Good news from Arkansas! (Minimum wage increase)

[Adam Smith]

Originally posted by Kidicious
1 to 3%?! What's the margin of error?

That includes the margin of error, which is why its a range, not a single number.

Lets take the midpoint (that a 10 percent increase in the minimum wage reduces the employment of low-skilled labor by 2 percent), with an implied elasticity of 2/10 = 0.2. Apply that to the situation in Mr Mitchel's post where the minimum wage increased from $5.15 to $6.25 in Arkansas and you get a [(6.25-5.15)/5.15]x0.2 = about 4 percentage point increase in unemployment of unskilled labor. Apply that to the situation in Ogie's post where the minimum wage increased from $5.15 to $7.00 in Minnesota and you get a [(7.00-5.15)/5.15]x0.2 = about 7 percentage point increase in unemployment of unskilled labor.

Some people might argue that they are willing to accept that cost in order to make some low wage workers better off. Or you might argue, as LOTM does, that better policies such as the negative income tax are politically infeasible (I am not so sure). But to claim that the cost simply does not exist is contrary to the evidence.

[Kidlicious]

Originally posted by Adam Smith
But to claim that the cost simply does not exist is contrary to the evidence.

Let's just say the evidence isn't very convincing. Sometimes you get more employment with increases in the minimum wage and sometimes you get less employment. I don't think there's any principle established.

[MRT144]

Im beginning to come around to the idea of abolishing the minimum wage, or at least not increasing it by 20% in one fell swoop. it screws over employers and it screws over some employees.

as an average blue collared guy the higher that minimum wage creeps the more I am going to want from my employer because I dont neccesarily have to keep this job to make a similar amount of money. and curently if i asked for a 20% raise Id probably be laughed at, and fired. (especially because it would result in a gross increase of 4000 dollars per year for them on their payroll)

[Gibsie]

If the minimum wage had been rising in line with inflation for the last however many years, there would be no need to increase it so much all in one go. But the Republicans kept striking it down, every year, and that's what happens.

[Dinner]

Originally posted by Imran Siddiqui
[q=Oerdin]as we know form JohnT's endless "the good times are rolling" threads[/q]

JohnT's?

DanS.

[Imran Siddiqui]

Originally posted by Kidicious
Let's just say the evidence isn't very convincing. Sometimes you get more employment with increases in the minimum wage and sometimes you get less employment. I don't think there's any principle established.

Let's put it this way: to use an exaggerated example, say the min wage went up to $50/hr (no one is seriously advocating this... at least I hope not). I think we can agree that there would be serious impacts. Less people would be hired and some small companies would have to go out of business. Now if such is the case for a $50/hr min wage, then there MUST be some effect from raising the wage any bit. It may not be very much, but at least some effect.

[Adam Smith]

Originally posted by Kidicious
Let's just say the evidence isn't very convincing. Sometimes you get more employment with increases in the minimum wage and sometimes you get less employment. I don't think there's any principle established.

Still waiting for you to produce one shred of evidence to support your position.....

[Dinner]

Originally posted by Adam Smith
That includes the margin of error, which is why its a range, not a single number.

Lets take the midpoint (that a 10 percent increase in the minimum wage reduces the employment of low-skilled labor by 2 percent), with an implied elasticity of 2/10 = 0.2. Apply that to the situation in Mr Mitchel's post where the minimum wage increased from $5.15 to $6.25 in Arkansas and you get a [(6.25-5.15)/5.15]x0.2 = about 4 percentage point increase in unemployment of unskilled labor. Apply that to the situation in Ogie's post where the minimum wage increased from $5.15 to $7.00 in Minnesota and you get a [(7.00-5.15)/5.15]x0.2 = about 7 percentage point increase in unemployment of unskilled labor.

Some people might argue that they are willing to accept that cost in order to make some low wage workers better off. Or you might argue, as LOTM does, that better policies such as the negative income tax are politically infeasible (I am not so sure). But to claim that the cost simply does not exist is contrary to the evidence.

The theory sounds nice and I agree that you can't raise the minimium wage by much without increasing unemployment but at the end of the day someone still has to take out the trash, wash the dishes, and cook the hamburgers. This isn't a job they can just ignore. The companies can't just fire the janitor because they still need someone to perform that service. True, they can try to find a more efficent way to do it but I doubt they'll come up with a faster way to push a broom or wash windows.

For a lot of these no skill minimium wage jobs people really have no choice but to have someone do them.

[Imran Siddiqui]

Originally posted by Oerdin
For a lot of these no skill minimium wage jobs people really have no choice but to have someone do them.

Well, or go out of business .

And sure they won't trim the janitoral staff, but they can and will trim the people that cook the food and the people that take the orders. May make business slower, but better than going out of business.

[Kidlicious]

Originally posted by Adam Smith
Still waiting for you to produce one shred of evidence to support your position.....

Do you honestly think that everytime the minimum wage is increased employment decreases? I think they raised it in California and we got more employment here.

[Imran Siddiqui]

Originally posted by Kidicious
Do you honestly think that everytime the minimum wage is increased employment decreases? I think they raised it in California and we got more employment here.

What was the result holding all other factors constant? You know, ceterus parabus (sp?)?

[Kidlicious]

Originally posted by Imran Siddiqui
Now if such is the case for a $50/hr min wage, then there MUST be some effect from raising the wage any bit. It may not be very much, but at least some effect.

No because employers are definitely going to make some changes when there is a huge jump in labor costs. When there is only a small change they will probably not make changes. Where employers close up shop they are often the less efficient producers.

[Kidlicious]

Originally posted by Imran Siddiqui


What was the result holding all other factors constant? You know, ceterus parabus (sp?)?

Factors aren't held constant. That's why economic models and studies aren't a substitute for common sense.

[Ogie Oglethorpe]

Originally posted by Imran Siddiqui


Well, or go out of business .

And sure they won't trim the janitoral staff, but they can and will trim the people that cook the food and the people that take the orders. May make business slower, but better than going out of business.

Generally one of the following results as a consequence of higher costs regardless of the reason (wages, higher material costs etc);

a) Reduction in quality of services
b) Reduce scope of operations to only profitable ones
c) Avoid/forgoe expansion opportunities and/or expand at slower rates
d) Go out of business

All of which suck for the general public either in the form of bad product or increased unemployment.

[Kidlicious]

Originally posted by Ogie Oglethorpe


Generally one of the following results as a consequence of higher costs regardless of the reason (wages, higher material costs etc);

a) Reduction in quality of services
b) Reduce scope of operations to only profitable ones
c) Avoid/forgoe expansion opportunities and/or expand at slower rates
d) Go out of business

All of which suck for the general public either in the form of bad product or increased unemployment.

So you are saying that a small increase in costs is going to 'generally' result in one of those 4? Those are decisions which will severely impact the business and you think a small increase in labor cost is going to affect the decision making?