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There�s no actual swordplay, but you can see flashes of steel along with sparks when economists wield their weapon of choice � statistical analysis.
One of the most dramatic running battles concerns the effect of minimum-wage laws. Do they increase incomes for low-wage workers, or are higher wages counterbalanced by increased unemployment?
Those opposed to government intervention once dominated this battlefield. In 1990, for instance, a survey of members of the American Economic Association showed that 60 percent agreed that minimum wages increase unemployment among young and unskilled workers.
In 1994, however, a now-famous case study by the economists David Card and Alan Krueger compared employment trends in fast-food establishments in New Jersey affected by an increase in the state minimum wage in 1992 with trends in nearby counties of Pennsylvania, where no legislative change had taken place.
Professors Card and Krueger reported the surprising result that employment trends in the two areas did not significantly differ. In subsequent research, including a book, �Myth and Measurement,� they provided additional support for their assertion that minimum wage laws have benefited low-wage workers.
Rallying under this banner, many economists pushed back against the conventional wisdom with some success. By 2000, only 46 percent of members of the American Economic Association agreed that minimum wages increase unemployment among young and unskilled workers. Another study published in 2006 showed that slightly less than half of all economists surveyed thought the minimum wage should be eliminated, while more than a third favored increasing it.
This shifting alignment intensified the conflict. Critics of the Card-Krueger studies point to a number of methodological limitations, including their focus on relatively small geographic areas. The economists David Neumark and William Wascher, among others, argue that minimum wages do more harm than good for low-wage workers.
Different conclusions reflect, in part, differences in research design. As can be seen from the map above, state minimum wages vary considerably by region and are lower (or nonexistent) in the South. These state-level differences complicate analysis of national trends, but also provide the opportunity to extend the case-study approach that Professors Card and Krueger developed to a larger number of counties over a longer period of time.
An important new study exploiting this opportunity will appear this month in The Review of Economics and Statistics. The economists Arindrajit Dube of the University of Massachusetts Amherst, T. William Lester of the University of North Carolina at Chapel Hill, and Michael Reich of the University of California, Berkeley, closely analyze employment trends for several categories of low-wage workers over a 16-year period in all counties sharing a common border with a county in another state where minimum wage increases followed a different trajectory.
They report that increases in minimum wages had no negative effects on low-wage employment and successfully increased the income of workers in food services and retail employment, as well as the narrower category of workers in restaurants.
The study successfully addresses a number of criticisms previously leveled at the case-study approach and points to flaws in all previous studies that have found negative employment effects.
The level of technical discussion is daunting, but if you don�t want to grapple with concepts like �spatially correlated fictitious placebo minimum wages� you can watch a video instead � Arindrajit Dube clearly explains the issues in a 12-minute interview. He emphasizes that higher minimum wages tend to reduce worker turnover, benefiting both workers and employers.
I�m sure this battle will rage on. My fellow blogger Casey Mulligan insists that increased minimum wages have reduced employment among teenagers. I plan a small skirmish on this point in a future post.
Meanwhile, consider the simple, stark reality that lies behind this educational clash of ideas. Once adjusted for inflation, the federal minimum wage in the United States today is lower than it was in 1967.
Wage earners seem increasingly unable to capture any of the gains from technological change and productivity growth. Whatever policies we cross swords over, we should count low-wage workers among the walking wounded.
I wonder what new found mysticism the Austrians will latch onto now.|||Quote:
I wonder what new found mysticism the Austrians will latch onto now.
I love your use of ALLCAPS.
Seriously, I never heard anyone insisting that the minimum wage correlated to higher unemployment. IIRC, it correlates somewhat obviously to inflation, and the argument against it is that setting a nationwide prevailing wage is stupidity of the highest caliber.
Incidentally, I thought this was delightful:
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At this point, I don't see how Krugman will ever live this down until he debates me on Austrian versus Keynesian business-cycle theory.
P.S. any reason you decided to edit out this?
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This shifting alignment intensified the conflict. Critics of the Card-Krueger studies point to a number of methodological limitations, including their focus on relatively small geographic areas. The economists David Neumark and William Wascher, among others, argue that minimum wages do more harm than good for low-wage workers.|||Quote:
Seriously, I never heard anyone insisting that the minimum wage correlated to higher unemployment.
It's only been the most common argument against a minimum wage over the past 50 or so years.
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IIRC, it correlates somewhat obviously to inflation
Let me get this straight. You're telling me that an inflation-adjusted minimum wage correlates with inflation?
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and the argument against it is that setting a nationwide prevailing wage is stupidity of the highest caliber.
Indeed... because of the Austrian/neo-classical axiom that it increased unemployment, which is false. Granted, it's rather obvious that if we arbitrarily set the minimum wage to $100/hr, it would be bad for employment, but that's hardly the issue. And as far as I'm aware, there's no valid economic argument establishing the "stupidity" of such a worker protection. That was the point: empirical econ (not even Keynesianism) - which the Austrians et al are happy to ignore in favor of their axioms - has refuted the presuppositional idealism found in those schools.
The comment about debating business cycles is useless. The majority of the Austrian business cycle is axiomatic and unproven, and Keynesianism isn't intended to to supercharge GDP in the first place - only prevent another Great Depression. If you look back, it was neo-classical precepts that lead to the deregulation of the financial sectors that leads to the "innovative" sub-prime and ARM devices that lead to to the housing crash, and flat out gambling and scams that lead to bank runs.
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P.S. any reason you decided to edit out this?
I didn't. Ctrl+f better.
|||Quote:Let me get this straight. You're telling me that an inflation-adjusted minimum wage correlates with inflation?
No, that increasing a minimum wage almost automatically increases prices (aka "inflation"). Plus, when you say 'inflation-adjusted', it sounds as if you're inferring some sort of indexing, which if it really existed would be the other part of the sane approach (which I believe is why your side hates the concept of indexing so).
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Granted, it's rather obvious that if we arbitrarily set the minimum wage to $100/hr, it would be bad for employment, but that's hardly the issue.
Why not? Particularly if, as your Central Planning Comerades might assert, raising the minimum wage raises the standard of living? As part of the inflationary cycle, employers would lag in hiring due to the increased cost; while it would not necessarily cause long-term unemployment, it could cause immediate short-term unemployment. Plus, the way this study is examining extremely small geographic footprints for extremely large multinational companies would submerge the effect - such as if McD's hires an extra fry cook across the board.
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And as far as I'm aware, there's no valid economic argument establishing the "stupidity" of such a worker protection. That was the point: empirical econ (not even Keynesianism) - which the Austrians et al are happy to ignore in favor of their axioms - has refuted the presuppositional idealism found in those schools.
Aside from the obvious one you already identified and I commented on above, you mean. I'm not interested enough in economics to really follow the sort of thing that you apparently get your rocks off with, but in some ways I find these "slippery slope" issues more legitimate when used in economic discussion than in other areas. Just as with the socialist belief that a thing can be worth more than someone is willing to pay for it, why should the nonsensical issue of the minimum wage extreme be discounted?
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I didn't. Ctrl+f better.
Hmm...
|||Quote:No, that increasing a minimum wage almost automatically increases prices (aka "inflation").
Your citation disagrees with your claim, and further goes on to use the "artificially high minimum" strawman to finish off its argument. I'm not sure what to say.
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Why not? Particularly if, as your Central Planning Comerades might assert, raising the minimum wage raises the standard of living?
Because there is no rational reason to arbitrarily raise the minimum that high. Even most highly-skilled professions require years of experience to get $50-100/hr. The point is not to make people rich or raise the standard for these low-level workers to parity with skilled workers; it's really only intended to provide a "livable wage" to young or unskilled workers. I agree that it ought to be indexed though, but I'm unaware of any broad opposition to that.
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As part of the inflationary cycle, employers would lag in hiring due to the increased cost; while it would not necessarily cause long-term unemployment, it could cause immediate short-term unemployment.
What does short-term unemployment even mean? A week, month, quarter? We really don't even measure employment below the quarter level because it's statistically insignificant.
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Just as with the socialist belief that a thing can be worth more than someone is willing to pay for it, why should the nonsensical issue of the minimum wage extreme be discounted?
So oxygen is worthless since it's not highly valued economically? What of post-scarcity? Look, I think the subjective theory of value has obvious merit, but it's pure idealism to discount intrinsic value, such as the value held by life, rights, natural resources or the environment. This is precisely why I favor empirically and sociologically informed econ over axiomatic econ.
Furthermore, what's nonsensical about a minimum wage? I'm not a strong supporter of it but it seems like a decent worker protection, and to be of little if any detriment to the economy as a whole (or even locally for that matter).|||For a moment I read this title as "16-year old" and completely missed the word study. That would have been much more interesting, although the results of the study are interesting in and of themselves.|||Quote:
Your citation disagrees with your claim, and further goes on to use the "artificially high minimum" strawman to finish off its argument. I'm not sure what to say.
Not the way I read it. Blind men & the elephant, I guess. As if that's a surprise.
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Because there is no rational reason to arbitrarily raise the minimum that high.
Then why is there a rational reason to arbitrarily raise it at all? I know you've got the bleeding heart of a true believer, but the underlying claim behind raises to the minimum wage is always increasing the number of dollars being earned by low-skill workers. That's why I despise the Democrat politicians who constantly tout them it as if it's meaningful. If they wanted to do something meaningful, they would both index and 'un-peg' it from being a Federal unilateral mandate. If states were allowed to set a minimum wage - even if it were a low one - it would be far more sensible economically. As it is, the best they can do is set an artificially higher wage above the Federally mandated one - with the consequence of the regions doing being the screaming flight of businesses (exceptions being the distortions in AK and NV). So in reality, rather than your academic artificiality, maybe unemployment really <is> the result.
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The point is not to make people rich or raise the standard for these low-level workers to parity with skilled workers; it's really only intended to provide a "livable wage" to young or unskilled workers.
And that's a load of horseshyte, because inflation adjusts to meet the new minimum.
First, are you seriously claiming that American workers don't have a "livable wage"? If you were actually in the military, you were below poverty level and minimum wage at the time - did you think you were "living" well? People aren't supposed to <want> to live on minimum wage any more than they're supposed to <want> to live on welfare.
Second, the underlying problem remains that of setting arbitrary levels in an economy - in this case, an artificial "raised floor". Or are you trying to pretend that price fixing is viable economic policy?
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I agree that it ought to be indexed though, but I'm unaware of any broad opposition to that.
The key words being, "I'm unaware". The Democrat party is lock-step in opposition; it's a dead issue before it's even brought up. This, of course, is partially to guarantee that they can be seen as being the "merciful party" and using it as a club to beat those more sensible than themselves.
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What does short-term unemployment even mean? A week, month, quarter? We really don't even measure employment below the quarter level because it's statistically insignificant.
So long-term unemployment is of no importance to you, I guess. You sound like one of the "99'ers"...
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So oxygen is worthless since it's not highly valued economically? What of post-scarcity? Look, I think the subjective theory of value has obvious merit, but it's pure idealism to discount intrinsic value, such as the value held by life, rights, natural resources or the environment. This is precisely why I favor empirically and sociologically informed econ over axiomatic econ.
As did the USSR. They spun 50 years worth of horseshyte about it, of much the same caliber as what you apparently buy into. I suppose you think that they were right all along?
Nothing has intrinsic value. Learn that and grow smarter.
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Furthermore, what's nonsensical about a minimum wage? I'm not a strong supporter of it but it seems like a decent worker protection, and to be of little if any detriment to the economy as a whole (or even locally for that matter).
If you're not a strong supporter, why did you make a "BOOYAHH!!" thread about it?
I'm not an anarcho-Libertarian who believes that we should completely strip all Gov't protections. What I will unceasingly combat is the "it's not so bad, so it doesn't really matter" claims such as you present. We need to go into this sort of social compact with eyes wide open, and we haven't done so for a coon's age. In the case of minimum wage, the primary result it has is to increase inflation, which many people think is a good thing. Those people are generally under 30, Progressive in nature (like Bush), or are already committed Leftists.
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I wish I could see this at work; sounds pretty apropos...|||Quote:
If you were actually in the military, you were below poverty level and minimum wage at the time - did you think you were "living" well? People aren't supposed to <want> to live on minimum wage any more than they're supposed to <want> to live on welfare.
I actually entered as an e4 (26ish/yr). But this is laughably wrong even for someone entering as a e1 given that the govt provides housing and food. You're able to live comfortably with a lover level of income because you don't have to shell out nearly a grand a month for an apt or several hundred for food. Literally all of your expenses beyond clothing are elective (as you don't really need a car on most posts).
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As did the USSR. They spun 50 years worth of horseshyte about it, of much the same caliber as what you apparently buy into. I suppose you think that they were right all along?
Can you not argue for your view witout guilt by association?
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Nothing has intrinsic value. Learn that and grow smarter.
Oxygen has intrinsic value; my need for it is both objective and does not change based on demand. Life has intrinsic value. Honestly, this type of naked idealism is precisely why the Austrian school is marginalized in the public sphere. Well, that and the outright rejection of empirical econ.
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So long-term unemployment is of no importance to you, I guess.
Are you high? Long-term is precisely what matters. That was the entire point of that sentence.
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If you're not a strong supporter, why did you make a "BOOYAHH!!" thread about it?
Because I dislike Austrian idealism.
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I'm not an anarcho-Libertarian who believes that we should completely strip all Gov't protections. What I will unceasingly combat is the "it's not so bad, so it doesn't really matter" claims such as you present.
The argument here is that it's demonstrably not bad (at least within out current model).|||Quote:
I actually entered as an e4 (26ish/yr). But this is laughably wrong even for someone entering as a e1 given that the govt provides housing and food. You're able to live comfortably with a lover level of income because you don't have to shell out nearly a grand a month for an apt or several hundred for food. Literally all of your expenses beyond clothing are elective (as you don't really need a car on most posts).
And that differs substantially from someone living in Section 8 housing and taking food stamps... how? Other than the "move out and draw fire!" bit, obviously. Plus, if you entered as an E4 then you were already earning as much as someone who had been in for a minimum of a couple of several years. Furthermore, I would presume that you received the higher rank due to some sort of skilled labor capability, which pretty much destroys your base claim. Those starting as skeeter wings compose the bulk of enlisted, and their life blows enough even if they <don't> have barracks that allow booze and whores.
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Can you not argue for your view witout guilt by association?
Well, can you answer the question? I didn't call you a commie, you'll note - just that their economic views are akin to those you're apparently supporting.
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Oxygen has intrinsic value; my need for it is both objective and does not change based on demand.
That must be why I can charge so much for it.
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Life has intrinsic value.
In Sub-Saharan Africa, Central America or Afghanistan? You amuse me. Yes, you get more for a live slave than a dead one, but that's because of the labor potential they represent being of far more relative value than the meat they are made of.
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Honestly, this type of naked idealism is precisely why the Austrian school is marginalized in the public sphere. Well, that and the outright rejection of empirical econ.
Actually, it's because of a bunch of Progressive ninnies with their heads full of cotton candy. �We have tried spending money. We are spending more than we have ever spent before and it does not work.�
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Are you high? Long-term is precisely what matters. That was the entire point of that sentence.
Then you've managed to argue the cross-purposes you accused me of. Minimum wage <can> cause unemployment in the long term, due to inflation - the only thing this study pretends to 'prove' is that the correlation isn't automatic or direct.
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Because I dislike Austrian idealism.
I dislike starvation; that doesn't mean it isn't a fact of life.
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The argument here is that it's demonstrably not bad (at least within out current model).
Nonsense. It's that it doesn't directly cause <one> of the specific 'bad things' of the several that my link indicates. The Gov't is responsible for increasing the minimum wage, the study didn't consider state minimum wages (as far as I bothered to identify), and the inability to exclude external factors all are just as problematic for the claim as the sample size.
Booyah, indeed.|||I seem to remember J's arguments as being of better quality than those I've been seeing lately...
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That must be why I can charge so much for it.
Intrinsic value =/= market value. If air became scarce, you can bet people would charge for it. (assuming there'd be enough of us left to gather air and charge for it)
Even water isn't free.
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