On Jan 18, 2007, at 2:45 AM, Jason McCullough wrote:
> I’ve been in what seems like a never ending argument over the last
> couple weeks with some conservatives, and one economist in
> particular, on a message board I hang out on. There’s an
> unbelievable level of certainty on the right, especially with
> economists on the right, that the minimum wage’s impact is not only
> significantly negative on employment, but significantly negative on
> the net welfare of the people having those jobs.
I doubt they're offering any evidence for the position - just saying something like, "It's common sense! [Or, more likely, "basic economics" - to show that unlike you, well-meaning naif, the hardheaded speaker has been inducted into the mysteries of the discipline.] When you raise the price of something you reduce the demand for it, whether it's porridge or labor. Force wages up beyond market levels, and you'll create unemployment. So in this case you're only hurting the people you're trying to help."
Problem is there isn't much evidence for this proposition. Even the theoretical appeal is a little dodgy, because the elasticity of demand can be extremely variable. In the recent gas price spike, for example, demand in the U.S. barely stumbled; people complained, but kept driving. Same with the wage. Increase it by 10% and what happens? Does demand for labor decline by 10% or 1%?
In fact, actual empirical studies of minimum wage show little or now effect on employment. David Card and Alan Krueger did a series of comparisons of similar jurisdictions, one of which increased its local minimum vs. another that didn't. There was no reduction in demand for low-wage labor in the areas that increased. Also, there was no visible decline in the demand for labor after the last rounds of minimum wage increases in the U.S. And, I just got a press release announcing the results of a survey by firm that does payrolls for a lot of small businesses, which found they don't care about a minwage increase.
Yeah, Bill Bartlett has a point that it's the class interests of economists at work. But it's also the idiot reflex of orthodox economics: raise the price, and demand just has to go down. It does, it does! But it doesn't.
Doug