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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

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
      - harryh 14y ago
        That's a local effect though (your quote). The money that goes in that workers pocket has to come from somewhere else. Also raising the minimum wage possibly causes some (slight) additional unemployment. So what's the overall stimulus effect on the economy? Unclear. It appears as if the second study on the page you linked to might try to address it, though it looks to me like more of an advocacy paper than an impartial study. That's just from a quick glance though. I will try to read further. My overall impression of the minimum wage debate is that it has a very high ratio emotion :: impact. Whatever overall effects it has on the economy appear to be quite small (almost within the noise), and yet it always generates a lot of intense argument. There's lots of signaling going on here I think.
      - cjy 14y ago
        That article is not talking about the multiplier effect. It is talking about consumers consumption smoothing...buying automobiles after the minimum wage goes up because there has been a permanent increase in their income. From the article: "Our estimates are silent about the aggregate effects of a minimum wage hike." I've read a lot of the econ literature in this area, and have never seen a defense of the minimum wage on the basis of multiplier effects. Too few people are working at the minimum wage. And, the minimum wage is too blunt of a instrument to try to counteract business cycles.
  - danielweber 14y ago
    Consumption spending is what we want to get out of a recession, but long-term you want to encourage investment spending.
    - stretchwithme 14y ago
      I don't think that is true. A dollar spent on creating a business is a dollar of demand too. The only advantage consumption has is that its easier for a politician to point to. And there is no proof that consumption gets us out of a recession faster. It is an unproven assertion. Where is the double blind study? And, yes, if government is going to use force on citizens to implement a theory, some proof is required. Especially if that theory selectively avoids effects that don't fit the goal of expanding government.
      - MartinCron 14y ago
        I don't think the dollar of spending is contrasted with the dollar of business investment. It's contrasted with the dollar stuffed into someone's mattress.
        stretchwithme 14y ago
        Dollars stuffed under the mattress don't compete with other dollars, raising their value and enabling them to buy more of the available goods and services. Dollars aren't resources. The resources exist and can be invested in different ways regardless of how many dollars there are. When there is a bubble collapse, like the collapse of housing bubble, demand for the thing that is being overproduced collapses. That has to happen in order for the economy to get back to producing things people value and are willing to buy with their own money. That collapse is a catastrophe for investors and workers invested in the bubble, but the other industries now can get all their raw inputs for less and can now grow. Keynesians look at the collapsed industries as if they are the only source of growth for the economy. But those unviable industries have actually been diverting resources away from viable ones. The collapse of the artificial bubble is a much needed correction.
  - dennisgorelik 14y ago
    If I was making $6/hour and now all potential employers are prohibited to pay me that much - in the long term I'm more likely to lose that income than "get a few more dollars to spend".

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
    - harryh 14y ago
      That's a local effect though (your quote). The money that goes in that workers pocket has to come from somewhere else. Also raising the minimum wage possibly causes some (slight) additional unemployment. So what's the overall stimulus effect on the economy? Unclear. It appears as if the second study on the page you linked to might try to address it, though it looks to me like more of an advocacy paper than an impartial study. That's just from a quick glance though. I will try to read further. My overall impression of the minimum wage debate is that it has a very high ratio emotion :: impact. Whatever overall effects it has on the economy appear to be quite small (almost within the noise), and yet it always generates a lot of intense argument. There's lots of signaling going on here I think.
    - cjy 14y ago
      That article is not talking about the multiplier effect. It is talking about consumers consumption smoothing...buying automobiles after the minimum wage goes up because there has been a permanent increase in their income. From the article: "Our estimates are silent about the aggregate effects of a minimum wage hike." I've read a lot of the econ literature in this area, and have never seen a defense of the minimum wage on the basis of multiplier effects. Too few people are working at the minimum wage. And, the minimum wage is too blunt of a instrument to try to counteract business cycles.
- danielweber 14y ago
  Consumption spending is what we want to get out of a recession, but long-term you want to encourage investment spending.
  - stretchwithme 14y ago
    I don't think that is true. A dollar spent on creating a business is a dollar of demand too. The only advantage consumption has is that its easier for a politician to point to. And there is no proof that consumption gets us out of a recession faster. It is an unproven assertion. Where is the double blind study? And, yes, if government is going to use force on citizens to implement a theory, some proof is required. Especially if that theory selectively avoids effects that don't fit the goal of expanding government.
    - MartinCron 14y ago
      I don't think the dollar of spending is contrasted with the dollar of business investment. It's contrasted with the dollar stuffed into someone's mattress.
      - stretchwithme 14y ago
        Dollars stuffed under the mattress don't compete with other dollars, raising their value and enabling them to buy more of the available goods and services. Dollars aren't resources. The resources exist and can be invested in different ways regardless of how many dollars there are. When there is a bubble collapse, like the collapse of housing bubble, demand for the thing that is being overproduced collapses. That has to happen in order for the economy to get back to producing things people value and are willing to buy with their own money. That collapse is a catastrophe for investors and workers invested in the bubble, but the other industries now can get all their raw inputs for less and can now grow. Keynesians look at the collapsed industries as if they are the only source of growth for the economy. But those unviable industries have actually been diverting resources away from viable ones. The collapse of the artificial bubble is a much needed correction.
- dennisgorelik 14y ago
  If I was making $6/hour and now all potential employers are prohibited to pay me that much - in the long term I'm more likely to lose that income than "get a few more dollars to spend".