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[lsanderson]

Would cutting the minimum wage raise employment?

It seems that more and more Serious People (and Fox News) are rallying around the idea that if Obama really wants to create jobs, he should cut the minimum wage.

Would cutting the minimum wage raise employment? - Paul Krugman Blog - NYTimes.com

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Comments

Re: When does Krugman get to be president like Bartlet?

[sethb.livejournal.com]

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.