http://ideas.repec.org/a/aea/aecrev/v84y1994i4p772-93.html
Thoughts?
http://www.econ.jhu.edu/people/Barnow/neumarmw.pdf
In short, their statistics failures led them astray. Imagine that.
The total number of people employed is not the issue in the implementation of minimum wage. The real issue is that there are people who will lose their employment as their output is less than the minimum wage because they can not freely sell their labor for less than the minimum wage. These folks are injured worst in this sick use of force on voluntary exchanges of labor.
And to make matters worse these folks lose the ability to collect valuable experience which will help them earn higher wages in the future.
Look at the plight of black men. They not only had to deal with racism but after minimum wage they had to deal with the government being against them as well. And the statistics prove this as almost immediately upon passage, the difference in employment rates between blacks and whites began to grow.
There's ongoing debate on this paper. The "refutation" you linked to certainly didn't end the debate. The point of this post is that whilst Micro 101 might suggest that minimum wage will always decrease employment, there are all sorts of empirical complications that need to be taken into consideration.
EconomistInTraining:There's ongoing debate on this paper. The "refutation" you linked to certainly didn't end the debate. The point of this post is that whilst Micro 101 might suggest that minimum wage will always decrease employment, there are all sorts of empirical complications that need to be taken into consideration.
Please clarify.
The point of this post is that whilst Micro 101 might suggest that minimum wage will always decrease employment, there are all sorts of empirical complications that need to be taken into consideration.
Yes, I think everyone here would agree with that. Though there are theoretical "complications" in addition to whatever "empirical complications" you believe exist. Ceteris paribus, enforcing a minimum wage above a market wage results in unemployment. Obviously, it is rarely the case that all other things are held constant.
^ labor markets are not perfect.
if you have a situation where there is only one major employer in your area (factory towns say), then the employer could potentially nagotiate wages below those that would result from a more comepetitive labor market. this implies that setting a minimum wage above that amount could actually INCREASE employment and in a net welfare improvement.
similar logic could be applied in situtations where you have multiple employers but high costs for job search. the fact that its costly to search for a job could give an employer enough market power to nagotiate rates below competitve rates, implying that welfare could be improved through a minimum wage.
now, one could argue "oh well, eventually the market will solve those problems. how many factory towns are left?? and look at monster.com!! thats reducing job search!" which I think makes sense. but i doubt those arguments serve much comfort those people that have to suffer the conditions in the mean time.
in any case, i think the op's point stands. life is more complicated than micro 101. and minimum wages need not always result in unemployment (in either theory or practice).
Ambition is a dream with a V8 engine - Elvis Presley
I would say it's ironic that Card & Krueger are still taken seriously, but I guess it makes perfect sense considering the pro-government policy bias that exists in the econ profession. If someone published a pro market paper with similar flaws found in Card and Kruger's various studies (inadequate data collection methods, statistical manipulation, and failure to examine beyond the 'seen'), they would be immediately discredited.
CK used telephone surveys where the interviewee had to interpret the question. Then they performed 'empirical analysis ' based on these subjective interpretations and came to conclusions that defy economic logic and as later shown the actual empirical evidence.
Furthermore, they didn't examine other competitors of the chains in question... (Large chains can probably absorb a wage hike much better than small independents...these chains could have increased their business and employees, but did that coincide with smaller mom and pop eateries closing down? )
http://reason.com/archives/1995/06/01/minimal-evidence/
http://www.econlib.org/library/Enc/MinimumWages.html
Which machine do you use to measures social welfare again?
^ funny an austrian would be arguing that something only exists if you can measure it.
So your point on social welfare is apriori?
^ i am saying the conclusions follow from the assumptions (pick up a labor econ textbook for the details). i'll let you decide if you think the assumptions are a priori true. methodology discussions are not my thing. I just thought it was funny you would be so quick to abandon your methodological foundations to score a rhetorical point.
PS* Even if you want to debate the existence of welfare (ala Roy Cordato), my note also described how employment would increase. Hopefully, the existence of the state of employment isn't as controvertial.
Except I did no such thing....
My first silly question was to get you to answer the second. You were smart enough to deflect the second one.
PS* Even if you want to debate the existence of welfare (ala Roy Cordato), but my note also described how employment would increase. Hopefully, the existence of the state of employment isn't as controvertial.
What do you think of the european model of industry based minimum wages?
What about regional minimum wages?