying out pathetically low levels of actual dividends compared to their monumental earnings. It's an unsustainable economic model where earnings are supposed to create a higher stock price rather than a dividend payout, even for absurdly profitable companies like Apple.
    - tsotha 14y ago
      >...but those mainly go to rich people who are likely to reinvest them rather than immediately spending them, because that small increase in dividend receipts doesn't make a huge difference on their overall financial situation. And when they reinvest that money what do you expect happens to it?
    - brc 14y ago
- robryan 14y ago
  It does have an effect in Australia I think. Many places would rather hire a group of casuals under 18 to cover 1 full time person. They can pay young people youth wages which are well under the minimum wage. Whether that is a bad thing or not I don't know.
  - pixl97 14y ago
    Looking at Spain's 55% youth unemployment, it's probably a good thing. Giving the young jobs is good, you don't learn how to work in a vacuum. Once they are older and have training they'll be able to find better jobs with the experience under their belt.
- jacalata 14y ago
  'belies' means 'does not give the impression of'. If it 'belies a simplistic understanding' then it gives the impression of a not-simplistic understanding.
- AJ007 14y ago
  Raising the minimum wage increases the disposable income for the employed. You are making the assumption that an increase in minimum wage does not decrease the employment rate. Your particular country may be benefiting from a commodities export boom, free-money level interest rates, or any number of other internal or external factors, which allow employers to get by fine with raising the minimum wage. Perhaps they had huge margins already, the customers can eat the increase in cost, CEOs are enjoying a stock market boom and don't dare to let their companies growth stall, whatever. In an economic contraction things aren't so rosy. We have a unique situation now where minimum-wage level employees are increasingly competing with machines. Increasing both the minimum wage and labor costs just expedites the progression of this trend.
  - warfangle 14y ago
    To take a line from Bartlett: that's why we need more retraining programs.
- csomar 14y ago
  You shouldn't be writing this if you have a poor understanding of economics yourself. Raising minimum wages doesn't raise productivity. It redistribute wealth from the rich (investors) to the poor (employees). It does create more spenders in the employees level and less spenders in the investors level. Actually considering the Deadweight loss (http://en.wikipedia.org/wiki/Deadweight_loss http://en.wikipedia.org/wiki/Deadweight_loss), we'll end up with more unemployment and less GDP
- nathan_long 14y ago
  >> rising minimum wage makes for more spenders Really? John lives near me and is unemployed. My neighbors and I all hate cutting our grass. We'd pay $5 an hour to have someone else do it, and John would prefer $5 an hour to $0. However, it's illegal for us to hire him at that wage. So we cut our own grass and he has no job. There's one less spender. There's also a bunch of hours we could have spent doing something more productive. For instance, I could have worked on my open source project instead of cutting my grass. But I'm producing $5 of economic value that hour instead of $50. So why is "you can't sell labor for less than $X" any more reasonable as a law than "you can't sell oranges for less than $X a pound" would be? Both lead to waste.
  - pixl97 14y ago
    Contract labor for the win. Sell the mowing job as a unit. I will pay you $X to mow lawn, you have one day to complete the task. You separate the speed in which the labor works from the value of the job. In most cases this leads the worker to complete as fast as possible for their own benefit, but does not harm you if the worker decides to take their time.
MartinCron 14y ago
That seems to be the effective argument against having a minimum wage at all. Once you establish a social contract that says that human effort should be valued at no less than a particular amount, we just accept that some level of underemployment as a result of that.
- harryh 14y ago
  Of course. The argument is about where you set the minimum. Everyone agrees that a $100/hr minimum wage wouldn't work because the vast majority of jobs wouldn't support that. So the question is how high can you go before the underunemployment effects outweigh the "human effort should be valued" bit. 7.25? 10? 15? Reasonable people can disagree.
  - MartinCron 14y ago
    It's more than just the underemployment vs. "human effort should be valued" balance, though. There's a meaningful stimulus and multiplier effect to be found when people who pretty much have to spend every single dollar they get to stay afloat get a few more dollars to spend. I'm at a point where if I got a small increase in marginal revenue, it wouldn't really change my spending. I remember a time, however, when a .25/hour increase made a meaningful impact on what I could purchase.
    - harryh 14y ago
      AFAIK there is no empirical research to support that claim.
      - MartinCron 14y ago
        A quick Google search found a handful of links to empirical research supporting that idea. Specifically: The authors examine 23 years of household spending data and find that for every dollar increase for a minimum wage worker results in $2,800 in new consumer spending by his or her household over the following year http://raisetheminimumwage.org/pages/stimulus http://raisetheminimumwage.org/pages/stimulus
danielweber 14y ago
A conservative economist says to not worry over a raise to $9 an hour: http://mungowitzend.blogspot.com/2013/02/please-to-calm-down-about-minimum-wage.html http://mungowitzend.blogspot.com/2013/02/please-to-calm-down... I do worry that we are eating away at low-pay jobs, which are often necessary steps for mid-pay jobs for the middle class. This is a tiny little step away from that, but probably not too much worth worrying about, given all the other things we have (like huge marginal rates on the poor as they rise out of eligibility for welfare programs).
lifeisstillgood 14y ago
I struggle to imagine why a business that cannot employ someone at 10 dollars and hour, is suddenly a Facebook style gangbusters when they pay 7 dollars an hour. If your business model is so thin that 3 dollars cripples you, really you need to re-think. (As an example, do we really think that the Comet/Currys/Circuit City sitting in a big car park miles out of town is running a sustainable business model for buying the latest gadgets? ) And on the demand side, do we think it is likely that the law firm that has five floors in the office block will decide that since all the cleaning companies costs have gone up, they will just leave the bins overflowing and ask the clients to wipe the toilets before use?
- harryh 14y ago
  You aren't thinking at the margin. In general, you are right, but at the margin you are wrong.
  - lifeisstillgood 14y ago
    I think the margin is the wrong way to view this - yes, there are companies where losing a dollar will make it uneconomic - but I will be amazed if that company is otherwise a strong, scalable and robust business model, instead of a crippled business limping along till something kills it off.
    - cjy 14y ago
      Hiring decisions are made at the margin though. Even strong companies stop hiring when the additional cost of an additional worker is less than the additional value to the business.
- ImprovedSilence 14y ago
  >> If your business model is so thin that 3 dollars cripples you, really you need to re-think well... that really depends on economy of scale I would say. Wal Mart has 2.2 million employees[1]. Lets assume 1 million of them are min-wage workers (assuming bottom rung has a high turnover, I think this might be conservative) Suddenly that $3/hr becomes $3 milllion/hr. Lets say the average worker works 30hrs/week, and suddenly this "$3" change from a $7 to $10 min-wage is costing Wal Mart 90 mil a week, over 4.5 billion a year! And eating 20% of your profit. [1] http://en.wikipedia.org/wiki/Walmart http://en.wikipedia.org/wiki/Walmart
dfxm12 14y ago
What happens is they get paid below minimum wage, and under the table, so they aren't paying taxes on their wages. I don't know if that is good or bad for the economy...
tibbon 14y ago
But how is there this weird curve that 40 years ago, there was an equivalent sustainable rate of essentially $24/hr or something- but now that businesses can't sustain it? It seems that companies and the economy keep growing, but for some reason we haven't kept up with the purchasing parity of lower end workers
- pixl97 14y ago
  Energy costs? Overseas competition? Cost of regulations?
dxbydt 14y ago
These sort of thought experiments come from the same place where they say we should tax the unemployed for oxygen inhaled & subsidize oxygen for the employer. i find uchicago-style social-engineering-disguised-as-economics alternately fascinating & repulsive, depending on which end of the table I am sitting at.
- natrius 14y ago
  What?
  - eli_gottlieb 14y ago
    The idea being that if joblessness has a social cost, we make the jobless pay that cost by taxing their breathing. Whereas if work, any work, is of social benefit, than we subsidize breathing by employers on a per-job basis. The thought experiment is: does working at a job have an intrinsic social value, or unemployment an intrinsic social cost, aside from the wages or lack thereof?
- deleted 14y ago
  [deleted]
rodgerd 14y ago
That's certainly a quasi-religious position of the Boston school; unfortunately, it doesn't appear to jibe too well with reality: http://www.cepr.net/documents/publications/min-wage-2013-02.pdf http://www.cepr.net/documents/publications/min-wage-2013-02.... for example.
eli_gottlieb 14y ago
I disagree. Any job that was likely to teach you anything or become a valuable experience for getting later jobs probably already pays more than minimum wage, and is probably more selective about hiring than minimum-wage employers, too.
- pixl97 14y ago
  You can disagree, doesn't mean you're correct. Right out of high school I worked at a gas station for a few months (needed to pay the bills) before I gained employment at an internet service. People skills, situation control, theft management are just a number of things I picked up there.
1123581321 14y ago
It increases unemployment of low-skilled black men mainly. Other low-skill demographics don't have as much of a problem finding employment when the minimum wage increases. This awkward fact is why lowering the minimum wage is progressive.
- Evbn 14y ago
  Unemployment doesn't have to be worse than low-wage employment, in a progressive socialized economy.
  - 1123581321 14y ago
    Unemployment is so mentally and physically unhealthy that I do not see how it could ever become better than working a job that creates candidacy for better jobs. An unemployed person isn't a student or a full-time volunteer (unless that person is networking; such people usually are well above minimum wage.)
chipotle_coyote 14y ago
This is a common argument, and it makes sense in theory. (I don't mean "in theory" snidely, I mean it in the real sense -- it's a defensible theory.) But here's the thing: there are states across the country that have higher minimum wage than the national minimum, and cities that have higher minimum wage than their states. This has been true for more than a decade in most of these places -- so there's been enough time for us to gauge the effects by now, right? If the theory was correct, most of those localities should have measurably higher unemployment rates in low wage jobs than surrounding localities, and most of those rates should not be able to be linked to other factors beyond the legislated minimum wage. As it turns out, there's no substantive evidence this has happened. California does not, it seems, have a statistically lower number of minimum wage jobs per capita available than other states. That's true even in San Francisco, which has the highest minimum wage in the country. In fact, there have been studies done on this. A lot of them. Generally they show either no effect on employment caused by raising the minimum wage, or at worst case a small negative effect. There's a fair amount about what economists think at this NYT article, including links to a few of those studies: http://economix.blogs.nytimes.com/2013/03/04/what-economists-think-about-raising-the-minimum-wage/?smid=tw-nytimes http://economix.blogs.nytimes.com/2013/03/04/what-economists... While the polled economists are rather evenly split on whether they think raising the wage is likely to be overall negative or positive, there was stronger agreement that "benefits of raising the minimum wage and indexing it to inflation outweighed the costs."
- pixl97 14y ago
  What about mobility. If a person loses their job, in the U.S. it is easy to move. With the number of people that have left California to other states with lower costs of living, or going to counties with lower costs these things are not easily gathered. http://www.newgeography.com/content/001925-if-california-is-doing-so-great-why-are-so-many-leaving http://www.newgeography.com/content/001925-if-california-is-...
jeza 14y ago
This thinking that people should be happy to work at a token wage than not at all worries me a bit. It might be okay for some teenagers who live at home with their parents and have their basic needs covered, but what about people who won't cover their cost of living with such a small amount? Where I live the minimum wage is $15.96 an hour and it is not really even possible to live on that and have any quality of life.
- tsotha 14y ago
  Ultimately in the absence of government subsidy people are paid what their labor is worth. If your labor is only worth $8/hr and the minimum wage is $15.96/hr, you won't get paid $15.96/hr. Whatever you would have done at $8/hr will be automated.
  - wildgift 14y ago
    You usually get paid less than what your labor is worth. That's how a business builds up its savings account, or pays off its debts.
    - tsotha 14y ago
      Nonsense. If that's the going rate for your labor, that's what it's worth. The fact that your employer can use your labor as part of a system that returns more value than the sum of its parts isn't relevant.
      - Evbn 14y ago
        By that same logic, if government raises the rate, negotiating on your behalf, your labor is worth more.
        tsotha 14y ago
        As other have noted we'd all be rich if that were true. No, your labor is still only worth what someone else is willing to pay. Your wages may go up temporarily because it takes time for employers to adjust. In the long run if you can't offer your employer more value than what he's paying you simply won't have a job.
yarrel 14y ago
That argument hasn't been supported by actual studies in the UK.
RyanMcGreal 14y ago
> One of the biggest arguments against it is that raises unemployment by making more people unemployable. This is a classic a priori economic argument, and the data do not support it. Here are some studies on the effects of minimum wage increases. "The Florida Minimum Wage After One Year" Summary: none of the dire predictions of job losses came true, the Florida economy continued to lead the country in job growth, and the unemployment rate continued to decline steadily, while economic growth accelerated. http://www.risep-fiu.org/reports/Florida_Minimum_Wage_Report.pdf http://www.risep-fiu.org/reports/Florida_Minimum_Wage_Report... "The Economics of the Minimum Wage" Summary: minimum wage increases have little or no impact on employment rates. http://www.progressive-economics.ca/2007/01/27/the-economics-of-the-minimum-wage-again/ http://www.progressive-economics.ca/2007/01/27/the-economics... "Step up, not out: The case for raising the federal minimum wage for workers in every state" Summary: critics argue that, faced with rising labor costs, employers are forced to lay off workers. This claim has been carefully studied by labor economists who have found little evidence that minimum wage increases lead to significant job losses. In fact, the research unequivocally shows that the benefits to low-wage workers and their families far outweigh the costs. http://www.epi.org/content.cfm/issuebriefs_ib149 http://www.epi.org/content.cfm/issuebriefs_ib149 "Myth and Measurement: The New Economics of the Minimum Wage" Summary: recent increases in the minimum wage had no adverse effect on employment. http://www.amazon.ca/Myth-Measurement-Economics-Minimum-Wage/dp/0691048231 http://www.amazon.ca/Myth-Measurement-Economics-Minimum-Wage... "States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth", Fiscal Policy Institute, 2004. http://www.fiscalpolicy.org/FPISmallBusinessMinWage.pdf http://www.fiscalpolicy.org/FPISmallBusinessMinWage.pdf "National Minimum Wage: Low Pay Commission Report 2005." Summary: The National Minimum Wage was introduced on 1 April 1999, with an adult rate of £3.60. Its introduction benefited about one million low-paid workers and had no measurable adverse effects on employment or inflation. http://www.lowpay.gov.uk/lowpay/report/pdf/DTi-Min_Wage.pdf http://www.lowpay.gov.uk/lowpay/report/pdf/DTi-Min_Wage.pdf I recommend Alan Manning's "Monopsony in Motion", which subjects the standard economic assumptions about perfect competition to some rigorous empirical testing. http://press.princeton.edu/titles/7522.html http://press.princeton.edu/titles/7522.html The market for labour is an imperfect market that does not behave in a simplistic manner: * Markets for labour are relatively inflexible - it's difficult and time-consuming to look for a different job, so it's hard for employees to 'vote with their feet' by seeking employment elsewhere - especially those employees making the least money and having to work the longest hours to make ends meet. * Because there are relatively few employers compared to a great many employees, employers have market power - they can force wages below a pure market rate because employees have limited options for alternate employment and limited opportunities to seek out those options. * Higher wages mean lower turnover and hence lower hiring and training costs for employers, which offset the allocative distortion of paying higher than a market rate. * At the same time, higher wages motivate employees to work harder, which raises productivity and can also help to offset the higher cost of labour. * When already-wealthy people make more money, they tend to invest it, but when poor people make more money, they tend to spend it. As a result, a policy that increases income to the poor has a bigger impact on GDP than a policy that increases income to the rich. * When low-income workers make more money, they depend less on government subsidies, which alleviates pressure on public expenditure.
RougeFemme 14y ago
In today's US economy, those jobs are not taken by the young anymore. They are being taken by people who have been laid-off/downsized, already have skills of some sort and don't need the experience of the low value jobs.

deleted 14y ago

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protomyth 14y ago

The main argument for me is that it leads to higher unemployment for teenagers and its affects on small businesses trying to get part time workers.

Evbn 14y ago
What does part time have to do with hourly wage?
- protomyth 14y ago
  part time jobs are the most likely to pay the minimum wage

gibsonf1 14y ago

The main argument against it is that many people loose their jobs when the minimum is raised for those who can't provide that much value to their employers. Any interference with the free market never results in a good thing. Note that the most innovative part of the economy, computers/software, is also the least regulated.

akowala 14y ago
Because of interference with the free market we have safer air to breath, water to drink, food to eat, and medicines to take. The free market only cares about something when it will affect profit margins positevly and lets be honest most people don't care about how why it's really important to not pollute the ocean. Without government interference we would still have child labor. Correlation doesn't equal causation, my friend. Most would agree the reason software is so successful is because of the ultra low barrier to market entrance because all you need to build software is a $300 computer and cheap Internet connection. I don't have the burden of having to run a physical store and pay all the expenses that go along with that. I can compete with billion dollar companies and win.
- gibsonf1 14y ago
  Interesting theory - can you explain why, then, that the most regulated economies ever, such as the former Soviet Union or former East Germany, were the most polluted? Interference in the free market causes chaos, such as our current economy and the direction things are going now, unfortunately. Your easy start up example is interesting too, as if there were more regulation, you would have to work through layers and layers of red tape and fees and lawyers to start a company etc which simply reinforces my point. If you were to add 50K+ to the costs of starting a software company due to regulation and fees, the innovation landscape would change dramatically as would the companies we have today.
  - Evbn 14y ago
    Gosh, I wonder if being ruled by a mass murderer dictator might have been a factor?

cjy 14y ago

The main argument against the minimum wage is that it may increase unemployment for unskilled workers. However, recent empirical work suggests that the minimum wage is currently low enough in the U.S. that raising it has quite a small effect on unemployment. Therefore, some economists feel the redistribution effects are worth a small cost in efficiency. Here is a survey of prominent economists on the effects of raising the minimum wage to $9: http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_br0IEq5a9E77NMV http://www.igmchicago.org/igm-economic-experts-panel/poll-re... Many economists would argue that increasing the EITC would be a better way to help the poor.

seanmcdirmid 14y ago
But the libertarians don't see it like that. If we give poor people $9, they'll want $25, $100, and then $1000/hour. There is no point in arguing a rise to $9/hour, so use straw man to make the argument against stronger! I like min wage increases vs EITC. A min wage increase pushes up the value of human labor, giving more incentive to innovate and automate, which is where we should be heading anyways. It's actually a hard love approach.
- emiliobumachar 14y ago
  Remember there's always that cozy alternative to innovate and automate: not starting that business after all.
  - seanmcdirmid 14y ago
    Fortunately we aren't like that. But we still need the pressure valve on at the low end to force us all up the value chain. It's like raising water rates to make you use water more efficiently, do you stop using it? No, you are smarter about how you use it. Human labor is the same thing. I've seen what happens when the bottom is too low...it's not much better than slavery or serfdom.
Evbn 14y ago
The problem with EITC (and Medicaid) is that it subsidizes employers like Walmart.

smsm42 14y ago

It's not only inflation. The argument is making more low-skilled youngsters unemployable and thus preventing them from stepping on the lowest step of the skills ladder which eventually would take them to higher wages. It also precludes people that are unable to generate enough value to justify minimum wage from earning any income instead of completely relying on state assistance. Inflation can be counteracting this - since if dollar costs less, eventually the value of it would fall low enough so that value generated by an unskilled worker is worth the dollars state prescribes to pay him - but that'd take time, and getting on the dole is easier than getting off.

Evbn 14y ago
Unemployed people can do plenty of things to develop skills, and are often required to do so by welfare programs. What are the main skills acquired by working at Walmart after the first week?
- pixl97 14y ago
  Assuming Walmart is the only minimum wage employer is your first mistake.
- smsm42 14y ago
  I don't know, never worked at Walmart (and shopped there maybe twice) but I can guess - people skills? Management skills if one becomes, say, shift supervisor? Plain old "showing up to work on time" skills (for a person who never ever held a steady job that might be a new skill too)? Having a resume that actually shows you can do all of the above so hiring you is lower risk? Developing skills because some law requires you to check the V in the papers and developing skills because you're actually earning your living doing that is a very different thing.

csomar 14y ago

No it doesn't lead to inflation (maybe inflation in products that the $10/hour employees mostly use) but the general rate of inflation should be the same. Raising the minimum wage redistribute the wealth from the rich to the poor. The disadvantage is that it creates a Deadweight loss (http://en.wikipedia.org/wiki/Deadweight_loss http://en.wikipedia.org/wiki/Deadweight_loss) resulting in unemployment and lost economic value. In a perfect, competitive and free market there should be no minimum wages. However, as a liberal capitalist, I think we should keep some standard.

Evbn 14y ago
Deadweight loss only occurs if government is incapable of putting people to productive work. government, while imperfect, has some capacity for organizing productive labor.