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The question "The distortionary costs of raising the federal minimum wage to $9 per hour and indexing it to inflation are sufficiently small compared with the b
by yetanotherphd 13y ago
The question "The distortionary costs of raising the federal minimum wage to $9 per hour and indexing it to inflation are sufficiently small compared with the benefits to low-skilled workers who can find employment that this would be a desirable policy." contains asssumptions that are very objectionable to someone trained in economics.
To most economists, it is wrong to think of the minimum wage as a tradeoff between distortionary effects, and a benefit to the workers. In particular, why do we want to benefit workers on the minimum wage? It seems that the people we really care about are people with a given (low) yearly income, and we can easily give/take benefits from them using the tax system.
To the extent that economists support a minimum wage, I assume it would be because it forms some kind of "default contract" that is less prone to cheating (e.g. promising one wage and delivering another).
- moocowduckquack 13y agoIn particular, why do we want to benefit workers on the minimum wage? Maybe because they need the money?
- yetanotherphd 13y agoMaybe you should have read past the sentence you quoted?
- moocowduckquack 13y agoI did, perhaps I misunderstood where you were coming from though. I was just meaning that there is a definite and not particularly subtle reason for minimum wage laws, sure the economics is used to set a level and to argue on the theory, but the reason for them existing in the first place does not come from economic theory, but rather from political experience with hungry angry people.
- yetanotherphd 13y agoIf there was no welfare, and no tax system, then introducing a minimum wage would probably be a net improvement. However, taxes and welfare already address the issue of hungry people (I don't particularly care how angry a person is). My problem is not with the goal of redistributing wealth, but with the minimum wage as a way to do this. Since the tax authorities already know the figure that we are really interested in (how much money a person makes in total), it makes more sense to lower the tax rate on low income earners, or increase welfare, than to increase the minimum wage.
- moocowduckquack 13y agoIf we had good universal welfare that did not depend on income, then having no minimum wage is politically fairly neutral. However when you have a situation where welfare is divisive and intrusive on the individual, then being able to leave welfare through employment is socially important. And it really does matter how angry the hungry person is, at least if you want to stay in government.
- yetanotherphd 13y agoWhile there is some truth to what you say, I would point out that (A) a person making $9 a year would still be paying around $900 federal tax, and (B) my understanding is that TANF is not especially intrusive (not sure what you mean by divisive). I still don't understand the logic of "X will make people angry so you shouldn't do X". Since I already care about how well off poor people are, why should I care about what makes people angry directly. While the government needs votes to stay in power, that doesn't change what in theory is the best policy, it just restricts the set of policies that we can choose from. While increasing welfare and decreasing tax on the poor, while (possibly) removing the minimum wage, might make some people angry, I don't see why this makes it a bad policy.