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But what's being discussed is only cutting the minimum wage. His analysis of why overall wage cuts wouldn't help is no doubt correct (I see no flaws in it, at least), but it completely fails to address the question. Minimum wage jobs are a small portion of the total (even fast foot often pays more than minimum these days), and the ability to hire cheaper at the low end could open up new jobs in a way that lower wages in the middle wouldn't. The question is, are there things that aren't currently being done that people would be hired to do if it were just a bit cheaper? I don't know the answer there.

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No. Please take the issue up with Krugman, but what I believe he's saying is that it fails to scale; what's not true in macro, is also not true in micro.

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I've got a comment in the moderation queue at the source. Yes, he's saying it fails to scale to everything, but the claim isn't that it scales to everything, so refuting that claim doesn't accomplish anything.

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1. Why did I go from minimum wages to overall wages? Clearly, a cut in minimum wages –which only apply to some workers — can raise the employment of those workers at the expense of other workers. But the advocates of a cut are claiming that they can raise overall employment. The only way that can happen is if a reduction in average wages raises employment.

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Thanks, I've replied at length there. Because the guy he links to, in particular, very clearly shows he doens't have the faintest clue how hiring decisions are made.

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buttonlass.livejournal.com

I hate this discussion. By all means let's lower the minimum. It will be even farther behind the actual cost of living which is sure to help. Gah! The only people who would seriously consider reducing this are folks who haven't tried to live on that wage recently. Throwing low-income families under the bus doesn't help.

As of a couple years ago the cost of living here in Chicago was almost 2x's as high as the federal minimum. Maybe if the wage went down we could get a nice round number like 2 out of the equation. It'll improve the feng shui.

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The claim is that more people would be employed if the minimum were lower. It's not clearly either true or false yet, despite decades of claims and studies.

If it's true, lowering the minimum would make people currently getting the minimum worse off, but would make some people currently unemployed better off (by being employed). Plus it would have some effects, even harder to predict, in surrounding groups.

Trying to balance out those two and decide if it's worth it for society is certainly not trivial or obvious. The numbers in each group would matter a lot.

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also-huey.livejournal.com

I keep reading claims like this, but nobody ever points at any data. So, I ask Google for some numbers, and make a pretty table, and wind up with this:

unemployment vs minimum wage in constant dollars

So the answer to the question Would cutting the minimum wage raise employment? would appear to be "doesn't much look like it, no".

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Ittsa bogus claim for repugs to hire cheaper servants and burger flippers.

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buttonlass.livejournal.com

I understood the claim. I object to speaking about it in hypothetical terms when real people aren't eating.

Also I think it is clearly false. I have yet to encounter a business that wasn't always trying to improve their bottom line. If they are currently getting by with a set number of employees they will not hire more, they will pocket the difference.

I actually do think it's obvious.

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I acknowledge that real people aren't eating, and that that's an important point. But, again, I point out that those not eating include those unemployed as well as those currently making minimum wage. Ignoring either group makes it impossible to reach a valid conclusion. (I don't, as I said before, know how to balance harm to one vs. harm to the other in any case; I don't claim to be able to reach a valid conclusion, I just feel it's necessary to consider BOTH groups to have any possibility of doing so).

Of course, if the claim is false, then it is easy; if there's no benefit to anybody, then there's no conflict between different benefits, which makes it much easier to reach a valid conclusion.

I have seen businesses choose to increase employment. On one day, they were getting by with a set number of employees, and yet they chose to increase that number the next day. I've even seen them do that in situations other than when they were obviously just skirting disaster. I've seen stores increase how frequently they plowed the parking lot. I've seen them decide to bring cleaning crews through more often. I've seen businesses decide to wash the windows more often. And I'm quite certain that the cost of doing those things was one of the factors considered when they made these decisions. So, without for a moment disagreeing with your opinion that improving the bottom line is their goal, I WILL disagree with your opinion that they will never hire more people if people get cheaper.

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So if a new employee is worth $7/hour in profit (before his salary), when the minimum wage is $7.25 he won't be hired; when it's $6.75 he will be. So in your model, reducing the minimum wage will increase employment.

A fast-food restaurant deciding whether to close earlier will compare the cost of staying open for the last hour with the income. If costs decrease, it is more likely to remain open, thereby providing employees another hour of work.

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Update: Rajiv Sethi:

What I cannot understand is why people of considerable intelligence persist in conducting a partial equilibrium Walrasian analysis of the labor market, as if we were dealing with the market for oranges. Please stop it.

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I noticed he wrote about the effects of reducing all wages. Reducing the minimum wage would increase the number of people employed slightly, and probably produce a decline in the total wages paid.

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daedala.livejournal.com

I think that depends on whether all wages somehow anchor to the minimum wage. I don't know if that is the case or not.

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I suspect it isn't the case; I suspect there's lots of elasticity in the middle, and the CEO salaries aren't much tied to the minimum, but the fast food worker salaries are more likely to be a little bit.

Anyway, that's one of the important questions, definitely.

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Union contracts aren't indexed to the minimum wage.

Raising or lowering it might have some effect on other wages, but not very much. Companies (in happier times) often raised incoming wages, with no effect on employees who'd been there for years.

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yarram.livejournal.com

...and probably, as a side effect, increase the number of people without health insurance of any kind. Employment dis-qualifies many people from subsidized insurance programs, but alas, even at present levels, minimum wage doesn't pay enough that workers can afford the insurance offered by their employers.

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Not quite. I think he's saying if it won't work at the macro level, it won't work at the micro level. It's just a shill.

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That claim is clearly bogus. Give one person a billion dollars, he's really happy and never has to work. Give everybody a billion dollars, and people aren't better off. (Some are, some are worse, on the whole society suffers.)

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http://krugman.blogs.nytimes.com/2009/12/16/minimum-wages-a-few-clarifications/

(deleted comment)

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Those salaries, though, are not currently set by law. Starting to set them by law is a big change, with big consequences.

We already set the minimum wage by law. The question is, is doing that actually helping people, as intended? Or is it, net, hurting people? Some people are probably paid more because of the minimum wage. Some people are probably unemployed because of the minimum wage (they'd be employed at a rate below the minimum, if it were legal). The question is, how many are there in each group, how much do they gain or lose on the deal, and what's the net benefit?

What jobs pay minimum these days? Waitstaff often, but with tips. What else? Last I checked, fast-food was paying significantly above minimum. Is the minimum wage mostly irrelevant today, because the market has moved real wages higher than the legal minimum? (I think this has changed a lot over the last 20 or 30 years.)

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Why do you want more lawyers?

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mizzlaurajean.livejournal.com

Clearly those who think this is a good idea do not understand the correlation between having a job so one can afford food and shelter.

Sometimes more is not the best objective.

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mizzlaurajean.livejournal.com

How about lowering CEO salaries to create living wage jobs.. Or cutting out their bonuses, that right there is about 5 living wage jobs per CEO.

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daedala.livejournal.com

I'm in favor of the tax on banker bonuses.

*Note: I work for a bank. If I get hired, my job is bonus-eligible. I'm assuming I would be taxed.

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