AEIdeas

The public policy blog of the American Enterprise Institute

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Discussion: (107 comments)

  1. Jon Murphy

    There is something I do not understand about the minimum wage.

    The real world evidence is overwhelmingly in favor of market-based wages. In fact, it shows rather convincingly that market wages are significantly higher than minimum wage (which I cite the BLS which shows just a few tenths of a percent of US workers earn minimum wage).

    Why, then, is this even a debate? We know that minimum wage prices workers out of the market. I mean, that’s just Econ 101 right there, supported by ample empirical and anecdotal evidence. The only way one can make minimum wage work is to assume a monosopony, which doesn’t even past the smell test.

    I mean, the evidence that markets create wealth for everyone is overwhelming (I know I keep using that word, but it fits here). Why restrain them because some person who has literally no clue what they are talking about disagrees about a contract between two people?

    A legitimate role of the government is to enforce contracts. Minimum wage legislation not only makes zero economic sense, but is clearly a violation of the legitimate role of the government because it forbids contracts being made for no good reason.

    1. Seattle Sam

      It’s a debate for the same reason that there is a debate about allowing K-12 schools to compete with each other for students. People in government get paid good money to stifle competition that might erode the number of and compensation for union jobs. The people who are priced out of a job by minimum wage laws are simply collateral damage.

    2. PeakTrader

      Jon, that’s the same sub-standard statement I’d expect from people with too little knowledge of economics. It’s just more laissez faire ignorance.

      Of course, the article is just a political statement, void of economics. American Samoa isn’t the U.S..

      Economists understand without real data and rigorous models, to reveal and explain reality, all you really have are models that make sense only in a vacuum.

      1. Jon Murphy

        …huh…

        1. morganovich

          peak-

          and that’s just the sort of unsubstantiated and foolish comment which is nearly devoid of content and substance that we have come to expect from you.

          1. PeakTrader

            Morganovich, what’s “devoid of content and substance” is the space between your ears.

          2. morganovich

            QED.

          3. Jon Murphy

            I am literally at a loss for words. This has never happened before.

      2. Peter McIlhon

        I suppose you ignore the Australia “evidence” as well. Australia the US is not.

    3. The US does have different standards for some different industries. Ask anyone who has worked as a waitress – they have been paid $2.65/hr for decades. Tips fluctuate by demographic, sales by economic health. And restaurants lobby that they can’t afford to pay them more wages. The labor force is so transient, they trend against unity for improvement; rather, they’d move on to other employment. Oh, wait… isn’t that what MINIMUM means?

  2. DOL. Let me guess. All 18 industry minimum wages are within 50 cents per hour of each other.

    1. morganovich

      http://www.dol.gov/whd/minwage/americanSamoa/ASminwagePoster.pdf

      that guess would be wrong.

      the range seems to be $4.18 for garment manufacturing to $5.59 for stevedores.

      that’s a 33% difference and $1.41 range.

      i suspect that the unemployment rate on samoa has to do with far more issues than just the min wage, but i think the question raised about multiple minimum wages is a valid one.

      why would any economy have one optimal minimum wage across industries?

      there is also significant evidence that employment in samoa dropped like a stone when min wages were imposed.

      http://www.gao.gov/products/GAO-11-427

      this is tricky, as there was also a recession, but these job losses are multiples of the national average and if higher min wages really are good for an economy, then they should have sheltered samoa from the downturn, not made it more intense.

      of course, as a new min wage hike is coming in 2015, we’re going to get another test case…

    2. morganovich

      http://www.dol.gov/whd/minwage/americanSamoa/ASminwagePoster.pdf

      that guess would be wrong.

      the range seems to be $4.18 for garment manufacturing to $5.59 for stevedores.

      that’s a 33% difference and $1.41 range.

      i suspect that the unemployment rate on samoa has to do with far more issues than just the min wage, but i think the question raised about multiple minimum wages is a valid one.

      why would any economy have one optimal minimum wage across industries?

      1. morganovich

        there is also significant evidence that employment in samoa dropped like a stone when min wages were imposed.

        http://www.gao.gov/products/GAO-11-427

        this is tricky, as there was also a recession, but these job losses are multiples of the national average and if higher min wages really are good for an economy, then they should have sheltered samoa from the downturn, not made it more intense.

        of course, as a new min wage hike is coming in 2015, we’re going to get another test case…

        1. Seattle Sam

          While the magnitude of the employment drop may be debatable, that there will be fewer people employed is not.

          1. Just wait ’til Peakaboob sees that! He’ll give you a piece of his mind. If there are any left, that is.

          2. PeakTrader

            Ron, you’re such a big “boob,” you make Dolly Parton blush.

          3. morganovich

            ron-

            lol.

            looks like you got it instead.

            did that daring and brilliant riposte finally convince you of the correctness of the peakonomic doctrine?

          4. morganovich

            That convinced me that Peak has no pieces of mind left to give.

        2. Sure! An Asian owned firm closed one of the two tuna canneries, being the major employers in American Samoa in 2009, and inshored some of the production to the U.S. which has a higher minimum wage.

          1. Hmm. Of course the US mainland minimum wage wasn’t set to arbitrarily double over the course of a few years, and the market for most of that tuna is the US mainland, so there may be other reasons for a fish company to consider moving some of its production on shore, the increased min wage being the final decider.

            And more importantly, what do those directly affected – the people of American Samoa want for themselves?

            If one believes that elected officials actually represent the people who elect them, then it’s of note that American Samoa Governor Togiola Tulafono, and American Samoa’s elected non-voting delegate to Congress, Eni Faleomavaega, are vocal opponents of the minimum wage increases. Who should we believe, meddlers in Washington or the people themselves?

            In addition, last year Obama signed bipartisan legislation halting the scheduled increases in min wage, purportedly prevent further job losses in American Samoa, while many of those same legislators are calling for *increasing* the min wage in the US.

            Is increasing min wage a good thing or a bad thing? Obviously those in charge of it have no clue.

            I’m assuming you don’t subscribe to the Peakonomic theory that the demand curve for labor slopes up, and that Asian fish companies are, therefore, attracted to the higher min wage on the mainland.

  3. morganovich

    jon-

    it’s a debate for reasons that have nothing to do with economics.

    it’s simply redistributionist realpolitik.

    people like to vote themselves free stuff at the ballot box, and those who do get a mandated wage hike wind up better off, even if it does damage to the economy as a whole.

    it gets pushed through for the same reason that tariffs do.

    hell, you can prove that tariff imposes a deadweight loss on the imposing economy 100% of the time, but it still does not matter.

    such are the politics of concentrated benefit and diffuse harm.

    so people do bad studies and say “hey, look, we hiked the min wage and jobs in fast food did not drop” and use it as purported economic cover when all they are really showing is bad study design.

    hell, i can design a study that makes it look like your thermostat makes temperatures drop when you turn it up.

    it’s easy.

    find a thermostat set for 65 and move it up to 70. neglect to mention that all the windows are open and it’s 90 degrees outside. then, as it cools e=int he evening, you say “aha! turning the thermostat up makes the temperature drop. look at the correlation!”.

    i fear we are in an age of post rational/post scientific method thinking.

    you pick your prejudice, then design a study to give you the right answer by working backwards ignoring any sort of control or spurious variable then you trumpet it as evidence and ignore the 100′s of datapoints that contradict it.

    neumark et al (in conjunction with the fed) surveyed 100′s of unemployment studies and found that 85% show that jobs drop when you hike min wages, yet people will fixate on one horribly constructed study in new jersey that focused on one industry and had no control arm to speak of.

    there’s no fixing it. people determined enough to believe of justify something will grasp at any pretext, however flimsy and use it to sway the economically uneducated.

    this is precisely why democracy makes for such poor economic policy.

    it’s like a jury listening to an expert and a crackpot describe a piece of forensic evidence, not being able to understand either, and then deciding to believe the guy with the nice tie or the guy who favors their preconceptions.

    1. Seattle Sam

      The part that seems to escape them is that the more they practice “redistributionist realpolitik”, the less there is to redistribute. But I guess if that process takes longer than your term of office, it’s of little matter to you. People like Lyndon Johnson and Coleman Young never had to face responsibility for the consequences. Just the adulation from those who thought they were getting a free lunch.

      1. morganovich

        sam-

        “The part that seems to escape them is that the more they practice “redistributionist realpolitik”, the less there is to redistribute”

        i wish it were that simple.

        i do not think that most of these voters care if it makes the pie smaller in the long run just so long as they get a bigger slice now.

        this is the problem with government and coercive force in economies.

        in a free market, you have to get others to transact with you of their own free will. thus, you have to offer them something they find attractive and transactions are always mutually beneficial.

        but if you can just mug someone and take their money, this all goes out the window. they might well want it more than you do and or use it better. but this does not matter.

        using the ballot box instead of a knife does not change the calculus on that.

    2. Seattle Sam

      What is truly sad, morganovich, is that in your thermostat example, people would immediately suspect that some other factors influenced the observed metrics, but a study purporting to show that the demand for something is uninfluenced by its price is embraced as proof. Post rational thinking sounds like a good term for it. It’s the sort of thinking that North Korea enforces on its citizens every day.

    3. Have you ever noticed they do those studies from year x to y and always choose a period when we are having a massive economic boom. The boom hides the job losses.

      1. PeakTrader

        Marque2, you don’t know what you’re talking about.

        Rigorous models control other variables to isolate the effect of the minimum wage on employment.

        Have you ever noticed many non-mainstream economists against the minimum wage can’t even construct sound empirical models?

        Instead, they rely on simple models that work well in a vacuum.

        1. Rigorous models control other variables to isolate the effect of the minimum wage on employment.

          So, in your view, telephoning individual fast food restaurants to ask someone to recall their experience of min wage effects on employment is “rigorous”?

          President Obama was against the min wage increases in American Samoa. Doesn’t he rely on mainstream economists

          Instead, they rely on simple models that work well in a vacuum.

          I’ve misplaced your scholarly original work, which I’m sure you’ve pasted here numerous times, that shows that the basic laws of supply and demand have been falsified WRT labor. Please present it just one more time.

          I understand that real world economics is extremely complex, with millions of things pushing and pulling on each other, and requiring a Master Economist such as yourself to understand it all, but which of those things shows outright falsification of supply and demand, while rigorously controlling for every other variable?

  4. PeakTrader

    To answer the question, politicans should listen to the labor economics literature, which shows increases in the minimum wage have little effect on employment.

    So, the income and multiplier effects are much stronger than the employment effect, and increasing the minimum wage will lead to faster economic growth and efficiency in production.

    It’s uncertain if different minimum wages for different industries is optimal. I haven’t heard of any rigorous studies. It seems similar to different interest rates, or rates of inflation, for each industry.

    However, we know the Fed has created much faster real growth in a crude way rather than micromanaging the economy.

    1. morganovich

      peak-

      that whole argument is completely false.

      the literature on min wages shows, very conclusively, that min wages do have a significant effect on employment.

      http://papers.ssrn.com/sol3/papers.cfm?abstract_id=961374

      this meta study shows the results of a couple hundred.

      the mechanism you keep trying to claim improves the economy is both massively falsified by the data and senseless in it’s assumptions.

      hiking a min wage with no productivity gain is, at best, zero sum

      either, the employers have less money or prices need to rise.

      if the employers have less money, you get less growth in the future due to lower investment and fewer new enterprises are launched as the return on doing so diminishes.

      you are focusing only on marginal propensity to consume and ignoring marginal propensity to invest which is ultimately the more important driver of long term growth .

      if prices rise, then the society as a whole loses out due to less real income and, at best, you just get some wealth redistribution, but again, run into problems of skewing money toward groups with lower propensities to invest.

      it’s funny that you admit to differing minimum wages being uncertain, but then seem to be certain that an overall minimum wage is good.

      after all, if different industries might have different optimal minimum wages, then why stop there? why would different companies within an industry not also have different optimal minumum wages?

      and just who is going to make this determination?

      your faith that a government body, at a distance, can make better decision than companies and those who work for them seems baseless.

      just how would government come by this information?

      how can you look at $7.50 and say with any confidence that it is too low and how could you then take that conclusion and expect to apply it to vastly different industries and companies?

      1. PeakTrader

        Morganovich, that study you cite was created by two people who are biased against the minimum wage, and couldn’t challenge an unbiased paper.

        Here’s what Nobel Prize (for economic growth) economist Robert Solow said: “The evidence of job loss is weak. And the fact that the evidence is weak suggests that the impact on jobs is small.”

        Here’s a source of studies:

        http://www.raisetheminimumwage.com/pages/job-loss

        1. morganovich

          peak-

          the study i cite cites roughly 200 other studies and was created with no agenda.

          the guy you cite is an activist and cites such utterly debunked studies as the new jersey fast food study.

          this is precisely the guy i had in mind when i was speaking of post rational/post scientific method arguments.

          your “unbiased paper” is precisely the thermostat argument i made.

          if you change a variable that is already outside of the operating parameters (like shifting a thermostat from 65 to 70 when it’s 90 degrees) of course you get little or no result.

          if you study the effects on the economy as a whole of changing the wages of 3% of people, of course it gets lost in the noise.

          these are not “unbiased, rigorous studies” they are rigged game propaganda.

          the card study from new jersey is a complete farce.

          it did not account for economic growth or the initial wages of employees. all it proved is that new jersey participated in the 90′s boom more than Pennsylvania.

          they published it as an editorial because no peer reviewed journal would take it. as it turns out, this was because their data was bad.

          further, it was inconsistent with the actual burger king employment records (it relied on the BLS).

          “the employment policies institute described this study as followsby the Employment Policies Institute found that the data sets Krueger and Card used were so badly flawed that “no credible conclusions can be drawn from the report.” Specifically, the study found, “the data set used in the New Jersey study bears no relation to numbers drawn from payroll records of the restaurants the New Jersey study claims to cover.””:

          in fact, when this study was done again using actual payroll records, it had the opposite result:

          http://www.nber.org/papers/w5224

          this is the sort of completely debunked studies you are citing.

          they are about as credible as mann’s hockey stick.

          1. PeakTrader

            Morganovich, no matter how many times your statements are proven false, you make the same exact statements. Obviously, you’re looking for new fools.

            “It is not uncommon to hear the Card and Krueger results dismissed by opponents of the minimum wage as having been disproved by the Neumark and Wascher study. However, an objective review of all the material from both sets of authors leads to the conclusion that the New Jersey minimum wage increase had no measurable impact on employment in fast-food restaurants. As discussed on the following pages, a number of factors support the Card and Krueger findings and call into question the results of the Neumark and Wascher study: 1) the questionable data collection methods used by Neumark and Wascher; 2) a reexamination of the Card and Krueger study using unbiased government records; and 3) the carefully worded conclusions in the final version of the Neumark and Wascher paper.

            Based solely on their own research—using highly questionable data—Neumark and Wascher concluded that the minimum wage had a negative impact on employment. They did, however, acknowledge that many of their results are not statistically significant. Even more telling, after reviewing the results of the second Card and Krueger study that used government data and combining that with their own findings, Neumark and Wascher hedge by saying that they can only decisively conclude that “New Jersey’s minimum wage increase did not raise fast-food employment in that state” (Neumark and Wascher 2000, p. 1,391). “

            “The best data for looking at the impact of the minimum wage on restaurant employment are ES-202 data, which are routinely collected by state governments for the unemployment compensation program. These data are likely more accurate than the phone survey originally performed by Card and Krueger and would not be subject to the same biases as the EmPI/Neumark and Wascher data. For confidentiality reasons, ES-202 data is generally not available to the public except in the form of broad aggregate data. Card and Krueger, however, received access to establishment-level data, which allowed them to reevaluate their original study using an accurate and unbiased source.

            The results of this study were published in the American Economic Review alongside the results of Neumark and Wascher (Card and Krueger 2000). The updated conclusion of Card and Krueger was identical to their first study: that the “increase in New Jersey’s minimum wage probably had no effect on total employment in New Jersey’s fast-food industry and possibly had a small positive effect” (Card and Krueger 2000, p. 1,419).”

          2. morganovich

            peak-

            you are like one of these climate nuts desperately claiming that mann’s hockey stick was real.

            this study has been torn to shreds. their data was either so badly collected that it failed to line up with reality or was outright faked.

            questionable data methods?

            they got the payrolls from the actual stores.

            it does not get much more primary source and unequivocal than that.

            you just quoting the sort of apologists that will lie, fake data, and cast aspersions to maintain their post rational views.

            did you even read the study?

            i doubt it.

            if you had, then there is no way you would be making such patently false and absurd arguments.

            here, try again:

            http://www.nber.org/papers/w5224

            these are the same stores that card et al claim to have surveyed. it’s the exact same sample set. it just uses the actual data instead of fabrications or estimates and as a result gets an elasticity of -.24, not the absurd .93 claimed by card.

            you have proven nothing other than your own inability to read actual data. the comment you quote does not even bear on this study.

            and then, like a true fraud, you try to take the careful and scientific language used by and actual economist and twist it. you really are the economics equivalent of an AGW fanatic. lie, misrepresent, fake data, and claim proof while pillorying anyone that actually acknowledges that all studies have some uncertainty.

            further, even if the card study has the results they claim (and it doesn’t) it would still not prove anyhting.

            if jersey and penn had different economic growth or the regions were not representative or equivalent, that would explain the whole thing.

            further, it does not account for price changes which would affect the real income of others as well as destroy jobs and or revenue.

            nor does it account for hours worked.

            the study is a clownish lampoon of actual economics.

            it is deliberately designed to mislead and to mask more than it reveals, and even then they had to fake their data.

            the fact that no peer reviewed journal would publish it out to warn you about just how bad their methodology is.

            a second year undergrad would laugh this out of the room.

            stop claiming these absurd false victories and try actually looking at the data.

          3. morganovich

            further, the whole “adjacent counties” thing is often bunk and horribly susceptible to cherry picking.

            imagine a min wage hike in san Francisco being compared to oakland who stayed static.

            would min wage really be the key variable there?

            it seems highly doubtful.

            you are pursuing propaganda, not empiricism.

          4. morganovich

            alternately, try thinking about it this way:

            the second (and equally flawed) card study using employment data showed jobs movement from 1991-7 that was statistically indistinguishable from zero.

            even if we accept their flawed methodology, it still shows that the hike hurt jobs in the sector.

            how do we know?

            we can look at the rest of the new jersey employment situation.

            1991 was a punk economic period. unemployment was about 7% in NJ.

            by 1997, it was 5%. thus, just keeping pace with the overall garden state economy would have yielded significant gains. but it didn’t.

            somehting made it lag.

            to argue that a min wage hike did not harm jobs is like arguing that using your brakes did not slow you going down a hill because you kept moving even though you can watch a guy who really did not use his brakes pull away from you.

            this is not even pseudoscience.

            it’s just nonsense.

        2. Just curious. Should I expect unbiased information from an organization that chooses a website name of “raisetheminimumwage” and describes themselves as follows?

          “RaisetheMinimumWage.com is a project of the National Employment Law Project. Working with state and national advocates and legislators, the National
          Employment Law Project is committed to rebuilding the wage floor for low-wage workers in the US.

          With our partners, we can provide strategic support, technical assistance, research, materials, and coordination for campaigns.“

          1. It would be more truthful of them to say they’re “committed to keeping it illegal for low-wage workers in the US to contract their labor out as they see fit.”

          2. PeakTrader

            How did the country survive in 1968 when the real minimum wage was above $10 an hour and the unemployment rate was 3.5%, with a rising teen labor force participation rate, that didn’t begin the collapse, until the real minimum wage fell below $8 an hour in 1980.

            While real per capita income doubled, the real minimum wage declined over 25%.

          3. How did the country survive in 1968 when the real minimum wage was above $10 an hour and the unemployment rate was 3.5%, with a rising teen labor force participation rate, that didn’t begin the collapse, until the real minimum wage fell below $8 an hour in 1980.

            Um… massive government spending on a 10 year war effort that was all all for nothing?

            You can’t seriously suggest causation between the minimum price for labor and low unemployment.

            Have you rigorously controlled for all other factors?

            Didn’t you already admit that raising the lowest legal price for labor has a negative effect on employment, even if it’s small?

          4. PeakTrader

            Ron, I stated in this link there are more powerful factors (not just one) that influence employment and the country can have a $15 minimum wage with full employment.

            Have you looked at the economics literature to discover factors that cause employment yet?

          5. Ron, I stated in this link there are more powerful factors (not just one) that influence employment and the country can have a $15 minimum wage with full employment.

            You state that same unsupported nonsense in every post that includes any mention of the minimum price for labor. It’s meaningless.

            Have you looked at the economics literature to discover factors that cause employment yet?

            Yes, I have, and raising the minimum price for labor isn’t among them, Peakaboob.

            What about my question? Can we expect an organization called “raisetheminimumwage.com to be unbiased as you claim?

          6. the most convincing and powerful evidence would be a direct study of the businesses actually impacted before and after the imposition of a minimum wage – if that is what you are trying to prove.

            If you are trying to prove a wider scope impact, then you need to provide the evidence to show that rather than hand-waving economic theory.

            when wider scope claims are made without substantiating them – then they are bogus studies to start with.

            pick the scope you want to prove – then show findings that are irrefutable by the facts.

            otherwise.. it is little more than a belief system where one can point to a minimum wage hike ANYWHERE and ANY TIME and then claim that any unemployment ANYWHERE or subsequently is causal.

            that’s just bogus.

      2. PeakTrader

        And you make the same simple and false assumptions, after you were shown they’re wrong.

      3. Jon Murphy

        Wait, Peak, hold up…you do realize you are sabotaging your own argument right now, right?

        1. morganovich

          jon-

          if he were capable of realizing things like that, do you really think he would argue as he does?

          1. Jon Murphy

            I mean, I’m just confused. We are saying here that minimum wage has negative effects on employment. He is constantly arguing that we are wrong, but all the stuff he linked to and quoted here today supports us that, yes, minimum wage does hurt employment.

          2. morganovich

            and apart from that, the “foundational study” cited by peak’s “authority” has been shown to be not only bad (and possibly fraud) but has been shown to actually provide a -.24 elasticity of jobs to min wage if you use the actual payrolls data. (nothing like some good, primary source material do debunk lies and manipulation)

            your confusion is understandable.

            post rationalism can be confusing until you get the hang of it.

            the trick is to simply decide upon an opinion and then argue that everyhting supports it, make reference to “the literature” in a vague yet authoritative fashion, and never, ever let anyone check your methodology. whenever possible, cite krugman. if cornered, claim to have already answered the question and slink off ready to emerge later acting as if you won the argument.

            like the dark side, it is a quick and seductive path for a young eco-jedi. (or a devoted charlatan)

            i think you’ll find, once you master the basic precepts, that you can rapidly become an “expert” on anyhting.

          3. PeakTrader

            Morganovich, it’s amazing how much time and space you take up with statements that have no real meanings.

            You’re in complete denial and just make things up rather than accept reality. You believe economics is whatever you want it to be.

            I’ve explained many of the mechanisms based on mathematical models and supported by empirical models before. Yet, you completely dismissed them and made up fairy tales in your attempts to contradict them.

          4. morganovich

            peak-

            repeating the same lies over and over does not make them fact.

            you are the one claiming “models” and ignoring reality.

            seriously, are you the michael mann of economics?

            you cite cooked data from bad studies, ignore literally hundreds of others, and then accuse others of ignoring the facts? you are truly a study in cognitive dissonance.

            you are embarrassing the whole discipline of economics by claiming to be associated with it.

          5. PeakTrader

            Morganovich, you couldn’t even get into a grad econ program, in the U.S., and certainly couldn’t pass any of the classes. You’d be crying and wondering what planet you’re on trying to pass even an upper division undergrad class.

            If you have a specific economic statement, I’ll address it, although I addressed many of them before and they seemed to have all gone way over your head. You make dishonest and ridiculous statements faster than any one person can keep up correcting them.

            So, next time just make one statement and stay with it rather than bouncing from one unrelated false assumption to another.

          6. Jon Murphy

            Could you answer my question, please?

          7. PeakTrader

            Jon says: “We are saying here that minimum wage has negative effects on employment. He is constantly arguing that we are wrong…”

            I never made that assumption. A few others assumed it.

            The labor economics literature suggests the (positive) income and multiplier effects may be much stronger than the (negative) employment effect, perhaps up to $15 an hour.

            The implication is raising the minimum wage will lead to faster economic growth and efficiency in production.

            For example, I stated before:

            A rise in the minimum wage can increase real economic growth.

            The higher wage attracts better workers, with higher reservation wages, to increase productivity.

            Minimum wage workers have high marginal propensities to consume. So, a higher minimum wage increases consumption.

            Only a portion of the higher minimum wage may be passed along in higher prices, because portions will be absorbed by “excess” wages of other workers (or overpaid workers) and “excess” profits (capital as a share of GDP is at an all-time high, while real wages declined).

            Weak or poorly managed firms will lose business or fail. However, stronger or better managed firms will gain their business, and also gain from the increased demand.

          8. Jon Murphy

            But you did make that assumption.

            I said: ” We know that minimum wage prices workers out of the market.”

            You said: “that’s the same sub-standard statement I’d expect from people with too little knowledge of economics.”

            But all the evidence you present, including Solow’s quote, support me that minimum wage harms, not helps, workers.

            I’m just confused because you keep contradicting yourself over and over again.

            And here’s the other thing:

            You said “The labor economics literature suggests the (positive) income and multiplier effects may be much stronger than the (negative) employment effect, perhaps up to $15 an hour,” and “A rise in the minimum wage can increase real economic growth.”

            There are a lot of qualifiers in there to suggest you are unsure as to the outcome of your theory. Considering the known negative affects of minimum wage, can we really justify people losing their jobs for something that may occur?

            Your language says you are not confident at all of the expected outcomes. Isn’t it unethical, nay immoral, to use other people as guinea pigs?

          9. PeakTrader

            Jon, don’t play dishonest and cute games with me. One Morganovich is enough.

            There are no contradictions in my statements. Your “confusion” is an overwhelming ignorance of economics.

            With faster economic growth, taxes increase. So, those who’s work isn’t even worth a subsistence can collect disability.

            Your comment: “unethical, nay immoral, to use other people as guinea pigs” is what you’re doing clinging to ignorance and dismissing the orthodox labor economics literature.

            Anyway, there are more powerful forces that determine employment. The U.S. can have a $15 minimum wage and full employment.

          10. Jon Murphy

            But you didn’t answer me.

            And I have no clue why you think I have an ignorance about economics. You seem to agree with me that minimum wage increases hurt workers. Furthermore, you seem to agree that the idea that higher minimum wage leads to more growth is unproven at best.

            So, I guess I have two questions for you:

            1) What, specifically, have I said that you disagree with?

            and

            2) How confident are you in your theory?

    2. To answer the question, politicans should listen to the labor economics literature, which shows increases in the minimum wage have little effect on employment.

      What, then, happened in American Samoa when a minimum price for labor was introduced in 2007? Did employment and earnings rise as predicted by the Peakonomics uppward sloping demand curve for labor?

      American Samoa isn’t the U.S.

      If that’s true, why are bumblers in Washington even involved in the labor market in American Samoa?

      1. What, then, happened in American Samoa when a minimum price for labor was introduced in 2007?

        Sheesh. American Samoa (AS) has been subject to minimum wage legislation through the special industry committee since 1957.

        AS is all about tuna processing. One of the two major processors, Chicken of the Sea, left in 2009. I’m sure the business decision was more than just the minimum wage. Curiously, some of the jobs were insourced to Lyons, Georgia.

        Another tuna processing facility should be fully operational by the end of the year driving down the unemployment rate.

        1. Jon Murphy

          They also have the highest amount of NFL players per capita

          1. The minimum wage is higher in Georgia than in American Samoa, no?

            Yes.

            It makes business sense. Have lower cost workers in Thailand “gut” (high labor intensity) the tuna, freeze the loins, ship it to the U.S. east coast and then “process” (high capital intensity) the tuna.

            You have answered the question yourself, and defeated your own argument. Labor intensive operations move to where labor is cheaper, capital intensive operations move to where capital is cheaper or more secure. When the balance that existed in AS was destroyed by meddlers in Washington, those operations moved elsewhere. Easy stuff. Capital intensive = rich countries, labor intensive = poor countries.

          2. Oops, my reply was to marmico

          3. When the balance that existed in AS was destroyed by meddlers in Washington, those operations moved elsewhere

            Why didn’t the other cannery, Starkist, move operations and why is Tri Marine reopening the closed Chicken of the Sea facility?

            BTW, there was a rather large tsunami that hit AS in 2009 which may also have something to do with the increase in the unemployment rate.

          4. Why didn’t the other cannery, Starkist, move operations and why is Tri Marine reopening the closed Chicken of the Sea facility?

            You would have to ask them, but it doesn’t matter. That’s not exactly a response to my assertion.

            Of course Starkist did lay off a significant number of workers at that same time, but I’m sure it was a just a coincidence.

            BTW, there was a rather large tsunami that hit AS in 2009 which may also have something to do with the increase in the unemployment rate.

            Unless no one is fixing their broken windows, wouldn’t a disaster create construction jobs rebuilding and repairing damage?

            Krugman would cheer a tsunami as a godsend for construction companies as he did the 9/11 attacks.

        2. Jon Murphy

          Sheesh. American Samoa (AS) has been subject to minimum wage legislation through the special industry committee since 1957.

          Yes, and their unemployment rate has always been several times higher than that of the US and other fishing-dependent economies. In fact, the American Samoa unemployment rate has only been below 10% once, in the mid-90′s.

          1. So. Chicken of the Sea closed its facility in American Samoa and relocated some of the production near Savannah, Georgia.

            The minimum wage is higher in Georgia than in American Samoa, no?

            It makes business sense. Have lower cost workers in Thailand “gut” (high labor intensity) the tuna, freeze the loins, ship it to the U.S. east coast and then “process” (high capital intensity) the tuna.

            Spurious correlation between the minimum wage and the unemployment rate!

  5. The Governor of American Samoa appeared in front of Congress begging them to freeze the automatic increases before they completely destroy the Islands’ economy.

    Governor Togiola stated that:

    “We are watching our economy burn down. We know what to do to stop it. We need to bring the aggressive wage costs decreed by the Federal Government under control. But we are ordered not to interfere”.

    http://bluecravat.blogspot.com/2012/07/obama-to-repeal-minimum-wage-law-its.html

    1. PeakTrader

      Weak tuna canneries should fail. Even if the minimum wage was lowered to $1 an hour, no one would work there, except maybe a few hobos.

      1. Weak tuna canneries should fail.

        So your claim is that it’s the job of the US government, rather than the market, to determine the number of tuna canneries exist in Amarican Samoa?

        Nice one, Peakaboob.

        Even if the minimum wage was lowered to $1 an hour, no one would work there, except maybe a few hobos.

        Are you saying that one third of the working population of American samoa – 5000 people are hobos? Do you have any idea how stupid that sounds?

        Learn some economics.

  6. It is interesting to note that one of the lowest minimum wages is for the “Government Employees Industry.”

  7. @PeakTtrader,

    For wealth transfer, why would you choose a minimum wage instead of Basic Income?

    1. PeakTrader

      Hitssquad, I’ve explained in detail how raising the minimum wage would move the economy towards optimization and correct structural problems built-up over decades.

      However, some people cling to their laissez faire philosophy, to maintain the collapsed teen labor force participation rate, since 1980, while teens and low-wage workers collect more benefits from government and parents, rather than pay taxes, keep weak business owners profitable, keep production costs higher than they should be (e.g. the costly turnover rate), maintain, or even increase, the saving glut and weak consumption, etc.. The more desperate someone needs a job, the better.

      To the laissez faire crowd, there are no problems. Their simple models, that hold everything else constant, work well, regardless of over a century of data.

    2. PeakTrader

      Nothing brings more joy to the laissez faire crowd than a worker riding his 10-speed bicycle to work, smiling with no teeth, shopping at dollar stores and eating dollar hamburgers :)

      1. Citizen Buddy

        Nothing makes the minimum wage enthralled cabal more delighted than to see the unskilled and unemployable, riding free public transportation, getting free dental care and using their EBT card for no fuss dining. :-)

        1. PeakTrader

          Yes, the “unskilled and unemployable” cannot learn in five minutes how to flip a hamburger.

          So, they take out $100,000 in student loans, grants, and scholarships to learn Austrian economics or fictional writing.

          Then, they find rather than wasting their time working and paying taxes, they can collect more in benefits from government and parents for not working.

          1. Yes, the “unskilled and unemployable” cannot learn in five minutes how to flip a hamburger.

            There’s more to it than learning to flip a burger. There’s going to work when you’re scheduled, showing up on time, taking work direction from someone you may despise, working well with others, following work rules you may not like, etc. etc. burger flipping is the least important skill to learn.

            The unemployable are, by definition, unemployable. They cannot be employed flipping burgers or anything else.

            So, they take out $100,000 in student loans, grants, and scholarships to learn Austrian economics or fictional writing.

            Where, exactly can an interested student find programs in Austrian economics rather than the usual Keynesian nonsense that’s so common these days?

            Then, they find rather than wasting their time working and paying taxes, they can collect more in benefits from government and parents for not working.

            A perfectly rational response to perverse incentives. How does arbitrarily raising the minimum price of labor help?

          2. PeakTrader

            Yes, if they’re unemployable they’re unemployable. So?

            Austrian economics is often taught as part of History of Economic Thought. What do you want to know?

            I explained in detail before differences in prices and wages, which you seemed to completely dismiss, or remain in denial.

          3. Yes, if they’re unemployable they’re unemployable. So?

            So – why do you include them with the unskilled in a sentence about burger flipping? It’s a waste of their time and somebody’s money.

            I explained in detail before differences in prices and wages, which you seemed to completely dismiss, or remain in denial.

            No, Peakaboob, you didn’t explain the difference at all, and of course you can’t. You just claimed they were different and left it at that.

            You are such a clown. Learn some economics.

      2. Nothing brings more joy to the laissez faire crowd than a worker riding his 10-speed bicycle to work, smiling with no teeth, shopping at dollar stores and eating dollar hamburgers

        Nothing brings more joy to the laissez faire crowd than a person making their own decisions and living the life they’ve chosen for themselves.

  8. Jon Murphy

    Peak:

    This may have gotten lost, so I’ll post it again down here:

    And I have no clue why you think I am ignorant about economics. You seem to agree with me that minimum wage increases hurt workers. Furthermore, you seem to agree that the idea that higher minimum wage leads to more growth is unproven at best.

    So, I guess I have two questions for you:

    1) What, specifically, have I said that you disagree with?

    and

    2) How confident are you in your theory?

    I would really like answers (numerated, if possible).

    1. PeakTrader

      Jon, I wonder if you read anything I wrote. You certainly haven’t acknowledged you understood my comments about the minimum wage.

      Rigorous empirical studies have proven increases in the minimum wage have a small effect on employment.

      I think, there are two opposing forces on employment. One is raising the minimum wage increases productivity and lowers production costs. So, instead of 100 workers, for example, to produce a level of output, 95 workers, for example, may be needed to produce the same level of output.

      The higher wage creates incentives for workers to keep their jobs (e.g. working harder for the higher wage) and attract more productive (idle) workers (e.g. with more education). There are also lower production costs, e.g. a lower turnover rate.

      The other force is when 100 workers get a $1 raise, one worker may lose his job and go on unemployment. So, 99 workers benefit and one worker doesn’t. 99 workers have $1 an hour more to spend or save. If they spend it, they generate a cycle of consumption-employment.

      There may be increasing returns initially, then diminishing returns, and then negative returns, e.g. when the minimum wage rises above $15 an hour.

      The freed-up labor, along with a rising labor force participation rate, can expand the economy at a faster rate.

      1. Jon Murphy

        I’ve read everything you’ve written and none of it makes sense.

        You accuse me of being economically ignorant, but then you agree with everything I say.

        You make incredibly weird and illogical assumptions, none of which are backed up by anything empirical (as your own studies cite).

        You do not (or cannot?) answer any of my questions; in fact, you do something like this and try to change the topic.

        So, again:

        1) What, specifically, have I said that you disagree with (aka, why do you claim I am economically ignorant)?

        and

        2) How confident are you in your theory (why do you use the qualifiers “may” and “can”)?

      2. Jon Murphy

        Look, I am just trying to look for some help here. Even though I am pretty awesome at what I do (as my papers, awards, track record, and clients attest to), I am always trying to learn.

        But telling me I’m ignorant, and then agreeing with everything I say sends me mixed messages.

      3. PeakTrader

        Jon, the fact you don’t understand my statements prove you don’t understand economics.

        Every economist I talk to understands my statements completely.

        What I don’t understand is what you’re talking about. It’s like you live in an upside-down world.

        1. Jon Murphy

          Look, if you can’t answer my questions, just say so.

          What what I am saying is this:

          I said “Minimum wage hikes have negative effects on employment.”

          You said I am ignorant and then proceeded to spend most of yesterday and today talking about how minimum wage hikes have negative effects on employment.

          So my question is really simple: what have I said that you object to?

          Furthermore, you keep using qualifiers in your statements, things like “may” and “can” which suggests that you are not confident in your models.

          You see, being a real-life economist who advises businesses and clients, I cannot get away with “may.” When I present something, I have to actually back it up. And when a client asks me how confident am I, I have to be pretty damn confident because he is risking millions of dollars on my word.

          So my other question is: how confident are you in your models?

          1. PeakTrader

            Jon, you’re digging yourself even deeper into your hole. The empirical models are normally tested at the 5% level, or fall within a 95% confidence level. Any economist would know that.

            It’s no easy task creating a sound empirical model, given there are so many influencial factors. You’ve proven you’re completely unaware of those factors, which require at least some basic economics.

          2. Jon Murphy

            I know all about confidence intervals. But I didn’t ask that.

            I asked you how confident you are.

          3. Jon Murphy

            But I am also confused, because the one paper you cited suggesting minimum wage hikes would create economic growth talks nothing about confidence intervals and only deals with a theoretical situation, assuming no job loss.

            So, it seems like you’ve not provided me with anything concrete, and you are not confident at all about the results.

          4. Jon Murphy

            But seeing as this conversation has been going on for 48 hours now and you’ve not answered the two most basic questions (and have even gone to great lengths to avoid answering) I asked, I can only conclude you are just arguing to argue.

            I got better things to do tonight than to deal with an argumentative ideologue.

          5. PeakTrader

            Jon, I don’t recall citing that paper.

            I don’t understand your statements.

            For example, you say my beliefs aren’t “concrete.” Therefore, I’m “not confident at all.”

          6. Jon Murphy

            You did cite that paper on Aug 31, 2013 at 6:21 PM.

            Go check yourself before you wreck yourself.

          7. PeakTrader

            I didn’t cite that link, I cited this link:

            http://www.raisetheminimumwage.com/pages/job-loss

          8. Jon Murphy

            Oh my God, you are such a fucking idiot.

            I can’t…I can’t deal with this. Stop talking to me because I will not respond.

          9. really Jon…. ??? boy have you changed… did you leave your church or something?

          10. I didn’t cite that link,

            http://www.raisetheminimumwage.com/pages/job-loss

            I cited this link:

            http://www.raisetheminimumwage.com/pages/job-loss

            Effing unbelievable!

            Your squirming, obfuscating, and outright lying are truly offensive.

            You are a liar and a fraud, without a basic understanding of human action or economics.

  9. Seattle Sam

    Expecting to see a dramatic impact on total employment from the minimum wage is a bit like expecting to see a dramatic impact on the Tigers’ record if they sit Miguel Cabrera. They might even conceivably do better for a while, but you wouldn’t cite that as evidence that Miguel’s performance has no impact on the team. The minimum wage directly affects a small portion of the workforce, and even indirectly it’s not huge. But raising the minimum wage will get you less employment than you would otherwise have. Even if the effect were small, why would you want to bench Miguel? To make the other players feel better?

    1. PeakTrader

      Would Miguel Cabrera play better golf for $10,000 or for $1 million?

      1. Jon Murphy

        Neither. He’d play baseball for $19 million

      2. Seattle Sam

        I’ve never seen Miguel play golf, only third base. However if he were to try to earn money playing golf he would run into the PGA equivalent of the minimum wage, which prevents those with lesser scoring capabilities from playing professionally (for $10,000 or even ten cents).

        1. PeakTrader

          Seattle Sam, I was thinking of Angel Cabrera, who won the U.S. Open and Masters.

    2. PeakTrader

      Would some golfers even play if first prize was only $1,000? They may just play golf instead of working :)

      1. Would Olympic contenders play for only that chintzy gold medal?

        I guess your model can’t control for variables that can’t be measured, so it fails.

        Jon is right about you, you know. Get a clue.

        And…learn some basic economics.

  10. The most convincing way to back up the assertion that higher minimum wages increases unemployment is to have a study that focuses directly on the businesses affected rather than wider, more generalized studies that include many other hard-to-calibrate factors.

    The tighter the study – the less extraneous factors that have to be considered and in turn lower the confidence level.

    The Pennsylvania/New Jersey study attempted to keep the study tight. It still had some flaws but not near the flaws that most studies have that widen the scope considerably – for no discernible reason to start with.

    When I see a study that goes back, for instance, to the New Jersey/Pennsylvania and shows before and after employment levels – ONLY OF THOSE BUSINESSes affected, I’ll put more stock into it.

    Otherwise, these other studies are designed to be wider scope on purpose so as to prove some pre-conceived point that cannot be easily refuted without trying to track down and unwind all the other influencing factors that the original study – purposely ignored and did not take into account.

    The really funny thing about this that makes the opponents even more bogus in their ideology is that we’re talking about 2-3% of the workforce – OVERALL – something we don’t even know what that number is in the studies conducted….

    you need real numbers from real businesses on real employment and the wider you make the study, the more you need to account for other factors – and when you don’t then your study is bogus from the get go.

    1. Seattle Sam

      If all you’re going to demonstrate is that small increases in MW do small damage and large increases do large damage, I’d accept that, but it still doesn’t make a case for why you would want to inflict even small wounds in the first place. Minimum wage simply gives money to people whose work is worth that wage at the expense of those whose work is not. I can see the political advantage to doing that, but not the economic one.

      1. I’m saying if you want to actually demonstrate – QUANTIFIABLE impacts then design your study to do just that by looking specifically at the employment numbers for the businesses directly affected – before and after.

        If the assertion is true – you have the best chance of showing by limiting other factors that could influence it.

        when they expand the study out to look at unemployment in the region – based on minimum wage impacts that accrue to only a small segment of that region – about 3% – you’ve automatically muddied the benefit of the study by including many other harder-to-quantify factors.

        Keep the study simple and focused and don’t to a scope and scale that brings other much more complicating factors into the study.

        why would you do that to start with?

        If your study is truly valid – you’ll not only show impacts to the directly affected businesses – you may well be able to better quantify – dollar for dollar increase scenarios.

        these large scale studies that include numerous other factors don’t prove anything other than if you widen the study – all kinds of other factors get involved and actually make it harder to provide clear evidence.

        the most powerful and convincing study would show actual direct impacts to the businesses involved.

  11. This Peak fella is about a bright as a fence post.

  12. He does, however, know how he FEELS–one of those touchy feely control freaks.

    I proclaim that I own myself! If I want to accept a job that pays $6.00 per hour, I don’t think this Peak control freak should have any say in the matter.

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