We keep hearing about what a great thing raising the minimum wage is, and how "the poor" need help. Reading this might help us understand why it isn't always in our best interests to DO so.




Raising the minimun wage is definitely popular. Voters in six states approved higher minimums last Election day. State politicians in both parties are practically drooling with eagerness to "help" lower income workers. After all, how could you call the minimum of $ 5.15 an hour a "living" wage ? Who can live on that ? We all want the poor to make more money. So if the government can raise wages by decree, why are the popular proposals so stingy ? What good is a measly buck or two extra ? Lets really do something for the poor. Lets raise the minimum wage to $ 20.00 an hour. Even better, $ 50.00 ! Or maybe we should take a deep breath and think like economists for a change.

The law of supply and demand, which operates whether we like it or not, says that when the price of something goes up, people buy less of it.

If the government mandates a higher minimum wage, some workers will get a raise. Some. But something else will happen. Employers will hire fewer low-skilled workers. Others will let some current workers go. Some will choose not to expand their businesses. A few will close altogether. If an employer beleives a worker creates only about $ 5.15 worth of value on the job, he won't pay $ 7.00, even if the government demands it. Only 2.5 % of all hourly workers make $ 5.15 an hour (or less; some jobs are exempt from the law).

Few of them stay at the minimum wage for long. As they acquire skills, their productivity rises, and they command higher wages. According to a study done for the Bureau of Labor Statistics, "minimum wages have virtually no effect on the careers of most workers."

Legal wage minimums kill all kinds of entry level jobs, particularly those that would teach young people basic work habits and the benefits of effort. Thats why there are no kids cleaning your windows at gas stations or working as ushers in movie theaters. Those jobs are extinct now because they're worth less than the legislated minimum.

Lets face it. The higher minimum wage is a feel-good law. A slight increase will pass because politicians and poverty activists will be able to say they have "done something" for the poor, while the victims of the policy go unnoticed. Then the resulting unemployment will justify expansion of the welfare state.

Except thats not true, and were this not written by an overly pretentious windbag, and was instead written by an actual economist it would have a more nuanced perspective.

Whether people like it or not, economics cannot be boiled down to simply understanding the rudiments of what supply and demand are. Surely if Stossel had read much into economics he'd learn about the existence of Giffen Goods for which demand increases when price increases. Or he may even learn of the the strange and fantastic concept of "statistical evidence" for which his argument is completely lacking. The effect minimum wage has on employment is not distinguishable from zero.

He of course also forgets two other parts of the supply demand equation, particularly "supply" and "marginal cost". The fact is to hire additional employees in equilibrium conditions requires you to offer better wages, since the labor market operates according to "the law of increasing costs" barring a severe economic recession. The problem is that in order to offer the new employees better wages, you need to offer your old employees better wages. This results in a marginal cost which is greater then what you are paying the additional employee. And if that marginal cost is greater then marginal revenue, then the employer will cease hiring additional employees.

So when you create a wage floor you flatten the marginal cost curve for hiring all workers who will accept that wage level. And so long as the wage is below marginal revenue the last employee makes for you, which in all likelihood it is, then you're not going to fire an employee due to an increase. In some sectors you can even see an employment increase.

The fact that this is supported by statistical evidence and empirical research, while the counterpoints are largely as weak as Stossel's lends creedance to do it if for no other reason then the public wants to, since there is little credible evidence that it will ever result in the doom and gloom that people like Stossel predict.

So, you're a self professed economist then.

Why not raise the minimum wage to $ 50.00/hour ?

These fancy concepts YOU bring up to impress us, only impress YOU. Your attempt to complicate a rather simple issue, and your name calling (windbag) tell us more about your OWN shortcomings in understanding this issue.

You say his argument is completely lacking, yet really provide no real evidence against it besides your dislike of JS for whatever strange reason.

Now, here's your opportunity to call ME names TOO

While I don't agree that the theoretical existence of Giffen Goods has any real relevance to the existence of a minimum wage, nor do I believe in a minimum wage in general, what you're asking and attributing to T-D here is spurious. His argument explains, by its own nature, how he would answer the rhetorical question you're repeating from the article. His argument is that the existence of a wage minimum prevents employers from having to pay the wage costs of additional laborers and allows them to employ more people without shelling out more salary per unskilled worker. Again, I don't really agree with this concept, in practice, but he's not suggesting the spurious oversimplification of driving wages up to prices like $50.00

Rather than write off what he said as "high-fallutin' fancy pants concepts" and demanding evidence, why don't you recognize that economic evidence was exactly what he gave you, if you'd bother to understand the terms.

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"Government big enough to supply everything you need is big enough to take everything you have... The course of history shows that as a government grows, liberty decreases."

-Thomas Jefferson

Because my tolerance for smartasses is presently at zero. If he explained it in a way that actually made sense, and did so without suggesting that the writer was a "windbag" or what not, I might be interested in carrying on a conversation. Is all he has basically done is said that that writing is total nonsense and has no valid points. I disagree with that and after reading TDs writing I'm not interested in reading anything else by him as I expect it to have the same general "attitude" that the one above did.

Did you even read what I wrote? It works so long as the total minimum wage is below the marginal revenue of an employee. Surprisingly enough not everything can be simplified into terms of infinitely good and infinitely bad. You may as well argue against hiring assistants, since after all, if one assistant is actually useful, why not hire a million? If lowering the interest rate .25% increases investment, why not make it zero? The number of false arguments which can be constructed along identical lines are limitless, and all equally invalid.

Fancy concepts? Marginal Cost is a principle concept of economics.

Marginal cost - Wikipedia, the free encyclopedia

I provided theoretical evidence and theoretical evidence with more solid grounding then Stossel's overly simplistic analysis. If you are so inclined i can provide you an example of a widget factory with fake data, alternatively, the statistical analysis would be the research done by Krueger and Card among others.

I dislike Stossel because his ideologically driven ideas do not substitute actual economic reasoning, the laissez-faire capitalist is just as idealistic in his belief that market forces will always result in a social optimum as the marxist is in his belief that he can successfully manage an entire economy. You may as well have cited Karl Marx

Yeah. I still haven't been able to figure out why the government doesn't just print up enough hundreds to give everyone a million dollars. If everyone were a millionaire, all of our problems would be solved. It's absolutely astounding that no one has thought of that.

__________________
"Government big enough to supply everything you need is big enough to take everything you have... The course of history shows that as a government grows, liberty decreases."

-Thomas Jefferson

I'm trying to remember the name of that movie where an old indian guy (I think he's an old indian) says:

"Yah, good idea."

Our economy is already built on paper (it's a house of cards). Lets bring it down faster

A federally mandated minimum wage is BS.

If a state chooses to set it at 4 bucks an hour, let them. If a state chooses to set it at 20 dollars an hour, let them. We can gain a lot more by learning from each other rather than let the federal government dictate it for everyone. Let states be the laboratories of democracy.

Ill even agree with $20 an hour. But the Right wage is anything above $9 an hour

In equilibrium employees are paid their exact marginal productivity. So, if an employee's MP is $4/hr, he will not get paid more, regardless of the minimum wage laws.

__________________
"Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the form of kings to govern him? Let history answer this question."
-Thomas Jefferson in his first inauguration address

What evidence supports that minimum wage helps workers?

__________________
"Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the form of kings to govern him? Let history answer this question."
-Thomas Jefferson in his first inauguration address

I've heard this one argued both ways but the view I tend to believe is the one that my economics teacher gave. He graphically proved to the class that higher minimum wages result in more unemployment but mentioned that it is beneficial to those who manage to keep their jobs. I thus tend to take a sort of standing in the middle but slightly leaning toward leaving things the way they are stance. I'm very wary about raising the minimum wage after he showed us that presentation. I'm not necessarily against it but I am wary.

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Those who argue for complete secularism are funny. They see what government does and then argue that we don't need it to start with prayer.

I think that a huge thing that is missing from the discussion is the matter of justice. How can anyone say, whether you believe that min. wage helps or hurts, that the min. wage is just? What if I want to work for $4/hr, why don't I have that liberty?

__________________
"Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the form of kings to govern him? Let history answer this question."
-Thomas Jefferson in his first inauguration address

Sounds about right.

I'd bet there WOULD be jobs created though for willing people, if some exceptions were allowed. Minor jobs maybe, but businesses might be willing too employ people for them if they weren't being forced to pay this or that amount.