New at Reason

January 8, 2007

Brian Doherty spends less than a hundred hours figuring out how Democrats are wasting that much-hyped chunk of time.

Comments

|1.8.07 @ 8:37AM|#

Excellent article Brian. Proof positive that anyone who thought the Democrats would really change things in a positive (for libertarians) way is a brain-dead fool.

|1.8.07 @ 9:12AM|#

Oh my goodness, the Democrats said they were going to pass ethics and budget reform, and then when they took power, instead of reinventing the government along the lines of Reason Magazine's preferred ideology, they passed ethics and budgetary reform.

All of the yammering about corruption and crooked books you see on this site doesn't mean anything, apparently. It's a just a stallking horse. You don't give a damn about the budget process, you don't give a damn about oversight, you don't give a damn about ethics.

Good to know.

|1.8.07 @ 9:14AM|#

joe,

Tell me the name of one incoming freshman Democrat who ran on a platform of ethics and budgetary reform. Just one.

thoreau|1.8.07 @ 9:16AM|#

joe is going to jump all over you for this:
The minimum wage hike? A classic bit of economic ignorance, will cost lots of poorer, less trained, and less educated people their first rung on the professional ladder--but it has the added benefit of being something the GOP will probably largely fold on, further proving that neither party has much economic sense or political guts.

If you change the "lots of" to "some" it's probably more accurate. Before I go any further, let me assure everybody that I oppose the minimum wage hike, and I encourage anybody with a strong opinion on the subject to re-read this sentence as many times as necessary.

The thing about the minimum wage is that if it's relatively low then small changes in the minimum wage tend not to produce easily measurable changes in the unemployment rate. Which should be no surprise when you consider that with so many factors changing in the economy all the time, small effects might not show up against the background.

Why would the effect of a small change be small? Partly because minimum-wage jobs tend to be jobs for which automation is not easy (i.e. service jobs), so demand is inelastic, and partly because so many low income workers make more than the federal minimum wage (i.e. many states have higher minimum wages) that only a small pool of workers are affected anyway. The result is that you have a small effect that's hard to discern from the statistics.

I want to reiterate that I do NOT support an increase in the minimum wage, and I encourage anybody with a strong opinion on the subject to re-read this sentence as many times as necessary.

Now, somebody is probably thinking "If minimum wage hikes don't affect unemployment, why not raise it to $50/hour?" Notice that throughout the discussion I said small changes do not produce easily measurable effects.

Finally, you're probably wondering why I'm harping on this. The answer is simple: Brian Doherty made a mistake that joe has been pointing out a lot lately, and it's better to get the facts straight than to have everybody reflexively argue against him even though he's (mostly) correct about this. At least in regard to small changes in the minimum wage and statistically significant changes in the unemployment rate.

|1.8.07 @ 9:25AM|#

Thoreau

Agreed. The wage hike is too small to eliminate jobs, or reduce poverty. It's a non-issue really. And yes, I too oppose it. However it is pointless to fight it. Let the Democrats have their political victory on this and lets move on.

|1.8.07 @ 9:34AM|#

Thoreau,

I think a small increase in the minimum wage is a good thing. You are right that a small increase doesn't increase unemployment or decrease poverty. What it does do, however, is take the issue off of the table and keep Joe and people like him from doing further damage; give them a meaningless increase and hopefully the issue will go away for a while before it does real damage.

|1.8.07 @ 9:38AM|#

jf,

Every Democrat who mentioned the name "Mark Foley" was running on ethics. That is to say, all of them.

Every Democrat who mentioned the words "earmark" or "bridge to nowhere" was running on buget reform. That is to say, all of them.

thoreau,

I haven't had this much fun demolishing a cherished libertarian belief about economic policy since the Social Security debate.

|1.8.07 @ 9:39AM|#

Oh, and can anyone else think of an effect of a minimum wage hike other than employment figures?

Something that even a worker whose reading about economic policy extends no further than looking at his pay stub every two weeks will iimmediately understand?

Anyone?

|1.8.07 @ 9:42AM|#

"Oh, and can anyone else think of an effect of a minimum wage hike other than employment figures?"

Reduced hours.

|1.8.07 @ 9:45AM|#

steveintheknow,

Stop confusing Joe with facts and economic analysis. In Joe world companies print their own money and pay their workers mininimum wage.

|1.8.07 @ 9:46AM|#

Joe

Like Thoreau pointed out, the hike is too small to make any differnce becuase the labour market already requires a higher wage for almost every job. Something like only 3% of jobs nation wide pay at the minimum wage, and most of those are jobs held by high school students.

|1.8.07 @ 9:51AM|#

steveintheknow,

3% of 100,000,000 is 3 million people. Most of the people earning the minimum wage live in low-income households.

You ever know anyone who had to kick in for the rent from their part-time high school job? I did.

Laught it up, John. As usual, the facts are on my side, and your theories fail the realty test.

|1.8.07 @ 9:51AM|#

steveintheknow,

You might be surprised. My girlfriend manages a telemarketing call center, where the pay starts at $7.00, with a $.50 raise (maximum) after some probationary period. A raise in the minimum wage to $7.25 is going to severely increase their costs, and when you are talking about a business that is already competing with overseas call centers for customers, a lot of good people could lose their jobs.

|1.8.07 @ 9:55AM|#

Most of the people earning the minimum wage live in low-income households.

Linkee? Or is this a cherished liberal belief for which no evidence is necessary?

|1.8.07 @ 9:58AM|#

Reduced hours also generally result in increased responsibility and workload for that extra buck an hour. As one employee loses hours, the remaining have to cover the work for only a slight raise.

:-|1.8.07 @ 10:04AM|#

"We've waited over 200 years for this time," Pelosi said.

Funny, she doesn't look a day over 130.

|1.8.07 @ 10:04AM|#

Oh, are we providing links now, RC?

That's funny, because there wasn't a single one requested prior to my comment.

Find your own info. I did.

|1.8.07 @ 10:05AM|#

Quick, somebody call a waahmbulance. I think Doherty is having a reverse Schadenfreude aneurism.

|1.8.07 @ 10:08AM|#

"3% of 100,000,000 is 3 million people. Most of the people earning the minimum wage live in low-income households."

And 97% of 100,000,000 is 97,000,000. In other words, not that many people relatively speaking are going too be affected. And the additional money those who would be affected receive is not going to lift them out of poverty.

In addition employees who benefit from a larger hourly wage will see their hours reduced anyway, resulting in the same overhead for the employer, and therefore the monthly income for the worker. Call it a 'theory' or simple math, I don't care.

"You ever know anyone who had to kick in for the rent from their part-time high school job? I did."

Yeah. Have you ever known a rich kid who works at the movie theatre over the summer for extra cash? I have.

Again the point is, a minimal wage hike at the margin is NOT going to affect much at all.

|1.8.07 @ 10:16AM|#

Relative to what? That's three million people!

BTW, the answer which eluded all of you economics geniuses (motto: so good at simple math, we don't care if our answers add up!) is "their pay checks are higher."

And I assure you, steveintheknow, such an event is indeed "much of an effect" to the people experiencing it.

|1.8.07 @ 10:25AM|#

"Relative to what?"

Relative to 300 million people. Thats 300 million people! Plus the average household income of a minnimum wage earner is about 43,000 a year from what I can gather.

"their pay checks are higher."

Not with reduced hours.

Again, a minimal wage hike at the margin is NOT going too affect much.

|1.8.07 @ 10:32AM|#

joe.

Yes, "their paychecks are higher"... for the majority of minimum wage earners, this will be the case. A minority will see fewer hours, or unemployment.

But here's a question for you... If their paychecks are higher, where does that money come from?

|1.8.07 @ 10:33AM|#

Steve,

3 million does not become any smaller a number by comparison to any other number. It is still 3 million people. If the government increased the income taxes of those people by exactly the same amount as their upcoming pay raises, you would be howling about it.

Those people matter, no matter what % of the population they are.

"Not with reduced hours." Or if a comet hits them, which there is just as much evidence for.

Are you under the impression that your local McDonald's franchise makes a habit of scheduling 10% more empoloyee-hours than it really needs every week?

|1.8.07 @ 10:36AM|#

Russ R,

"A minority will see fewer hours, or unemployment."

The % of employees who will keep their jobs and receive higher paychecks is at, or approaching, 100%.

The % who will lose their jobs, if it exists, will be so small as to be undetectable by economists and statiticians attempting to find them.

The extra money will come from exactly the same place at the rest of the weekly payroll. Some have speculated that employers will let workers go and keep thier payrolls the same, but this has become an untenable theory to defend.

|1.8.07 @ 10:43AM|#

If what you're saying, steve, is that the minimum wage hike will have imperceptable macro-economic effect, I agree with you.

But that rather misses the point. Minimum wage hikes are worthwhile because of the localized effects they have, on the individuals who earn that wage, but also on those communities that have a large % of their workers making at or close to minimum wage.

How much more is going to spent at a corner store if 50 people within a two block radius get pay hike? A lot more than the cost of the minimum-wage clerk's pay hike.

|1.8.07 @ 10:45AM|#

3

|1.8.07 @ 10:46AM|#

I have no idea why my last comment produced "3".

|1.8.07 @ 10:47AM|#

So far, you're correct.

That extra money comes out of the payroll account of the employer. Every dollar of it. Nothing is magically created, it's a zero sum game.

The higher payroll costs mean that one of three things will inevitably happen:

1. Something else will be done to cut costs, (e.g. cut workers, cut hours, cut benefits, etc.).
2. If no costs can be cut, profits will fall (profits which are... yes, some other individual's income).
3. If profits have nowhere to fall to, the business will close.

In every case, the benefits you point out are offset by losses that you ignore. Read Hazlitt's "Economics in 1 Lesson".

But regardless of the economics, a minimum wage is a coerced transfer of wealth from employers to workers. That's why libertarians oppose it.

|1.8.07 @ 10:47AM|#

""Not with reduced hours." Or if a comet hits them, which there is just as much evidence for."

With all due respect that's just bullshit. If you have ever worked in a restaurant as I did all the way through school, you know how tight the owners/managers are with weekly hours and overtime. When I was a manager at a pizza joint and the min wage in Texas was bumped to 6.25 in Texas, everyone got there hours cut except for the employees who were already making more, and everyone's overtime was cut.

It's not a crackpot theory, it is a reality that all small businesses must face.

TCR|1.8.07 @ 10:51AM|#

Another way I suspect companies pay for wage increases is by simply not replacing someone when they get fired/promoted/quit or whatever. Workers left end up picking up the slack and for their extra few pennies end up doing the job of more than one worker. Both my wife and I have experienced this first hand.

Would employers not replacing someone count as a job loss?

|1.8.07 @ 10:52AM|#

No, not 3!

;-)

TCR|1.8.07 @ 10:55AM|#

How much more is going to spent at a corner store if 50 people within a two block radius get pay hike? A lot more than the cost of the minimum-wage clerk's pay hike.

Not necessarily. If the guy at the corner store had to raise prices to compensate for increased labor costs, doesn't it sort of balance out?

|1.8.07 @ 10:55AM|#

Sorry, but there is nothing that can be done. 3 is here, and he's pissed!! ;)

|1.8.07 @ 11:01AM|#

Economics is not a zero-sum game, Russ R. More efficient allocation of dollars produces additional wealth, rather than just spreading it around. Given the incapacity of lowest-run workers to easily change jobs (due to the costs associated with such changes, the modesty of the difference in wages in absolute dollars between one bottom-tier job and another, the lack of employment opportunities in areas where minimum wage jobs are plentiful,
and the undeniable differences in power between minimum-wage workers and the employers they "negotiate" with), is it so hard to believe that minimum-wage labor does not behave exactly as the most simplistic economic models would predict? That maybe these workers are earning less than the value of their labor?

How about "4. a minimum wage hike will produce sufficient positive economic effects that it will not produce a net loss of profit?"

I've heard rumors that there are actually some universities that offer more than one lesson in economics - why, some of them even have a whole second course! - because the complexity of how the economy actually operates isn't adequately described in one lesson.

|1.8.07 @ 11:02AM|#

TCR,

If the attrition you talk about what happening to a significanty degree, it would show up in unemployment figures, and job growth figures.

It doesn't.

|1.8.07 @ 11:03AM|#

steve,

You're only imagining "3" because of your reactionary ideology.

As much as you clearly want to believe in 3, the data simply do not support your theory.

|1.8.07 @ 11:05AM|#

TCR,

What I'm saying is, the amount of additional money the workers/shoppers would have to spend would exceed the additional labor costs the store owner incurs in that situation.

|1.8.07 @ 11:30AM|#

Joe, here are some links:

http://aspe.hhs.gov/hsp/lwlm99/turner.htm

http://www.bls.gov/cps/minwage2005tbls.htm

The long & short of it:
Min wage workers are overwhelmingly young, middle class, childless, and very part time.

In Arizona, we just passed a state minimum wage increase. After the election (gee, thanks) my paper printed a story where they went out to talk to min. wage workers. There was an orchard picker that expressed relief. The others were young retail workers who said they mainly worked for the employee discount, mentally disabled workers who were going to lose their jobs before the state decided to exempt them, waiters who said it was tips that really mattered to them, and Mexican day laborers on the street corner who said they wouldn't work for less than $10/hour anyway.

|1.8.07 @ 11:33AM|#

Not only am I the magical number, but I am the title of a fantastic made for TV movie. You cannot escape my presence, I am in all and above all. In the words of a great man, "I am therefore I jam". joe if you do not give in to the dark side of the minimum wage debate I will pee on you!!! 3 has spoken.

|1.8.07 @ 11:40AM|#

and Mexican day laborers on the street corner who said they wouldn't work for less than $10/hour anyway.

Wait, you mean they're stealing our good jobs? Uh oh.

|1.8.07 @ 11:42AM|#

joe:

"More efficient allocation of dollars produces additional wealth, rather than just spreading it around."

Correct... so then why would you endorse a less efficient system than what the market produces?

"...maybe these workers are earning less than the value of their labor?"

I didn't realize you're a Marxist. Just so you know, all workers earn less than the value of their labour to the employer. That's why they are employed... because hiring them costs less than the value they add.

Value is subjective, and it can only be determined by the employer and the employee... not by a few hundred people sitting in Congress.

dhex|1.8.07 @ 11:51AM|#

"Every Democrat who mentioned the name "Mark Foley" was running on ethics."

oh, joe.

oh.

man.

you make me sad sometimes.

TCR|1.8.07 @ 11:58AM|#

What I'm saying is, the amount of additional money the workers/shoppers would have to spend would exceed the additional labor costs the store owner incurs in that situation.

Again, not necessarily. Prices tend to rise to the maximum level that "the market will bear." Because people have more money to spend, the market will bear higher prices. This is doubly true when you consider that some businesses will opt to raise prices rather than lay off employees. Because prices rise, the extra money made by each minimum wage earner won't go as far and we're back where we started.

Also, you don't take into account the unseen effects of a wage hike. For example, if I owned a restaurant and wanted to expand to a new location, I might not be able to if my labor costs rise drastically. Now there are 10 or so jobs that would have been created but now won't because of the wage increase. Even though that wouldn't show up in any unemployment stats, it is still a drain on the economy.

I've heard rumors that there are actually some universities that offer more than one lesson in economics - why, some of them even have a whole second course! - because the complexity of how the economy actually operates isn't adequately described in one lesson.

No, the economy can't be accurately described in one lesson. However, many of the basic principles by which it operates can be.

|1.8.07 @ 12:05PM|#

Russ R,

I listed four reasons why minimum wages do not represent the most efficient allocation of capital.

And rather than address any of them, you called me a Marxist, and whiffed on the "value of their labor" point. Thanks, genius, for telling me that there is a difference between an employee's earnings and value of his production.

Why don't you take another crack at my comment, just to make sure you didn't misunderstand anything.

|1.8.07 @ 12:09PM|#

TCR,

With the population rising, a lack of job production would most certainly show up on unempoloyment statistics.

"However, many of the basic principles by which it operates can be." The knowledge of physics I could gain in one lesson would convince me that nothing heavier than air could fly, just as certainly as the knowledge of ecnomics I could gain in one less would convince me that a minimum wage would increase unemployment.

Understanding how the basic principles work in a vacuum isn't sufficient to predict how events would occur in the real world.

|1.8.07 @ 12:26PM|#

Damn - this thread spent exactly 0.0 hours discussing Iraq. Exactly 1 hour less than the the Democrats.

VikingMoose|1.8.07 @ 12:43PM|#

[humor]
Called you a Marxist and misstated the classical W=MPL, (since we're in the theoretical world) to boot!

Pareto efficiency might not be in his wheelhouse, either, as people who wanna consider themselves "Austrian Economists" don't like GE theory :)
[/humor]

"is it so hard to believe that minimum-wage labor does not behave exactly as the most simplistic economic models would predict"

Tis a shame that sophomore year econ is too simple for everyday life :)

Does anybody wanna take a crack at Neumark's work and how his findings differ from Card and Krueger or Katz? The complexity of their work goes far beyond yelling DEMAND CURVE because you have to isolate the effects. All else being equal.

N found negative employment effects with the elacticity approx -0.15, consistent with the neoclassical model.

C&K looked at fast food in PA and NJ and found positive effects. That market was better modeled by a monopsony one, and that the employers faced an upwards-sloping labor supply curve - the firms are price takers in the product market but have, to some extent, some level of market power in the labor market.

The data fairy doesn't come down and make this a black-and-white issue. It's hard to grasp, especially since there are strong theoretical predictions as to the direction of the employment effect of a minimum wage, but teasing out the effects from the data that can be collected is hellishly difficult.

There is some thought that the standard competitive model cannot provide an explanation for the findings of C&K., so the expected neoclassical result might not be appropriate (Neumark has a response to this study, BTW).

Burkhauser, Couch, and Wittenburg (2000) find that C&K may have inappropriately modeled certain macroeconomic controls (from the abstract), for example. While Ehrenberg (1995) enthusiastically notes that the C&K findings are devastating to neoclassical theory and empirical methods.

Who is right?

RE: hours worked and minimum wage.

The Response of Hours of Work to Increases in the Minimum Wage
Kenneth A. Couch; David C. Wittenburg
Southern Economic Journal, Vol. 68, No. 1. (Jul., 2001), pp. 171-177.

Their findings are consistent with the neoclassical predictions on minimum wage and labor demand. They use the same equations in the 2000 paper (above).

The more interesting study will be to see how "living wage" laws affect employment, wages, and welfare. Neumark's work in that area doesn't focus on current big box ordinances, so, stay tuned!

In the meantime, the minimum wage discussion continues to serve as a proxy battle for other fights, including the gratuitous piling on Joe.

So it goes.

How about Iraq? Should we have a minimum wage for window fixers and glassiers there?

/kicks pebble. trods off.

|1.8.07 @ 2:11PM|#

joe:

Now that I'm back from lunch, I will "take another crack at your comment", as you requested.

"Economics is not a zero-sum game, Russ R."

But wealth transfers are a zero sum game. And I've already pointed out that setting a minumum wage amounts to a coerced wealth transfer between individuals, which is the primary reason that liberatrians oppose it. The argument that it is also economically inefficient is a secondary point, intended for people like you who don't actually care about the injustice of coerced wealth transfers, because you believe that it somehow makes everyone better off on aggregate.

There's the very simple reductio ad absurdum argument (which thoreau already noted above) that we should just set the minimum wage to $100/hour if we want to make everyone better off. The real world just doesn't work that way... the money has to come from somewhere, and some of us actually care about the Peters who are being robbed to pay the Pauls.

"More efficient allocation of dollars produces additional wealth, rather than just spreading it around."

An efficient market would be one that was free of government interference.

And now you're going to tell me that you (or your favourite politicians) can allocate capital more efficiently than the markets... right? Were that the case, you would all be successful investors and not government employees.

"Given the incapacity of lowest-run workers to easily change jobs (due to the costs associated with such changes, the modesty of the difference in wages in absolute dollars between one bottom-tier job and another, the lack of employment opportunities in areas where minimum wage jobs are plentiful,
and the undeniable differences in power between minimum-wage workers and the employers they "negotiate" with), is it so hard to believe that minimum-wage labor does not behave exactly as the most simplistic economic models would predict?"

Your collection of points all amount to arguing that there exists a bargaining power imbalance between workers and employers. Such an imbalance can only occur if the supply of people willing to work at a given wage exceeds the demand from employers willing to hire them. Tell me how forcing wages even higher will rectify that imbalance?

"That maybe these workers are earning less than the value of their labor?"

You're justifying government intervention by claiming that labourers are being exploited. What's not Marxist about this?

And for VikingMoose, wages will never be exactly equal to the marginal product of labour except for in a perfect competition model, which is a nice theory full of unrealistic assumptions, and does not exist anywhere in the real labour market. First, labour is not a homogenous good. Second, transaction costs and information assymetries do exist. And third, there are barriers to entry in the labour market (e.g. minimum wages). When you relax the assumptions, the predicted outcome doesn't hold.

How about "4. a minimum wage hike will produce sufficient positive economic effects that it will not produce a net loss of profit?"

How about rephrasing that as "4. A miracle occurs."

For every extra dollar or spending power that you've added to the economy from the higher wages, deduct a dollar from the economy to account for the source of those funds. They didn't appear out of nowhere.

So now you're left with the argument that the added dollars of spending power carry more economic value than the subtracted dollars, resulting in a net gain in economic utility.

If your argument is that the workers have a higher marginal propensity to consume, which is good for the economy, the counter-argument is that their employers have a higher marginal propensity to invest, which was also good for the economy. Are you going to argue that the economy needs more consumption and less investment?

Or are you going to argue that people's aggregate happiness would be higher because the wealth would be distributed more evenly? In which case the following reductio ad absurdum applies: Whey not tax all wealth and income at 100% and redistribute it all equitably? Oh wait... the Russians tried that for a few decades. I hear it didn't do much for aggregate happiness.

"I've heard rumors that there are actually some universities that offer more than one lesson in economics - why, some of them even have a whole second course! - because the complexity of how the economy actually operates isn't adequately described in one lesson."

I can only assume that you've neither read the book, nor studied economics in any depth.

VM|1.8.07 @ 2:24PM|#

Was being silly there, Russ - that's why it was bordered in [humor] tags!

And Katz and Krueger and Card have investigated minimum wage under ologopsonic conditions. So the "perfect competition" bit you cite simply highlight how complex this issue is.

Not sure at whom your final zinger is directed, but have you looked into recent work on minimum wage and employment effects?

Your response remains strongly rooted in abstraction and theory, yet you're so gung ho all-too-serious, you missed my humor tags, and talk about "perfect competition", where it appears that you missed the rest of the post!

Astonished in Chicago,
VM

|1.8.07 @ 3:13PM|#

It seems to me a minimum wage hike is more likely to affect inflation than anything else. Not a cost-push inflation, which has been debunked, but a relative scarcity inflation.

The free market is a bidding war between buyers and a seller. If a person has more pieces of paper to flash at a seller, the seller will accept the higher bid. But the amount of hours worked to buy that item will theoretically stay the same. But then there's productivity gains, so it's really tough to model exactly. I would think that raises to the average state level would be statistical noise, and even then you might be able to get away with raising it to the overall inflation rate (compared to the last time it was changed) without much damage.

This argument, as mentioned earlier, is mostly a proxy for social justice vs. economic justice proponents.

|1.8.07 @ 3:42PM|#

Russ R,

"There's the very simple reductio ad absurdum argument (which thoreau already noted above) that we should just set the minimum wage to $100/hour if we want to make everyone better off."

There's also the reductio ad absurdum argument that, since a 0.4 BAC will kill you, no consumption of alcohol is safe. So what?

"An efficient market would be one that was free of government interference." Is this part where I cross myself, or where I kneel, Father? You keep making these theological statements, which simply aren't backed up by the evidence. If minimum wages made the economy less efficient, we'd see it in the numbers. We don't. Doesn't the fact that your beloved model is a complete failure in this case suggest that you should do something different.

"Such an imbalance can only occur if the supply of people willing to work at a given wage exceeds the demand from employers willing to hire them." That's where you're mistaken. I've listed four reasons why, and you still can't bring yourself to consider them.

'How about rephrasing that as "4. A miracle occurs."' And yet, that is what the evidence demonstrates. The fact that your language cannot effectively describe what is happening does not prevent it from happening.

"I can only assume that you've neither read the book, nor studied economics in any depth."

I can only assume that you've read enough politics-masquerading-as-economics to convince yourself of what you want to believe, despite the complete failure of your theory in the field.

When your theory and reality collide, you need to put more stock in reality. Yes, your theory is internally logical, but it fails to describe the real world. That means your assumptions are wrong. You should work on that, instead of shouting "nuh-uh" at reality.

|1.8.07 @ 5:19PM|#

joe: "If minimum wages made the economy less efficient, we'd see it in the numbers. We don't."

We do... it's called "France".

Nordic Elk|1.8.07 @ 5:51PM|#

XLS file of OECD per capita productivity showing France and Belgium more productive per worker and per hour worked than the US.

Solow and Ramsey address this, and from your obvious highly skilled, highly trained economic mind, you probably already learned this. Or just get out your macro book by David Romer. He goes over it, too.

Keyword: conditional convergence.

For how correct you wanted to appear about econ before, you certainly let that mask slip.

|1.8.07 @ 6:40PM|#

Nordic Elk,

Silly me for accepting the theory that supply would inevitably exceed demand when prices are forced above their equilibrium level, resulting in market surpluses.

BTW, the file you linked to fails to compare the rates of unemployment in France, Belgium and the US (9.7%, 8.4% and 5.1% respectively), which is a tad more significant to the minimum wage issue at hand. N'est-ce pas?

In case you were wondering, France's and Belgium's minimum wage rates are about 70% higher than the rate in the US.

But what would I know about such things.

Nordic Elk|1.8.07 @ 8:22PM|#

Russ:

Since you mention "efficiency" and not "unemployment", it was provided to show that you were wrong. So, no. Unemployment isn't what you cited. So it isn't the issue. Quelle Surprise. N'est-ce pas?

You have not provided one whit of evidence to support your claims about minimum wage. You could bring up Neumark and Wascher's elasticity of labor demand being -0.15, you could talk about Manning's oligopsonic models. You didn't. It appears as though you don't know that stuff.

You actually could bring some studies to the table. This is a complex issue, and the employment effects of the minimum wage, at least in the increases we're talking about here don't seem to be as big a deal as, say, Shepherd's study where he finds that the minimum wage doesn't address the goals of FLSA of 1938. (most damaging point to why the minimum wage laws are a bad idea, IMO)

Or you could really be cool and bring up the study from Indonesia when they doubled the minimum wage - you could have brought up those. (Since you're claiming economic expertise, I'll let you dig that one up and see the findings - or: why workers in big companies liked it).

Or you could have cited Neumark and Wascher's 2003 study on cross national youth employment and minimum wage, which pretty much supports their other findings, which have been reported.

Oh - Luxembourg's minimum wage, per your list, is higher than the (5.15)(160 hours per month) US's. Their 2006 unemployment was 4.6%, per the oecd.

"For all of 2006, the unemployment rate dropped [in the US] to a six-year low of 4.6 per cent"

So you were simply a dumbass.

"But what would I know about such things."

Apparently not too fucking much, dickhead.

If you took the time to read what I wrote, outside of the humor, instead of trying to lecture (unsuccessfully though pompously) you'd see that you don't know shit, you were spoon fed the info, from real life economists and stuff, yet your ideological/theoretical zeal blinded you.

I have cited studies that find there is a small negative employment effect from the minimum wage. Due to coverage, the effect isn't as large as you'd think.

Simply pointing to minimum wage and unemployment numbers doesn't really do much. If it were that easy, why weren't there all these studies that simply show that?

I guess the cracker jacks box from which you got your economics lesson got wet or something, so you couldn't read the rest of it...

|1.8.07 @ 10:28PM|#

"Since you mention "efficiency" and not "unemployment", it was provided to show that you were wrong."

What you cited (GDP/hours worked) a measure of labour force productivity, not market "efficiency". Unemployement is a measure of labour market efficiency (or, more appropriately, inefficiency). Which do you think is a more relevant here?

In fact, now that I think about it... higher productivity figures would be one potential outcome of raising minimum wages. If you were an employer who was faced with higher labour costs, and either cut jobs or hours but expected the same output from your employees, what would happen to your productivity figures?

"Studies...Neumark and Wascher...Manning... Shepherd...Indonesia..."

I'll get right on that reading list and get back to you sometime next week... but tell me... will any of them contradict what I've said above?

"Oh - Luxembourg's minimum wage, per your list, is higher than the (5.15)(160 hours per month) US's. Their 2006 unemployment was 4.6%, per the oecd."

Oh - but country X's minimum wage is lower than the US and their unemployment rate is only Y%.

Cherry picking examples isn't exactly an effective technique. Pointing to France was intended to be an illustration using an extreme, and therefore clear, case of an over-regulated labour market plagued with lower efficiency.

Were I willing to invest more time, I would have compiled a scatter chart of developed nations, plotting minimum wage as a percentage of average income on one axis and unemployment rate on the other. What do you expect the resulting relationship would be?

"...dumbass...not too fucking much, dickhead...you don't know shit..."

How very eloquent.

"I have cited studies that find there is a small negative employment effect from the minimum wage. Due to coverage, the effect isn't as large as you'd think."

How is that different from what I said above? I only talked about the direction of the employment effect, not the magnitude. I would have been surprised if you'd said that employment levels increased, all else being equal.

But, did you see any studies that dealt with the economic losses attributable to employers having less money available to invest because of higher payrolls, or the impact of lower profits on business failures? I haven't seen any, but I admit, I haven't looked.

But I know that these issues certainly aren't being addressed by the folks pushing for the minimum wage hike.

|1.9.07 @ 9:46AM|#

"Silly me for accepting the theory..."

Silly you for accepting any theory in contravention of the evidence.

You're still arguing that a 747 can't fly, and referring me to the first chapter of the Physics text.

Nordic Elk,

But this line slopes down. DOWN! That's all I need to know! Geez, how stupid do you have to be not to realize that the line slopes down?

|1.9.07 @ 10:46AM|#

"Silly you for accepting any theory in contravention of the evidence."

Evidence? What evidence?

Sorry... I must have missed something... when did you introduce any evidence?

You've been dead right on a bunch of things.

1. That most people will see an increase in their paychecks, despite the possibility of reduced hours.

2. That additional buying power in the hands of workers would stimulate the economy.

3. That only a small percentage of jobs would be lost. (about 6.1%, according to the elasticity figure that Nordic Elk so graciously provided, and a 41% wage increase)

4. That when theory and reality collide, one should put more stock in reality.

So far, on all of the above points, I'd agree with you entirely.

What I've been trying to point out to you, and you've been ignoring, is that you're only looking at one side of the balance, increasing the cash flow of workers.

There's still the unseen issue of reducing the cash flow of employers, and all the associated impacts: lower income, lower investment, less hiring, less personal spending by owners, higher rate of business failure, lower rate of business formation, more outsourcing to lower wage economies, etc.

All you've done is say... "a minimum wage hike will produce sufficient positive economic effects that it will not produce a net loss". You know this how? Obviously you have evidence...