What price minimum wage?

[Eriny]

Just a theory here, but isn't it possible that minimum wage increases are linked with a higher percentage of unemployed people because working becomes more attractive and the participation rate rises?

I believe in the minimum wage, there has to be some kind of safety net. The situation in America is not right: there are people there working 8 hour days who still don't have enough to pay rent and medical bills (granted, they do have a minimum wage which is probably fine if you're a teenager working part-time, but next to nothing for someone trying to run a household) and some have no hope of getting out of their situation (being educated and having better job prospects will put you even more in debt). There's also other issues such as outsourcing and overworking. The market mechanism can be pretty cruel to the individual who's essentially just trying to make ends meet.

[Collin Li]

Wages have been going up for the past century yet our unemployment is at record lows...
A few cents doesn't determine employment. Demand for employees due to booming economies does.

Wages can go up, while unemployment stays low, no-one has said that is impossible. This is simply possible by an increase in demand for workers (as you have explained is caused by booming economies). The market will naturally do this, because a high demand for workers represents a need for more workers. In order to get more workers, employers need to pay more in order to get them.

To artificially increase wages is a different story. If the market wage is lower than the proposed minimum wage, then the government-enforced price floor will lead to cuts in employment because the government has ramped up wages beyond what the current level of demand commands. Just let the market do its thing. Government intervention costs money (the costs of enforcing), and it costs liberties - people cannot freely negotiate wage contracts.

[brendan]

Give me a figure or estimate from that data of what the unemployment levels would be at without minimum wages. I can say with a great deal of certainty (based on common sense) that it would not be a significant difference.

If it is so obvious, then provide the hard evidence for your claim.


In 152 pages David Neumark and William Wasche discusses over 90 recent studies on the effect of minimum wages on employment, including 4 studies from Australia. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research" by David Neumark, William Wascher http://papers.nber.org/papers/w12663

Their conclusions:
1. among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries.
2. very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects.
3. the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.

There's also other issues such as outsourcing

why is that even an issue? what about the poor people in poor countries who now have jobs where before they did not?

The market mechanism can be pretty cruel to the individual who's essentially just trying to make ends meet.

how can the market mechanism be cruel when the market clearing price is not the result of a deliberate and intentional human action? only individual people can be cruel.

[Collin Li]

Just a theory here, but isn't it possible that minimum wage increases are linked with a higher percentage of unemployed people because working becomes more attractive and the participation rate rises?

I don't get the point of this. You might have to clarify.

I believe in the minimum wage, there has to be some kind of safety net. The situation in America is not right: there are people there working 8 hour days who still don't have enough to pay rent and medical bills (granted, they do have a minimum wage which is probably fine if you're a teenager working part-time, but next to nothing for someone trying to run a household) and some have no hope of getting out of their situation (being educated and having better job prospects will put you even more in debt). There's also other issues such as outsourcing and overworking. The market mechanism can be pretty cruel to the individual who's essentially just trying to make ends meet.

An increase in the minimum wage is nothing but a band-aid solution. It will better off the employees that manage to survive job losses, but it will cut-off those who were living on at least some wage onto unemployment: a worse situation.

I have no problems with outsourcing or overworking. The minimum wage actually worsens overworking problems, because those who are not competitive will be sacked, while the minimum wage already applies pressure on employers to sack uncompetitive employees currently working at the minimum wage.

[costargh]

Just a theory here, but isn't it possible that minimum wage increases are linked with a higher percentage of unemployed people because working becomes more attractive and the participation rate rises?

I believe in the minimum wage, there has to be some kind of safety net. The situation in America is not right: there are people there working 8 hour days who still don't have enough to pay rent and medical bills (granted, they do have a minimum wage which is probably fine if you're a teenager working part-time, but next to nothing for someone trying to run a household) and some have no hope of getting out of their situation (being educated and having better job prospects will put you even more in debt). There's also other issues such as outsourcing and overworking. The market mechanism can be pretty cruel to the individual who's essentially just trying to make ends meet.

I agree with you 100%.
Its a more humane approach to the issue.
That is why I brought up the example of the girl at my work who has moved from America because she couldn't live off the money she was making over their.

Their should be a minimum wage as a safety net but it has to also be practically implemented. (ie. Not just be $1 an hour and say that that is the safety net).

Wages have been going up for the past century yet our unemployment is at record lows...
A few cents doesn't determine employment. Demand for employees due to booming economies does.

To artificially increase wages is a different story. If the market wage is lower than the proposed minimum wage, then the government-enforced price floor will lead to cuts in employment because the government has ramped up wages beyond what the current level of demand commands.

But the minimum wage is already so low that that is not a problem. Economic theory is a lot different to its practical implementation. At my work over the last 2 years, over 100 employees have left most citing "crap wages". Thus their is always a high demand for workers at my workplace, yet the wage that they offer has not increased (probably increased in-line with inflation). Even though we are currently 20 people underemployed we have not increased wages that we are offering.

Unemployment is just a statistic.
If one person is employed with a company for 2 years (citing reasonable wages), they will naturally become effective and efficient at their job which will help the company succeed.
If you have one person who been in 4 jobs in the last 2 years (always changing to try and increase wages) then none of the companies are benefiting because of the constant staff chaning resulting in constant rehiring, unskilled employees (in terms of real life training) and ineffecticve and inefficient workplaces. Yet the unemployment rate may still say for both scenarios that unemployment is at 4%.
My point is that workers who are content with their minimum wage are more willing to stay in their job resulting in less staff turnover and an increase in company efficiency and effectiveness.

[brendan]

Economic theory is a lot different to its practical implementation.

What coblin said IS the practical implication:
In 152 pages David Neumark and William Wasche discusses over 90 recent studies on the effect of minimum wages on employment, including 4 studies from Australia. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research" by David Neumark, William Wascher http://papers.nber.org/papers/w12663

Their conclusions:
1. among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries.
2. very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects.
3. the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.

[costargh]

Economic theory is a lot different to its practical implementation.

In 152 pages David Neumark and William Wasche discusses over 90 recent studies on the effect of minimum wages on employment, including 4 studies from Australia. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research" by David Neumark, William Wascher http://papers.nber.org/papers/w12663

Their conclusions:
1. among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries.
2. very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects.
3. the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.

Why don't you make it your sig
You've posted the bottom part twice now
and the top bit 4 times.

[brendan]

Its a more humane approach to the issue.

Unemployment is just a statistic.

How is it ever humane to say that "unemployment is just a statistic" as if to ignore or discount the real human and tragic effects of being unemployed?

[brendan]

Why don't you make it your sig

I should because you keep ignoring the hard facts when they are inconvenient to your argument.

[costargh]

I never denied that it may raise unemployment, I just said to what degree would it have changed unemployment rates.

[costargh]

Its a more humane approach to the issue.

Unemployment is just a statistic.

How is it ever humane to say that "unemployment is just a statistic" as if to ignore or discount the real human and tragic effects of being unemployed?

But it is true.
If you only have to work 1 hour a week to be considered employed then a person who is 'employed' for 1 hour and a person who is 'unemployed' are almost on level terms

[brendan]

No, it is not just unemployment, minimum wages also create disemployment effects: http://papers.nber.org/papers/w12663

[costargh]

Maybe you have misinterpreted my statement that
"Unemployment is just a statistic"

It fails to recognise that people who are employed may very well be in a similar position to people who are theoretically considered employed.

[Collin Li]

But the minimum wage is already so low that that is not a problem.

If it is not a problem, then why can't we let the market deal with it? You would admit that it does have an effect. The effect is negative, that is my argument.

Even though we are currently 20 people underemployed we have not increased wages that we are offering.

So what? This is because your employer believes the benefits do not outweigh the costs (that is, if he offered a higher wage).

If you have one person who been in 4 jobs in the last 2 years (always changing to try and increase wages) then none of the companies are benefiting because of the constant staff chaning resulting in constant rehiring, unskilled employees (in terms of real life training) and ineffecticve and inefficient workplaces. Yet the unemployment rate may still say for both scenarios that unemployment is at 4%.

Smart companies would fix this by offering wage increases (they would do this because as time goes on, the benefits justify the costs). If they do not, it is to their own detriment. The market solves this, because smart companies will sustain profits in this way, and thus these companies will survive and thrive.

[costargh]

No, it is not just unemployment, minimum wages also create disemployment effects: http://papers.nber.org/papers/w12663

I haven't denied that... why have you posted that link for the 5th time...