5 ms·

Raising minimum wage would stimulate consumption. Poor people spend their money. Rich people sit on theirs.

by sudioStudio64 11y ago

monochromatic 11y ago
Raising minimum wage increases unemployment.
- fnordsensei 11y ago
  Source? I managed to find this site that'd done an analysis of past increases, and the results seem far from clear cut. https://cdn.americanprogress.org/wp-content/uploads/2013/12/minwageunemployment_tbl1.png https://cdn.americanprogress.org/wp-content/uploads/2013/12/...
  - Tarang 11y ago
    It comes from academic material, typical neoclassic economics textbooks teach this so I assume its from The Wealth of Nations. By increasing the minimum wage it locks out a portion of employees from being employed where the marginal product of labour is less than the minimum wage. Because of this there are actually tonnes of papers studying its effects: [1] http://www.nber.org/papers/w0846.pdf http://www.nber.org/papers/w0846.pdf (one such paper)
  - jjoonathan 11y ago
    Doucouliagos and Stanley published a great review in 2009 with the key figure being a scatterplot of study size vs elasticity (elasticity = change in # jobs / change in min wage) [1]. This looks like a funnel centered around the true value. The funnel is wide where N is small and narrow where N is large. Two conclusions from the figure: 1. The true elasticity is ~0 (maybe ever so slightly negative). Only small increases in minimum wage were studied, so this isn't an argument in favor of drastic raises, just an argument that small raises don't hurt under prevailing conditions. 2. The funnel should be symmetrical because random error does not favor higher vs lower elasticity. Instead, the funnel is bent, which is evidence of strong publication bias in favor of results of the form "increases in minimum wage decrease the number of jobs." FWIW I don't think minimum wage increases are a great way out of this mess because I think reduced workweek and basic income / minimum income / EITC are all better options. Still, I think this figure is pretty convincing evidence that economists place too much faith in their neoclassical model. [1] Page 33 of http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.398.2297&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.398... EDIT: added conclusion, fixed possibly misleading wording
  - Symmetry 11y ago
    That's a pretty misleading statistic there. US unemployment in that time period has tended to increase in spikes on the order of a few months then fall rapidly in most cases but slowly since the 2007 recession. So you'd expect that in any randomly selected state with an unemployment rate over 7% it'll have decreased after one year in 90+% of cases. If you're willing to be creative you can come up with a statistic that seems to support nearly anything. There are plenty of decent arguments and studies you can use in support of a minimum wage rather than something like this.
- lumberjack 11y ago
  So does banning child labour and many other regulations. Not all jobs are created equal and not all jobs are useful or need to exist at all. And if they so desperately need to exist then whoever so desperately needs them should damn well pay for them. And if they cannot then by definition of modern economics, that demand does not actually exist and nothing of value is lost.
- Symmetry 11y ago
  That really depends on how much you raise the minimum wage by. Small increases have been shown to have pretty negligible effects on unemployment, especially in the short term.
SilasX 11y ago
That would imply that it would be even better, from the perspective of "stimulating consumption", to just give suitcases of cash to random bums, who spend it even faster.
- angersock 11y ago
  Incorrect, because the bum can only spend so much at one time, practically. You don't want a handful of random bums (your phrasing) either slowly living off the suitcase for a couple of years or quickly burning through on high-ticket items--you want a whole lot of poor people who can buy 2 more things at the checkout this week.
  - SilasX 11y ago
    It still implies that you should favor cash grants to random bums, since they spend faster than the working poor, who might have the audacity to wait til Friday to buy those shoes. If you favor cash grants to the poor over middle class (on account of the former spending faster), you should similarly favor grants to bums over the working poor. Alternatively, just recognize that there are more considerations, when forming optimal policy, than the rate of consumption.

Raising minimum wage would stimulate consumption. Poor people spend their money. Rich people sit on theirs.

monochromatic 11y ago

Raising minimum wage increases unemployment.

fnordsensei 11y ago
Source? I managed to find this site that'd done an analysis of past increases, and the results seem far from clear cut. https://cdn.americanprogress.org/wp-content/uploads/2013/12/minwageunemployment_tbl1.png https://cdn.americanprogress.org/wp-content/uploads/2013/12/...
- Tarang 11y ago
  It comes from academic material, typical neoclassic economics textbooks teach this so I assume its from The Wealth of Nations. By increasing the minimum wage it locks out a portion of employees from being employed where the marginal product of labour is less than the minimum wage. Because of this there are actually tonnes of papers studying its effects: [1] http://www.nber.org/papers/w0846.pdf http://www.nber.org/papers/w0846.pdf (one such paper)
- jjoonathan 11y ago
  Doucouliagos and Stanley published a great review in 2009 with the key figure being a scatterplot of study size vs elasticity (elasticity = change in # jobs / change in min wage) [1]. This looks like a funnel centered around the true value. The funnel is wide where N is small and narrow where N is large. Two conclusions from the figure: 1. The true elasticity is ~0 (maybe ever so slightly negative). Only small increases in minimum wage were studied, so this isn't an argument in favor of drastic raises, just an argument that small raises don't hurt under prevailing conditions. 2. The funnel should be symmetrical because random error does not favor higher vs lower elasticity. Instead, the funnel is bent, which is evidence of strong publication bias in favor of results of the form "increases in minimum wage decrease the number of jobs." FWIW I don't think minimum wage increases are a great way out of this mess because I think reduced workweek and basic income / minimum income / EITC are all better options. Still, I think this figure is pretty convincing evidence that economists place too much faith in their neoclassical model. [1] Page 33 of http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.398.2297&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.398... EDIT: added conclusion, fixed possibly misleading wording
- Symmetry 11y ago
  That's a pretty misleading statistic there. US unemployment in that time period has tended to increase in spikes on the order of a few months then fall rapidly in most cases but slowly since the 2007 recession. So you'd expect that in any randomly selected state with an unemployment rate over 7% it'll have decreased after one year in 90+% of cases. If you're willing to be creative you can come up with a statistic that seems to support nearly anything. There are plenty of decent arguments and studies you can use in support of a minimum wage rather than something like this.
lumberjack 11y ago
So does banning child labour and many other regulations. Not all jobs are created equal and not all jobs are useful or need to exist at all. And if they so desperately need to exist then whoever so desperately needs them should damn well pay for them. And if they cannot then by definition of modern economics, that demand does not actually exist and nothing of value is lost.
Symmetry 11y ago
That really depends on how much you raise the minimum wage by. Small increases have been shown to have pretty negligible effects on unemployment, especially in the short term.

SilasX 11y ago

That would imply that it would be even better, from the perspective of "stimulating consumption", to just give suitcases of cash to random bums, who spend it even faster.

angersock 11y ago
Incorrect, because the bum can only spend so much at one time, practically. You don't want a handful of random bums (your phrasing) either slowly living off the suitcase for a couple of years or quickly burning through on high-ticket items--you want a whole lot of poor people who can buy 2 more things at the checkout this week.
- SilasX 11y ago
  It still implies that you should favor cash grants to random bums, since they spend faster than the working poor, who might have the audacity to wait til Friday to buy those shoes. If you favor cash grants to the poor over middle class (on account of the former spending faster), you should similarly favor grants to bums over the working poor. Alternatively, just recognize that there are more considerations, when forming optimal policy, than the rate of consumption.