Minimum wage

Good or bad?

Any references to morality and any clearly ideological viewpoints (ON EITHER SIDE) will be ignored. Factual evidence accepted only.

[TomCollins]

It's good if you like unemployment and inflation.

[The Don]

Bad: The supply of labor exceeds demand (in some circumstances when the minimum wage is above equilibrium) which leads to unemployment and an inefficient allocation of resources.

I am not sure what you mean by this. The supply of labour exceeds the demand? What does that have to do with minimum wage. That is the price of labour, not it's supply. Isn't it?

[The Don]

If the price of labor is above the market equilibrium (as is the case when the government determines wage prices), then more people will want to work than employers are willing to hire. Basic economics. This isn't the case all of the time (when equilibrium is above the minimum wage there is no effect) but sometimes it is... primarliy causing unemployment.

Can you back this up with any evidence?

[TomCollins]

Economics 101.


Edit - added a link.
web page (http://en.wikipedia.org/wiki/Supply_and_demand)

I want actual proof. Empirical evidence.

[TomCollins]

[ QUOTE ]
I want actual proof. Empirical evidence.

[/ QUOTE ]

Try looking at every piece of evidence in the theory of Supply and Demand. If you can disprove this, you can mention me in your Nobel Prize Ceremony.

[The Don]

It seems as though in America the minimum wage laws have primarily affected teen employment. Most people earning minimum wages are (were in 1997) not "breadwinners" (only 11.7% according to the article) but teens with limited human capital or multiple income families.

Source - Minimum Wage Laws and Teen Employment (http://www.heritage.org/Research/Labor/BG1162.cfm)

[BluffTHIS!]

Minimum wage is what you get paid to 12 table $1/$2 limit games online.

[Dr. Strangelove]

only if you really suck

Please do not respond in my thread. I am not arguing that supply and demand are not extremely interrelated. I am wondering if there is any proof that minimum wage affects employment. You are not welcome here.

[The Don]

Googling "Unemployment" + "Minimum Wage" isn't that hard... in doing so you will discover that they are connected. This thread is pointless without debate, especially if you will not accept fundamental reasoning.

[ QUOTE ]
Googling "Unemployment" + "Minimum Wage" isn't that hard... in doing so you will discover that they are connected. This thread is pointless without debate, especially if you will not accept fundamental reasoning.

[/ QUOTE ]

I am not saying they are not connected. I am saying I do not know if they are or if they are not. There has been one link so far (and it looked like your standard partison website, biased in the extreme). If this is so 'basic' then it should be very simple to prove.

[ QUOTE ]
[ QUOTE ]
Googling "Unemployment" + "Minimum Wage" isn't that hard... in doing so you will discover that they are connected. This thread is pointless without debate, especially if you will not accept fundamental reasoning.

[/ QUOTE ]

I am not saying they are not connected. I am saying I do not know if they are or if they are not. There has been one link so far (and it looked like your standard partison website, biased in the extreme). If this is so 'basic' then it should be very simple to prove.

[/ QUOTE ]

The states with the 3 highest minimum wages have the 3 highest unemployment rates. A high minimum wage hurts the people that become unemployed from it, it hurts businesses because they have to pay more, and it hurts the consumers who have to pay more for the goods and/or services. The only ones who are helped are the ones who get the raises.

Macro and Micro econ should be a required course in high school. Too many people are hoodwinked by the left-wing politicians into believing import quotas, high minimum wages, etc are good for the economy. I'm sure a majority of you liberals would second guess your beliefs about the economy. You can keep your gay marriage concerns and whatever, but no way you'll be touting import quotas, price ceilings, and minimum wage increases after taking those courses. Join the Libertarian Party.

http://seattlepi.nwsource.com/opinion/153901_unemploy26.html?searchpagefrom=2&searchdiff =42
http://angry-economist.russnelson.com/minimum-wage.html
http://www.mises.org/fullstory.aspx?Id=1603

[BCPVP]

I'll quote directly from my econ textbook:

[ QUOTE ]
Here are 12 propositions with which at least 7 out of every 10 economists agree:
... * A minimum wage increases unemployment among young workers and low-skileed workers...

[/ QUOTE ]

I do not doubt your textbook says that; that does very little to convince me of it's veracity. Also, do not many economists look at atleast a small degree of unemployment as a positive thing?

[BCPVP]

It sounds like you won't be convinced no matter what anyone says.

[TomCollins]

[ QUOTE ]
Please do not respond in my thread. I am not arguing that supply and demand are not extremely interrelated. I am wondering if there is any proof that minimum wage affects employment. You are not welcome here.

[/ QUOTE ]

Looks like you are the one who isn't welcome. Working on that 3rd star, eh?

Supply and demand set the price. FACT.

In this case, the product is labor. If you set the minimum price of labor to be higher than the market price, there will be a surplus of labor. This means unemployment.

I will hold anyone claiming minimum wage is GOOD to these standards as well.

You can really just use some basic logic here if you wanted to.

Say I am willing to work for $4 an hour, and an employer is only willing to pay $4 an hour for the position I want. Bang! I'm employed. Introduce minimum wage of $5 - Bang! I'm unemployed just that quickly.

Now, in that very simple scenario, did minimum wage help employment or hurt it? Did it help the firm or hurt it?

[fluxrad]

grunching...

Good, when used to a small extent. It is, as with most government intervention, equity at the cost of efficiency.

Funny, that. Most armchair Republican economists tend to forget that a perfectly free economy is also the least equitable. And while I'm sure it's all well and good to [censored] over the poor in the short run ("I earned my money" and all that), it leaves quite a poor impression on the other socialites when the indigent subjects of your fiefdom come to burn your house down, rape your wife, and take your money.

In short: Whether you pay them so they may buy it, or they kill you for it...the poor will have their bread.

[BCPVP]

[ QUOTE ]
I will hold anyone claiming minimum wage is GOOD to these standards as well.

[/ QUOTE ]
Anyone who does so obviously doesn't understand economics. If you won't be convinced by what 70+% of economists believe to be true, what's the point of continuing?

fluxrad, minimum wage laws hurt the poor. The poor people who are willing to work for $4/hr right now are unemployed.

[fluxrad]

[ QUOTE ]
fluxrad, minimum wage laws hurt the poor. The poor people who are willing to work for $4/hr right now are unemployed.

[/ QUOTE ]

This isn't quite true. You are correct in that miminum wage laws cause an increase in unemployment. But you are incorrect in that minimum wage laws "hurt" the poor. What minimum wage laws do is reduce overall poverty at the cost of unemployment. I pulled Newmark, 2002 from my old Econ texbook if you want me to source the actual paper.

I should say, I'm not a fan of setting the minimum wage at something like $10 an hour. I don't believe the minimum wage is equivalent to a wage that one can support a family on. But I do believe society should have a law that says you cannot employ someone long-term at a wage less than X. I think we need that law for the same reason we have usury laws. Because the poor and the desperate make really dumb economic decisions - and this can be exploited by others (re: efficiency vs. equity).

Again - I should stress that a minimum wage is less economically efficient. But I think not having one would cause serious long-term social consequences (i.e. crime due to poverty). In being a proponent of a national minimum wage, I am choosing the lesser of what I percieve to be two evils.

[ QUOTE ]
I'll quote directly from my econ textbook:

[ QUOTE ]
Here are 12 propositions with which at least 7 out of every 10 economists agree:
... * A minimum wage increases unemployment among young workers and low-skileed workers...

[/ QUOTE ]

[/ QUOTE ]

I call [censored]. Identify this "textbook", because I'd be shocked at one that would be so imprecise. A "minimum wage" set below the clearing price would, of course, have NO effect on unemployment -- something 999 out of 1000 economists (the other one is drunk or the author of your book) should agree on.

[BCPVP]

[ QUOTE ]
I call [censored].

[/ QUOTE ]
I'm not bluffin'. /images/graemlins/smirk.gif

The book is Economics 7th Edition by Michael Parkin of the University of Western Ontario. Copyright 2005. The quoted section is on page 14.
http://www.bookbyte.com/product.aspx?isbn=0321246829&ref=froogle

This is the required textbook for Economics 202 (Macro) at the University of Wisconsin-Whitewater for Prof. Yahmin (my prof).

[ QUOTE ]
[ QUOTE ]
I call [censored].

[/ QUOTE ]
I'm not bluffin'. /images/graemlins/smirk.gif

The book is Economics 7th Edition by Michael Parkin of the University of Western Ontario. Copyright 2005. The quoted section is on page 14.
http://www.bookbyte.com/product.aspx?isbn=0321246829&ref=froogle

This is the required textbook for Economics 202 (Macro) at the University of Wisconsin-Whitewater for Prof. Yahmin (my prof).

[/ QUOTE ]

I read something very similar in my Micro Econ textbook.

[BCPVP]

I think what's throwing Elliot off is the lack of "nuance" /images/graemlins/smirk.gif. Yes, if you set the minimum at below the equilibrium price of labor then there won't be much effect. But it's easy to see the effect when you set the minimum at above the equilibrium price. That's why it seems to me that the OP doesn't know much about economics because if she did, she could draw a supply/demand graph of it and see for herself.

edit: I forgot to mention that the reason there isn't much nuance to the statement was because it was basically part of the introduction. There's a whole section for the minimum wage in the book that says what I said above.

Hey I assume you go to UWO? what limits (if any) do you play? Do you play any live poker?

"Because the poor and the desperate make really dumb economic decisions - and this can be exploited by others (re: efficiency vs. equity)."

Do you think there is any downside to sheltering a person from the consequences of their ignorance?

[BCPVP]

[ QUOTE ]
Hey I assume you go to UWO? what limits (if any) do you play? Do you play any live poker?

[/ QUOTE ]
I'm not exactly sure why you assumed that. I go to UW-Whitewater (see location). When not at school, I live in a suburb of Green Bay.

Unfortunately, the only poker I play is a live game here and there. I don't have a credit card to try online, but I've been considering it.

[Borodog]

Sense and Nonense on the Minimum Wage (http://www.cato.org/pubs/regulation/reg18n1c.html), from the Cato Institute (http://www.cato.org). Since it seems you can't be bothered to follow fundamental economic logic, you may want to just skip to the tables at the end, and note the unanimous negative impact on employment of the 90-91 minimum wage increases.

If you have the stomach for it: Many detailed articles about the minimum wage from the Ludwig von Mises Institute (http://www.google.com/u/Mises?hl=en&submit.x=0&submit.y=0&&q=minimum%20wag e).

You should bookmark both www.cato.org (http://www.cato.org) and www.mises.org (http://www.mises.org) .

Edit: Whoops. It appears that I have responded to the wrong person. The "you" in this post refers to the OP. My apologies.

People having to work 80 hours a week to survive.. Good or bad?

ahh... thought you might go to university of western ontario. Guess not ; 0

[BCPVP]

Lol, actually, I thought you meant University of Wisconsin-Oshkosh.

[cardcounter0]

[ QUOTE ]
note the unanimous negative impact on employment of the 90-91 minimum wage increases.


[/ QUOTE ]

Wasn't the decade of the 90s one that was noted for its extremely low unemployment?
/images/graemlins/confused.gif

[cardcounter0]

Aren't 70+% of economists from the United States? Hasn't the United States had minimum wage laws for about 50 years?
How can such a third world country, hampered so long with the bad economy minimum wage laws, produce so many economists?

[cardcounter0]

[ QUOTE ]
You can keep your gay marriage concerns ...

[/ QUOTE ]

I thought it was the right that had "concerns" about gay marriage.

[KaneKungFu123]

how does minimum wage hurt the poor? if they were willing to work for $4/hr and now they are unemployed they just get more government benefits and dont miss Springer!!!!!!!!

[BCPVP]

[ QUOTE ]
Aren't 70+% of economists from the United States?

[/ QUOTE ]
I don't know and don't know if there's any way to know this.

[ QUOTE ]
How can such a third world country, hampered so long with the bad economy minimum wage laws, produce so many economists?

[/ QUOTE ]
Ever think that it might be in spite of and not because of?

Draw a graph of the supply and demand curves. Draw a horizontal line below the equilibrium (since this is what we're concerned with). Note the shortage caused by this price floor.

[ QUOTE ]
I forgot to mention that the reason there isn't much nuance to the statement was because it was basically part of the introduction. There's a whole section for the minimum wage in the book that says what I said above.

[/ QUOTE ]

Hmm, fair enough. What are the other things that 70% agree on?

Here are some numbers if you still aren't convinced. This is a 1.94MB pdf file, a research study lead by a Florida State University professor.

http://mail.commonwealthfoundation.org/r17-03.pdf

Here is a summary:

[ QUOTE ]
The proposed legislative effort to raise Pennsylvania’s minimum wage could lead to a catastrophic $350 million hit on the Pennsylvania economy and the loss of 10,000 jobs, according to a study commissioned by the Commonwealth Foundation and the Washington, DC-based Employment Policies Institute (EPI).

“The most troubling consequence of artificially increasing the cost of labor in Pennsylvania is that it hurts the very people that minimum wage proponents purport to be helping,” said Matthew Brouillette, president of the Commonwealth Foundation, an public policy research and education institute located in Harrisburg.

The study, The Effects of the Proposed Pennsylvania Minimum Wage Increase by leading labor economist Dr. David A. Macpherson from Florida State University, found that more than 2,800 jobs would be lost for people earning less than $25,000, if a proposal in the General Assembly were enacted. Although most of the economic cost in Pennsylvania, $262.7 million, would stem from increased labor costs to employers, a significant portion, $86.7 million, would result from the lost income from the thousands of employees who stand to lose their jobs.

The study affirms what many economists have previously noted—artificial increases in the wage floor are a blunt and ineffective means of assisting low-income employees because of the simple fact that most minimum wage earners aren’t poor. Only 10% of Pennsylvania’s minimum wage earners are the sole earner in a family with kids. Over half (56.2%) are under 24, and 45.9% still live with their parents. Nearly two-thirds (65%) are part-time employees. The Commonwealth Foundation/EPI study also found that the average family income of minimum wage employees in Pennsylvania is nearly $50,000.

“Despite the high cost of the increase, many low-income persons will see no benefit because they either do not work or work too few hours to benefit from the increase,” said Brouillette. “Overall, Pennsylvania families whose incomes fall below $12,500 would experience only an $89 increase in annual income.”

Flynn said, “The emotionally compelling arguments for raising the minimum wage cannot escape the drastic negative economic consequences. Minimum wage hikes impose enormous costs on the economy, businesses may be forced to close their doors, employees will likely lose their jobs, and new opportunities for job creation will be lost.”

In his testimony before the Senate committee, Flynn offered an alternative to artificially increasing the minimum wage as better means of assisting low-income workers. He urged lawmakers to explore more effective and targeted means of helping low-income employees through a state Earned Income Tax Credit (EITC) companion to the federal EITC, which 17 states presently offer to low-income families, but Pennsylvania does not.



[/ QUOTE ]

btw in my previous post, an important line in the summary was as follows

[ QUOTE ]
simple fact that most minimum wage earners aren’t poor.

[/ QUOTE ]

[ QUOTE ]
[ QUOTE ]
I forgot to mention that the reason there isn't much nuance to the statement was because it was basically part of the introduction. There's a whole section for the minimum wage in the book that says what I said above.

[/ QUOTE ]

Hmm, fair enough. What are the other things that 70% agree on?

[/ QUOTE ]
"1) A ceiling on rents reduces the quantity and quality of housing availability. (93%)
2) Tariffs and import quotas usually reduce the general economic welfare. (93%)
8) A minimum wage increases unemployment among the young and unskilled workers (79%)
9) The government should restructure the wellfare system along the lines of a "negative income tax." (79%)
10) Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)"

Richard M, Alston, J. R. Kearl, and Michael B. Vaughn, "Is There Consensus among Economists in the 1990s?" American Economic Review (May 1992): 203-209.