Economics Questions

Re: Is the desirability of the minimum wage strictly an empirical question?

krazy kaju — Mon, 08 Jun 2009 01:19:57 GMT

Juma:

krazy kaju:

So is a 1000% increase in the minimum wage justifiable if it won't increase unemployment by 1000%?

In theory, yes because there's an overall welfare gain. Of course, that's why we're saying it's an empirical question, because at that level of an increase the elasticity will likely always be perfect, so the policy is not desirable. A minimum wage increase will only increase welfare with small incremental hikes and at low levels

You do realize that even only a 100% increase in unemployment would be a doubling, right? That would leave millions of people out to starve in the streets. That's what you get for your "net gain."

Re: Is the desirability of the minimum wage strictly an empirical question?

jwilsn1020 — Sun, 07 Jun 2009 00:19:17 GMT

Put bluntly, talk of an amalgamated loss or gain is faulty. On the macro side, ivory tower economists end up taking something of a statist approach (seeking "amalagated gains" as a means of self fulfillment). In asking if it is an "emperical question", you appear to be refering to its affect on the social economy. Nonetheless, the question of "desirability" is strictly subjective - a group of people cannot desire something, only its members. If you want to assess upshot of the implamentation of minimum wage that's fine; but, if it's truly "desirability" that you're after you'll have to be a bit more introspective and use your own subjective scale of value (which, in turn, will simply be a reflection of your personal values). hope this helps..

Re: Is the desirability of the minimum wage strictly an empirical question?

wilderness — Sat, 06 Jun 2009 23:56:18 GMT

Juma:

I said it's about OVERALL NET GAIN. I didn't mean to imply there wouldn't be any losses

You call it an overall net gain when your numbers exclude people getting coerced out of a job due to government intervention. This is an injustice. I don't think you can call something an overall net gain when people lose their jobs due to coercion. It's actually called criminal.

Re: Is the desirability of the minimum wage strictly an empirical question?

TheOrlonater — Sat, 06 Jun 2009 23:34:16 GMT

It seems like a heirarchy of low productivity.

Re: Is the desirability of the minimum wage strictly an empirical question?

Bostwick — Sat, 06 Jun 2009 23:24:22 GMT

Juma:
Therefore, a 10% increase in the minimum wage won't decrease employment by 10%, so there's a positive income gain for minimum wage workers.

That's ridiculous!

Putting 8% of workers out of work is okay because someone else's income went up 10%? So much for equality!

Re: Is the desirability of the minimum wage strictly an empirical question?

Jon Irenicus — Sat, 06 Jun 2009 22:36:15 GMT

True, but I think that's the point of saying it's an empirical question. The people who lose their jobs and income suffer, but all the other people still employed gain from the higher wages. And if the elasticity is less than perfect, the gain will exceed the loss

What "gain"? What if the loss of the jobs of the individuals is (subjectively to them) a far greater loss than those with higher salaries? How will the firms find the resources to pay these higher wages without making cutbacks elsewhere, that put the market on a suboptimal track (the unseen)? How does "elasticity" magically make an uneconomic policy economic? Whether it causes 2, 10 or 100% unemployment is irrelevant to whether it's efficient, regardless of how much of a "gain" (read: how much those who are still in employment can extort from their employers) it offers. I'm not even sure supply would be unaffected as lines of production reliant on cheap labour that is now outlawed (effectively) would certainly be impacted, with entire swathes of individuals engaging in productive work now out of a job (reducing net output, as the "winners" did not increase productivity to merit higher wages.)

Re: Is the desirability of the minimum wage strictly an empirical question?

Juma — Sat, 06 Jun 2009 22:29:49 GMT

MatthewWilliam:

Juma:
It's hard to speak in terms of utility because people are so different. That's why I said the assumption that everyone affected is of similar nature is problematic. But if you measure the social welfare in terms of dollars, there's a clear net gain

Right, but otherwise it's impossible to tell. Even if we agreed with your analysis, no-one has become any more productive after the wage increase. There will be fewer goods produced mutatis mutandis. The price of the produts will rise.

The economics of coercion have failed time and time again--this is no different.

I thought according to Austrian economics prices wouldn't be affected because there is no change in supply and demand for the product

Re: Is the desirability of the minimum wage strictly an empirical question?

MatthewWilliam — Sat, 06 Jun 2009 22:26:45 GMT

Juma:
It's hard to speak in terms of utility because people are so different. That's why I said the assumption that everyone affected is of similar nature is problematic. But if you measure the social welfare in terms of dollars, there's a clear net gain

Right, but otherwise it's impossible to tell. Even if we agreed with your analysis, no-one has become any more productive after the wage increase. There will be fewer goods produced mutatis mutandis. The price of the produts will rise.

The economics of coercion have failed time and time again--this is no different.

Re: Is the desirability of the minimum wage strictly an empirical question?

Juma — Sat, 06 Jun 2009 22:20:36 GMT

MatthewWilliam:

Juma:
I said it's about OVERALL NET GAIN. I didn't mean to imply there wouldn't be any losses

I think I made the same point earler: how can you make such comparisons? One person's income is destroyed, while a few other people have had their's slightly raised. How can you compare these two, and then tell us that there has been an overall utility increase?

Or an even more simple example: The government seizes (involuntarily) $10 from A, and gives it to B. Is there a utility increase?

It's hard to speak in terms of utility because people are so different. That's why I said the assumption that everyone affected is of similar nature is problematic. But if you measure the social welfare in terms of dollars, there's a clear net gain

Re: Is the desirability of the minimum wage strictly an empirical question?

MatthewWilliam — Sat, 06 Jun 2009 22:14:04 GMT

Juma:
I said it's about OVERALL NET GAIN. I didn't mean to imply there wouldn't be any losses

I think I made the same point earler: how can you make such comparisons? One person's income is destroyed, while a few other people have had their's slightly raised. How can you compare these two, and then tell us that there has been an overall utility increase?

Or an even more simple example: The government seizes (involuntarily) $10 from A, and gives it to B. Is there a utility increase?

Re: Is the desirability of the minimum wage strictly an empirical question?

Juma — Sat, 06 Jun 2009 22:03:17 GMT

wilderness:

Juma:

wilderness:

Juma:

nibbler491:

Also, you're completely wrong in saying there's any gain. The only thing you can do by raising the minimum wage is force business to reallocate resources.

If the minimum wage is 10 dollars, and you increase it 10%, bringing it to 11 dollars, also increasing unemployment by 5%, how is there a welfare gain?

Hundreds of thousands of people who were once making 10 dollars are now making nothing, and the people who were making 10 dollars are now making 1 dollar extra. Clearly all you've done is given workers a handful of extra dollars at the expense of hundreds of thousands of people's livelihood.

This is entirely irrelevant however. Utilitarianism is bullshit.

To make the numbers simple, if the minimum wage is 10 dollars and there are 10 people employed, and it's increased by 20% and employment decreases by 10%, that means 1 person lost his job (so a loss of $10) but the other 9 people gain a $2 raise, which equates a $18 gain for everyone. So the net gain is $8

Juma, what about the person that lost their job?

It's unfortunate, but that's the nature of policy and markets. There's always winners and losers. The goal is to try to create more winners than losers

But you insisted it was all about gains. In a State economy, such as in the U.S., we're talking about an average of 625,000 people going unemployed each month because somebody else wouldn't allow their wage to drop $1. Your focus is too narrow. Meanwhile, wage prices could drop, prices of goods drop, but unemployment wouldn't need to drop. That's more like a win-win.

I said it's about OVERALL NET GAIN. I didn't mean to imply there wouldn't be any losses

Re: Is the desirability of the minimum wage strictly an empirical question?

wilderness — Sat, 06 Jun 2009 21:54:36 GMT

Juma:

wilderness:

Juma:

nibbler491:

Also, you're completely wrong in saying there's any gain. The only thing you can do by raising the minimum wage is force business to reallocate resources.

If the minimum wage is 10 dollars, and you increase it 10%, bringing it to 11 dollars, also increasing unemployment by 5%, how is there a welfare gain?

Hundreds of thousands of people who were once making 10 dollars are now making nothing, and the people who were making 10 dollars are now making 1 dollar extra. Clearly all you've done is given workers a handful of extra dollars at the expense of hundreds of thousands of people's livelihood.

This is entirely irrelevant however. Utilitarianism is bullshit.

To make the numbers simple, if the minimum wage is 10 dollars and there are 10 people employed, and it's increased by 20% and employment decreases by 10%, that means 1 person lost his job (so a loss of $10) but the other 9 people gain a $2 raise, which equates a $18 gain for everyone. So the net gain is $8

Juma, what about the person that lost their job?

It's unfortunate, but that's the nature of policy and markets. There's always winners and losers. The goal is to try to create more winners than losers

But you insisted it was all about gains. In a State economy, such as in the U.S., we're talking about an average of 625,000 people going unemployed each month because somebody else wouldn't allow their wage to drop $1. Your focus is too narrow. Meanwhile, wage prices could drop, prices of goods drop, but unemployment wouldn't need to drop. That's more like a win-win.

Re: Is the desirability of the minimum wage strictly an empirical question?

Juma — Sat, 06 Jun 2009 21:47:06 GMT

wilderness:

Juma:

nibbler491:

Also, you're completely wrong in saying there's any gain. The only thing you can do by raising the minimum wage is force business to reallocate resources.

If the minimum wage is 10 dollars, and you increase it 10%, bringing it to 11 dollars, also increasing unemployment by 5%, how is there a welfare gain?

Hundreds of thousands of people who were once making 10 dollars are now making nothing, and the people who were making 10 dollars are now making 1 dollar extra. Clearly all you've done is given workers a handful of extra dollars at the expense of hundreds of thousands of people's livelihood.

This is entirely irrelevant however. Utilitarianism is bullshit.

To make the numbers simple, if the minimum wage is 10 dollars and there are 10 people employed, and it's increased by 20% and employment decreases by 10%, that means 1 person lost his job (so a loss of $10) but the other 9 people gain a $2 raise, which equates a $18 gain for everyone. So the net gain is $8

Juma, what about the person that lost their job?

It's unfortunate, but that's the nature of policy and markets. There's always winners and losers. The goal is to try to create more winners than losers

Re: Is the desirability of the minimum wage strictly an empirical question?

wilderness — Sat, 06 Jun 2009 21:43:03 GMT

Juma:

nibbler491:

Also, you're completely wrong in saying there's any gain. The only thing you can do by raising the minimum wage is force business to reallocate resources.

If the minimum wage is 10 dollars, and you increase it 10%, bringing it to 11 dollars, also increasing unemployment by 5%, how is there a welfare gain?

Hundreds of thousands of people who were once making 10 dollars are now making nothing, and the people who were making 10 dollars are now making 1 dollar extra. Clearly all you've done is given workers a handful of extra dollars at the expense of hundreds of thousands of people's livelihood.

This is entirely irrelevant however. Utilitarianism is bullshit.

To make the numbers simple, if the minimum wage is 10 dollars and there are 10 people employed, and it's increased by 20% and employment decreases by 10%, that means 1 person lost his job (so a loss of $10) but the other 9 people gain a $2 raise, which equates a $18 gain for everyone. So the net gain is $8

Juma, what about the person that lost their job?

Re: Is the desirability of the minimum wage strictly an empirical question?

Knight_of_BAAWA — Sat, 06 Jun 2009 21:35:39 GMT

Knight_of_BAAWA:
And what about those who are priced out of a job because of the meddling? Remember to consider that which isn't seen.

Juma:
True, but I think that's the point of saying it's an empirical question. The people who lose their jobs and income suffer, but all the other people still employed gain from the higher wages. And if the elasticity is less than perfect, the gain will exceed the loss

So we have to employ some sort of utilitarian calculus? No. We simply have to consider the effects without even having to resort to testing it. And regardess of the gains some might make, the reality is that it will cause distortions in the market. That's bad.