Comments on: Can the minimum wage create jobs?

By: Confused

Confused — Sat, 21 Jan 2012 19:12:41 +0000

How are you getting 150m? By my calculations, you’d have to discount the cost (which I’m taking as 25bn) at 9% to reach a DPC of 150m after 60 years, using R/(1+i)^t

By: SirenofBrixton

SirenofBrixton — Fri, 20 Jan 2012 15:47:57 +0000

It’s self-defeating to have people who can’t take care of themselves. The cost of cleaning up the mess – health care, prisons, social services etc – is insane. Far better if we gave everyone the opportunity to have a living wage (not just minimum!) and pay tax, there’s plenty of churn in the system, plus we can have smaller government. But of course, some people profit from cleaning up the mess. It’s very much in their interest to keep wages low.

By: shodanalexm

shodanalexm — Fri, 20 Jan 2012 12:43:39 +0000

The problem for Card and Krueger is that they challenged some very deeply held beliefs rooted in conventional micro. Subsequent testing of the arguments runs up against the same problem.

The following is an interesting attempt to get to grips with the biases in the literature:

Doucouliagos, H. and Stanley, T. (2009) Publication selection bias in minimum-wage research? A meta-regression analysis, British Journal of Industrial Relations, 47, 2, 406-428.

By: Flora

Flora — Fri, 20 Jan 2012 12:25:54 +0000

Doesn’t this view of the minimum wage ignore the benefits for businesses and the economy as a whole of higher incomes for the poor? Aren’t the low paid more likely to spend a wage increase than save it, thus boosting aggregate demand? On a separate note, pay in many companies is completely divorced from the value of the thing the worker produces- take most CEO’s pay packets which have seen massive inflation in recent years even when profits fall. That is the problem of our system which grossly rewards failure at the top and imagines itself unable to afford the meager pay-packets of those at the bottom of the food chain.

By: Simon Rogers

Simon Rogers — Fri, 20 Jan 2012 12:09:38 +0000

In a society where we pay in-work benefits, the net effect of abolishing the minimum wage is to subsidise badly paying employers. This is a terrible idea economically.

By: Duncan

Duncan — Mon, 16 Jan 2012 11:33:39 +0000

Card and Krueger’s dif-in-dif approach was flawed as the ‘common trends’ assumption was violated – employment in Pen was decreasing where in NJ it was flat…or so my ‘metrics lecturer told me today!

By: registradus

registradus — Sun, 15 Jan 2012 23:49:47 +0000

James I think you missed the part where “graduating during a recession can affect one’s earnings for far longer than the recession itself” where is the motivation for gaining an education when its not going to improve your chances of a good career? Better to enter a trade or stay home and play playstation…

By: Roald

Roald — Sun, 15 Jan 2012 18:08:23 +0000

As Fransisco de Vitoria stated, 200 years before Adam Smits; the Just Price equals the local market price. Forget this axiom, whether it is manipulating or fixing the price of milk, labour or the most important one interest on money, and you will create structural problems to the economy, as we can see everywhere in the world (except perhaps in NewJersey fastfood chains)

By: Daniel Earwicker

Daniel Earwicker — Sat, 14 Jan 2012 23:25:16 +0000

“But if a young adult cannot produce enough of value to justify being paid a living wage… He, the institutions which trained him and the society in which he lives, have far bigger problems”

Do they? We (assuming we’re all nice enlightened liberal people) wouldn’t say that about a severely disabled person who is therefore unable to work. Okay, we might in abstract refer to the “problem” of how to feed and clothe them, but we’d accept it as “our problem”, and all chip in our taxes, as a civil society.

How does this square with the Homo Economicus who finds himself living in the highly-developed, highly automated economy of 2050? He might be the kind of person who could acquire the skills needed to earn a decent crust in 1980, but the economy of the future may simply have no where to slot him in – unless he’s prepared to charge less for his labour than some fancy self-repairing machine does!

And if this might be true to a large extent in the near future, might it be already true to a limited extent today?

Is it really safe to assume that we know how to “educate” people reliably so that they all become the kind of high-flying people who can acquire high-valued skills? I see little to inspire that confidence. It seems more likely that we’re always going to have people with a range of abilities, and as the economy develops, it will have need of the productive labour of an ever smaller elite subset of those people in order to yield a huge surplus.

In which case, we have to come to terms with the welfare state. It’s here to stay and it’s only going to get bigger.

By: Alexis Pavlou

Alexis Pavlou — Sat, 14 Jan 2012 18:23:08 +0000

Game theory tells us that ‘forbidding workers to sell their labour below a certain price’ is the perfect way to stop exploitation. Without the NMW, inequality in the UK would be even wider that the obscene levels we see today.

Year 1 A Level economics tells us that the lowest paid have the greatest multiplier, so the NMW is good for Aggregate Demand too.