David R. Henderson  

Krugman and a Critic on the Minimum Wage

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President Obama has proposed an increase in the minimum wage from its current level of $7.25 an hour to $9.00 an hour. This is after the George W. Bush increase, between 2007 and 2009, from $5.15 an hour to $7.25 an hour. That would make it a 75-percent increase over 6 years. This is at a time when inflation has been very low. Adjusted for inflation, the increase over 6 years, if Obama's proposal is legislated, would be about 55 percent. That's big.

How, I wondered, would Krugman handle the proposed minimum wage issue? Well, after all, he is an economist who thinks a lot about economic policy and its effects and blogs daily about these things. And he did write the following about the "living wage," which is essentially a higher minimum wage, in 1998:

So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This theoretical prediction has, however, been hard to confirm with actual data. Indeed, much-cited studies by two well-regarded labor economists, David Card and Alan Krueger, find that where there have been more or less controlled experiments, for example when New Jersey raised minimum wages but Pennsylvania did not, the effects of the increase on employment have been negligible or even positive. [Krugman should have pointed out here that Card and Krueger didn't study employment in general. They studied employment in fast-food restaurants.] Exactly what to make of this result is a source of great dispute. Card and Krueger offered some complex theoretical rationales, but most of their colleagues are unconvinced; the centrist view is probably that minimum wages "do," in fact, reduce employment, but that the effects are small and swamped by other forces.

What is remarkable, however, is how this rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda--for arguing that living wages "can play an important role in reversing the 25-year decline in wages experienced by most working people in America" (as this book's back cover has it). Clearly these advocates very much want to believe that the price of labor--unlike that of gasoline, or Manhattan apartments--can be set based on considerations of justice, not supply and demand, without unpleasant side effects. This will to believe is obvious in this book: The authors not only take the Card-Krueger results as gospel, but advance a number of other arguments that just do not hold up under examination.

For example, the authors argue at length that because only a fraction of the work force in the firms affected by living wage proposals will be affected, total costs will be increased by only 1 or 2 percent--and that as a result, not only will there be no significant reduction in employment, but the extra cost will be absorbed out of profits rather than passed on in higher prices. This latter claim is wishful thinking of the first order: Since when do we think that cost increases are not passed on to customers if they are small enough? And the idea that employment "of the affected workers" will not suffer because the affected wages are only a small part of costs is a non sequitur at best. Imagine that a new local law required supermarkets to sell milk at, say, 25 cents a gallon. The loss in revenue would be only a small fraction of each supermarket's total sales--but do you really think that milk would be just as available as before?


So how did Krugman handle the economics of the minimum wage? By talking about the politics of the minimum wage. Krugman tries to establish that the Republicans are shedding crocodile tears because they don't really care about the workers who might lose their jobs if the minimum wage were increased.

I wondered if any of his commenters on his web page would catch Krugman changing the subject. So I started reading through the comments, something I don't generally recommend because most of the commenters are sycophants. But one commenter, Capt. J Parker, nailed it, writing:

OK, Republicans are evil, check. Shills for the Uber-Rich, check. Now that that's out of the way, that is to say: the Politics of the minimum wage have been cleared up, Isn't the Amazing Dr. K going to treat us to a discussion of the Economics of the minimum wage? The Good Dr. K states: (Those despicable Republicans would) "like people to believe that their opposition (to raising the minimum wage) is driven by sincere concern for workers who might lose their jobs." People won't believe this according to Dr. K because Republicans are known to be evil and not because concern about increasing unemployment by increasing the minimum wage is economically misplaced, which it is not. So, can I take this as a capitulation from Dr. K that the Econ 101 supply/demand analysis that shows how unemployment increases when government mandates a price above market really is correct? After all, we also have empirical evidence that the last increase in the federal minimum wage (courtesy of Harry, Barry and Nancy) really did increase unemployment among the least skilled.

http://economix.blogs.nytimes.com/2009/11/18/the-minimum-wage-and-teenag...

So, don't we need some magic progressive fairy dust to sprinkle on the Economics of this proposal of the president's to make the obvious downsides of the plan go away? Otherwise it would seem President Obama is willing to throw some of the least advantaged among us out of work for the sake of a "political trap." Now, that would be evil.


Well, Capt. Parker almost nailed it. He should have written "courtesy of Harry, George, and Nancy."


Comments and Sharing


CATEGORIES: Labor Market , Regulation



COMMENTS (42 to date)
economist writes:

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Daniel Klein writes:

Great post, David.

It seems to me that Paul Krugman has turned almost exclusively to rousing a low quality Democratic/social-democratic rabble, and hence will very rarely acknowledge any serious shortcomings of cows sacred to that rabble. The transformation seems to have started around the time he became a regular at the NYT; that was very apparent to me when Harika Barlett and I worked through all of his NYT columns 1997-2006. The omissions become deafening (and hence the title of our article, "Left Out").

Tyler Cowen makes a remarkable contrast. He practices temperance almost to the point of intemperance. In this respect (and others) he is in the company of John Stuart Mill.

A question: Who is the closest thing, temperance-wise, to a Tyler Cowen on the left/Democrat side of discourse today?

Foobarista writes:

By the time Obama is out of office, K will have written the exact opposite of every column he wrote while Bush was in office, so his net intellectual output for the past 16 years will be zero.

Glen Smith writes:

Foobarista,

In the early 90s I was a struggling economic analyst. I was advised to either pick a new career or pick a party and figure out how to support my master's policies, right or wrong, while shredding my master's enemies policies, right or wrong. Even when the policies were basically the same.

Eric Falkenstein writes:

You keep quoting the pre-Bush Krugman as if he's the same guy. That guy is dead. The new Krugman thinks he sees the higher game as based on lying and all sorts of evil-Rove tactics, so he feels it would be naive to concede anything but a gambit when arguing for his team. In short, he's now an articulate partisan hack.

John V writes:

Exactly, Eric F.

I don't even refer to him as DR. Krugman anymore. He's simply MR. Krugman now. The good doctor is dead indeed.

MingoV writes:

"The higher wage reduces the quantity of labor demanded, and hence leads to unemployment."

I believe that President Obama knows this and considers it to be a feature, not a disadvantage. Increased unemployment plus more than tripling the weeks of unemployment benefits makes more dependents. After being out of the work force for nearly two years, many of the unemployed can't find jobs. They either suddenly become disabled (in the last four years one million became disabled after their unemployment benefits ran out) or become poor enough for Medicaid and welfare. The 49% soon will be 59%.

Tom West writes:

While it seems likely that there may be some job loss by very low marginal product workers, I find the minimum wage discussion slightly disingenuous.

If one concerned about the workers' welfare, surely we're looking at a trade-off of substantially increased wages against possible job losses, and if we're concerned about freedom to engage in mutually agreed contracts, then surely job losses or worker welfare considerations are irrelevant.

As it is, it seems rather political posturing. The fact that all of economic policy is a trade-off falls to the political yelling that any policy with a downside is invalid, and the fact that economic freedom may invalidate talk of welfare goes unmentioned because it doesn't politically "sell".

Krugman *is* a politician. I don't expect real analysis from him. Econlog, however, should be able to achieve higher standards than that, especially given the quality of the authors.

David R. Henderson writes:

@Tom West,
You do realize, don't you, that when you accuse someone of being disingenuous, even "slightly disingenuous," you're accusing him of being dishonest? That's a serious charge and doesn't reflect the good manners that you generally bring to this discussion.
But because you generally do have such good manners and this is "slightly" a slip, I will answer you. I agree that, in our role just as economists, we need to look at tradeoffs. The way to do it is to look at all costs. For every dollar that the remaining employed workers get due to the minimum wage, someone else, either a business or a consumer or both together, gives up a dollar. So that dollar of transfer is not a net gain.

ThomasH writes:

Krugman's analysis of the economics of returning the real minimum wage to the levels of the early Regan adminstration have not changed and are well known to liberals: EITC is a superior way to redistribute income to low wage workers. Presumably he thought the politics are not the same (today's Republicans are much more hostile to the EITC than those of a geration ago)and more worth discussing.

conor writes:

"Who is the closest thing, temperance-wise, to a Tyler Cowen on the left/Democrat side of discourse today?"

David Brooks? :-)

Justin Rietz writes:

Somewhat a side note, but the econometric techniques used by Card and Krueger (a flavor of differences in differences)have been fairly well rejected by modern econometricians.

Dick King writes:

Mr. Rietz, I had heard that but I've never seen the citation. Can you post one?

People quote Card & Krueger at me ad nauseum, and I have noted that it's an isolated "result" and that extraordinary claims require extraordinary evidence, but I haven't seen an article that offers the canonical refutation and I would like to.

Thanks...

-dk

Justin Rietz writes:

I don't know if there is a canonical refutation, and I am by no means an expert, but the paper with which I am familiar is Abadie et al (2010) "Synthetic Control Methods for Comparative Case Studies."

Methinks writes:

Tom West,

Suppose that as a result of a wage policy imposed by your political overlords you became unemployable, but your other ten co-workers earn significantly more money. I would tell you that it's a good policy because your ten former co-workers are so much better off at the slight cost of your immiseration. How would you respond to my argument?

Certainly, you can't tell me that you wouldn't be completely behind your own immiseration. On net, those who are employed are better off and only the least productive have now become permanently impoverished and dependent. Their welfare doesn't matter (as I gather from the flippant way you dealt with that issue in your comment). Any other argument would be, by your own definition, disingenuous.

Certainly, you can't seem to make the connection between a person's welfare and retaining his option to negotiate the price of his labour. For how can government policy that robs people of their options make them better off?

Charlie writes:

Just hours later, Krugman wrote an article on the economics of the minimum wage:

http://krugman.blogs.nytimes.com/2013/02/16/minimum-wage-economics/

Perhaps, DH can be excused for jumping to conclusions, but it does make Daniel Klein's comment look pretty silly. It is difficult to look for evidence against a thesis, when confirmation bias is so much more natural.

Mark writes:

"Adjusted for inflation, the increase over 6 years, if Obama's proposal is legislated, would be about 55 percent. That's big."

The minimum wage was raised to $2.65 in 1978. In 2012 dollars, that's $9.20. Now $9 isn't so big -- in fact, under the proposal the wage still hasn't caught up.

(I'll choose another year to be fair: 1981, $3.35 wage. In 2012 dollars, that's $8.33. That makes $9 a real increase, but not a crazy one.)

Marquand writes:

After a minimum wage raise what happens to the general level of non-minimum wages in one or two years?

Will the general wage level rise?

Maniel writes:

Are we overlooking genius? First, let us reflect on the President’s Nobel-Laureate credentials, gained by not being George W Bush. Now, is there another Nobel Prize on the horizon, a result of him proving that he is not Milton Friedman? At first glance, he appears to have discovered a (new) magic number, $9 (he may have rounded up from $8.97, but let’s not play accountant here) corresponding to the perfect wage to filter out undesirables (a loaded term, admittedly - better terms might be under-qualified, capability-challenged, or other-experienced) seeking employment by others. Unless our congressmen (and women) trample each other in their rush to vote this proposal into law, we should soon see a single standard that can be applied to young and old, those living with others or on their own, heads of households or part-timers, city slickers or pea pickers, neocons or ex-cons, parents returning to the workforce after breaks for child rearing or teenagers entering the workforce to help overwhelmed parents, etc. On reflection, discovering just one wage, $8.97 (sorry, make that $9 even), to serve as a hurdle for the under-qualified might not be enough to earn a second prize. Pardon this temperance, but so-called “minimum wages” have been around for some time now, making it illegal to work for less than those minimums. I'm sure that I can hear Dr. Friedman laughing - no magic there.

Michael writes:

While I agree that the comments section in Krugman's blog is mesmerizingly syncophantic at times, the lurking variable is actually a shared liberal ideology between blogger and posters (as pointed out by Daniel Klein). For example, the comments section of PK's post about income inequality not causing low GDP growth was filled with angry comments to the contrary.

Jay writes:

Robin Wells obviously wrote the latest NY Times missive filed under PK's name.

David R. Henderson writes:

@Michael,
While I agree that the comments section in Krugman's blog is mesmerizingly syncophantic at times, the lurking variable is actually a shared liberal ideology between blogger and posters (as pointed out by Daniel Klein).
Good point.

Charlie, the Krugman piece you link to doesn't justify your criticism of David's argument, in fact, it seems to me to validate it. Especially;

...there just isn’t any evidence that raising the minimum wage near current levels would reduce employment.

I wonder how much of his general audience (as opposed to a gathering of professional economists) will catch that, 'near current levels'?

Not to mention that there is such evidence; the much higher unemployment rates of teen-aged and low education level Americans.

E Pearse writes:

There is a piece called, "Minimum Wage Laws: A Chinese Torture Story", At America's Chronicle, which takes a rather unusual and curious tack after analyzing the usual answers when you present the problem to liberal listeners by taking it to its almost-ultimate conclusion, i.e., if raising the minimum wage from $7.25 to $9.00 is good, raising it to $18.00 is twice as good, or raising it to $90.00 is ten times as good. So why would you want to do only a little good when you can do a lot of good?

Their answers is where the "Chinese Torture" analogy comes curiously in play. (Find it at: www.AmericasChronicle.com )

Tom West writes:

My apologies for "disingenuous". Dishonest is certainly not want I meant, and it absolutely incorrect.

I suppose I fear the Krugman-ization of the blogosphere, where the political fight overwhelms the ability to actually talk trade-offs and facts. (Even if my politics might (sort of) align with Krugman's, I don't bother reading him because his job is to win, not to enlighten.)

And in retrospect, you're addressing shortcomings in a politically-oriented piece, so a lack of discussion of all aspect of the issue is to be expected. Again, my apologies.

Your point about the transfer is, of course, quite correct. And certainly that is one of the things that should be front-and-center and is rarely mentioned. In general, I approve of the transfer, but the idea of hiding it because it might not sell is anathema to any interesting discussion.

David R. Henderson writes:

@Tom West,
Apology accepted. You're the classy guy I thought you were. Actually, re Krugman, this might surprise you, given how critical I am, but I do read him in part to be enlightened. When he just sticks to being an economist, which, as other commenters above have noted, is rare nowadays, he still can hit it out of the park.

Tom West writes:

"Who is the closest thing, temperance-wise, to a Tyler Cowen on the left/Democrat side of discourse today?"

If I could find one, they'd be on my read-list so fast... Sadly, I think that criticisms of occasional deviations from the party line are much harsher from the left than from the right.

Methinks: How would you respond to my argument?

*Every* policy is a trade-off with the innocent suffering. Your desire for law enforcement absolutely means that some innocents will be unjustly jailed. Do the wrongs of the innocent harmed by law enforcement override your benefits of a police force?

In other words, we try and see all the trade-offs and judge the costs/benefits for all of them. Pretending your preferred policy has no costs is for the politicians, not those who seek to enlighten.

With minimum wage (at the rates suggested), we don't seem to see an awful lot of unemployment increase for what is a reasonable increase in both wages and thus incentive to work. Moreover, places without a minimum wage don't tend to be places where the workers are better off, although this is my anecdotal observation.

Also, my personal observation has been that humans tend to value workers by what they're paying them, rather than their marginal product, and I think society benefits from the higher respect paid to such workers.

This is, as David brought up, traded against likely higher costs to consumers and the *severe* loss for those marginal product workers, even thought they seem to be few in number.

Certainly, you can't seem to make the connection between a person's welfare and retaining his option to negotiate the price of his labour. For how can government policy that robs people of their options make them better off?

That's a can of worms. First, being social animals, one person's negotiations definitely has effects on the rest of us. Simple case if you're a rights absolutist - choosing to sell yourself into slavery absolutely has an effect on how all around you perceive the intrinsic rights of human beings.

Second, most negotiations at the low end are about market power, not marginal product of labour. Artificially restraining the labour market is pretty much manipulating market power. Giving someone market power is pretty much always to their benefit. (Until minimum wage goes above their marginal product, anyway.)

None of this is to say that all manipulation is good, but I think it's pretty clear manipulation *can* make some people better off (at the cost of others, of course).

andy writes:

I have read the article linked by Krugman...and I don't like it. Formost:
- it studies mostly teenage unemployment, which seems to me rather 'unstable' because of schools etc.
- it assumes that restaurants/restaurant workers are marginal firms/marginal employers; I think this is the biggest flaw: the fact, that you employ people on minimum wage does not mean, that you are the marginal employer and your workers are marginal employees. Actually, especially in Fast food chains, the sane assumption would be that this is rather NOT the case as these people have quite a high marginal productivity.

Econ101 says that on price floor the marginal workers will be fired. I don't think fast food chains workers are marginal workers; I don't think most fast food chain restaurants are actually marginal restaurants. Therefore I wouldn't expect these studies to find an effect. They didn't find it.

Actually, it seems to me a better explanation than the ones they offer in the study; you don't have to assume business owners are losing voluntarily money; you don't have to assume they are stupid; you don't have to believe in some strange consumption/savings multiplicators being so large they would actually make an effect for a small hike in wage in a minority of workers.

Methinks writes:

Tom West,

Your desire for law enforcement absolutely means that some innocents will be unjustly jailed. Do the wrongs of the innocent harmed by law enforcement override your benefits of a police force?

Really? You cannot see the ocean of difference between systematically violating the most disadvantaged would-be workers and an occasional, regrettable mistake in an imperfect criminal justice system (our criminal justice system is just vile, btw, but that's another topic)?

With minimum wage (at the rates suggested), we don't seem to see an awful lot of unemployment increase for what is a reasonable increase in both wages and thus incentive to work.

No, we only see that the most disadvantaged are worse off. You seek to rob them of their right to negotiate the price of their own labour - i.e. take from them the little they have left. You immiserate those who are the most needy and you pat yourself on the back for this. Lovely.

Pretending your preferred policy has no costs is for the politicians, not those who seek to enlighten.

What cost exactly does my preferred policy of no minimum wage policy have? Except to snatch from would-be meddlers a vehicle for self-aggrandizement at the expense of the poorest of the poor, of course?

Also, my personal observation has been that humans tend to value workers by what they're paying them, rather than their marginal product, and I think society benefits from the higher respect paid to such workers.

I think it will surprise you that your personal observations are pretty meaningless. I don't know what "humans" you're talking about, but the value of my employees has always been determined by their marginal product. I don't value an employee I'm paying $4/hour but who is producing $2/hour of output more. I value him a lot less. So much less that I'll fire him. How much does "society" respect the unemployed?

That's a can of worms. First, being social animals, one person's negotiations definitely has effects on the rest of us.

What?

Simple case if you're a rights absolutist - choosing to sell yourself into slavery absolutely has an effect on how all around you perceive the intrinsic rights of human beings.

What's with yet another straw man? What does rights absolutism or selling yourself into slavery have to do with anything? And before you dive off that cliff: wage rate does not determine slavery. If you believe that you have the right to negotiate your own compensation what gives you the right to rob another person of that right?

Giving someone market power is pretty much always to their benefit. (Until minimum wage goes above their marginal product, anyway.)

Well, now you're just confusing me. First you say that employees are valued based not on how much they produce but by how much they are paid, then you assume (without evidence) monopsony power among employers of low-skilled labour and claim to, through a minimum wage, give "market power" to these low-skilled employees. But, wait! Only to those whose skill level warrants the new higher wage in the first place! According to you, this new higher minimum wage prices the even lower-skilled workers out of the labour market completely instead of elevating them in the eyes of their employers, after all. Which is it?

None of this is to say that all manipulation is good, but I think it's pretty clear manipulation *can* make some people better off (at the cost of others, of course).

Of course it can. It can make relatively more educated and well-spoken white people better off by pricing poor, black men out of the labour market and condemning them to a life of poverty and serial imprisonment. I guess we can all pat ourselves on the back for that.

Flint Fredstone writes:

Man called "disingenuous" (not candid or sincere, typically by pretending that one knows less about something than one really does) calls large number of commenters sycophants (a self-seeking, servile flatterer; fawning parasite). Someone has a very thin skin.

mark writes:

I have a question. Where I work a percentage of what most people(a few exceptions) is a bonus. A rough guess is 10 to 15 percent of wages is the bonus. I assume my company would have to pay the minimum wage and add the bonus which is not guaranteed and fluctuates daily. Is this so? Getting rid of the bonus which frankly would not bother me that much(corrupts the work environment) is probably out of the question as management wants it to be a motivator. This is a half billion dollar company and many of the positions start at 8 dollars an hour. Also, the company would probably want to maintain the shift differentials so this also would complicate the math on this proposal. I really was shocked by this proposal given all the fuss about Obamacare but I am trying to avoid politics.

Bill Rodz writes:

Do you mind posting a link for that study by Harry, George, and Nancy?

Rick Beasley writes:

Would I be way off to suggest that Robert Reich falls into a similar category as Krugman? After reading or listening to either of them, I often am left with a sneaky suspicion that something important was intentionally left out, or perhaps selective application of the basic principles of economics is at play.

One other thought: I remember the days when I worked at or near the minimum wage. Even if I had understood the minimum-wage debate back then (and I didn't), I would have preferred the higher minimum wage. Poor Bastiat.

Bob Layson writes:

It should also be considered that another effect of minimum-wage commands, they are hardly 'laws', is to reduce any non-monetary benefit of the employment package (working conditions, holidays etc.) and to get the workers working harder than before.

Tom West writes:

What cost exactly does my preferred policy of no minimum wage policy have?

The justification for minimum wage is based on the idea that the typical wages for unskilled labour are a lot less than their marginal product because of their lack of market power (more unskilled labourers than unskilled jobs, immediate need prevents negotiation, etc.).

Minimum wage is an (crude) attempt to redress that lack of market power. So, to answer your question, What cost?

The cost of "no minimum wage" is the significant chunk of workers who earn substantially less than they might otherwise not due to their lack of productivity, but because of external factors.

[The benefit of "no minimum wage" comes to those with very low marginal products and from those who profit from the unskilled's lack of market power - the owners and, in competitive markets, the consumers.]

Now, *you* may consider labour (or humans in general) like any other market commodity with no intrinsic worth except as determined by the laws of supply and demand, but that's not shared with most people, so we propose modifications to the market to address what we see as a problem.

The truth is that the market is simply a tool created by man to serve us, not the other way around. Like any tool, we'll tinker with it to give what we believe are better results.

The market is not sacred, nor is it natural (natural is the big guys taking all my stuff and killing me if I argue). I think markets are an incredibly good tool for producing wealth, but where I think it can be tinkered with to create greater happiness, I'm happy to do so.

(By the way, thank you for spelling labour with a 'u'. I normally try to conform to spelling norms of the host, but I figure at this far down in the discussion thread, there will be few to dismiss my points because of the "foreign-ness" of my spelling.)

ThomasH writes:

"The higher wage reduces the quantity of labor demanded, and hence leads to unemployment."

I believe that President Obama knows this and considers it to be a feature, not a disadvantage.
[Mingo V]

How distressing to see a policy propolas discussed on the basis of assuming bad faith on the part of the proponents.

Methinks writes:

Tom West,

I don't care what fantasy minimum wage is justified upon and your going on about general theoretical monopsonist conditions doesn't mean such conditions exist . What evidence do you have that employers of low-skilled labour are monopsonists? Do you seriously suggest that the hundreds of competing businesses that employ low-skilled labour in every town represents a monopsony?

Now, *you* may consider labour (or humans in general) like any other market commodity with no intrinsic worth except as determined by the laws of supply and demand, but that's not shared with most people, so we propose modifications to the market to address what we see as a problem.

Of course I don't believe humans have any value outside of their marginal product, Mr. West! This is why I am so passionate about individual rights, about liberty, about not setting a minimum wage which prices the neediest among us out of the market entirely! This can only be read as the behaviour of a person with no respect for human life.

The problem you see is that the least skilled and most vulnerable are able to and, more importantly, voluntarily choose to find work where they gain valuable skills which allow them to rise above their impoverished condition on their terms and not yours, such that you're denied a chance for self-agrandizement at their expense. At least that is how your comments read. You're proud of this?

The truth is that the market is simply a tool created by man to serve us, not the other way around.....The market is not sacred, nor is it natural

You don't know what a market is. A market is created simply by people coming together and entering into voluntary transactions with each other. Do you have something against peaceful, voluntary, uncoerced interactions between people, Mr. West? Is the freedom of your fellow human beings to interact in a peaceful, voluntary, uncoerced manner not sacred to you, Mr. West? Do you find something "unnatural" in voluntary, peaceful, uncoerced interactions between your fellow man? Are there circumstances in which you prefer serfdom or Gulags and other forms of slavery?

And I have yet to hear from you an explanation for why you feel wholly justified in making - through the imposition of a minimum wage - the most vulnerable of the population worse off to the benefit of the less vulnerable. From the content of your previous comments, you fully understand that you're pricing out of the market those whose marginal product does not justify your new arbitrary minimum wage, yet you don't seem bothered by this. Why not? You cling to the belief that making the worst-off even worse off is justified because it makes the better off even better off. Why?

No matter how much you want to believe that you're doing something noble, you know (based on what you yourself have written on this very thread) you are in fact simply robbing the poorest of yet of one more of their few choices. In supporting a minimum wage that costs them so dearly, how do your reconcile your dismissive attitude toward them with your expressed desire to help the needy? Isn't it time to rethink your position?

Ultimately, these are questions for you to consider and you answer to yourself. You reconcile these things with your own conscience, not with me.

(You're welcome. I am an immigrant to the United States and I have never been a conformist. This is how I spell. It is correct, though not American. I've tried over the years to break certain habits like "r" before "e", but I slip up and none of my American teachers have ever corrected me in my long ago school days because those spellings are correct. I invite you to join me in throwing off your chains of conformism and join me in flying your "re" and "u" flags of foreignness! Be yourself Be free!)

Dr. Murphy writes:

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Jack Davis writes:

Don't know if anyone has read David Neumark's book Minimum Wages; he devotes a chapter to the politics of the minimum wage. He concludes that primarily increases in the minimum wage are caused by primarily the well-intentioned, if misguided desire of the American public to help the poor. A lesser influence is lobbying by powerful interests like Wal-Mart who think raising the min wage will hurt their smaller competitors who can't afford the increased costs.

Also, almost no one who cites Card and Krueger's studies to advocate raising the wage mention a key fact: even those two say that the min wage increase is a "extremely blunt" way to fight poverty.

Michael writes:
Adjusted for inflation, the increase over 6 years, if Obama's proposal is legislated, would be about 55 percent. That's big.

I have two problems with this statement:

1. The minimum wage is still less than it was throughout the 1960s and 1970s when adjusted for inflation. It's not that it is too high now, it was too low 6 years ago.

2. Why would any economist look at inflation-adjusted wages and not GDP-per-capita adjusted wages? If consumers only keep up with inflation, productivity will slow. It must. Unless workers live on borrowed money...

Dave Anthony writes:

IF we wanted to help the poor more effectively, wouldn't it make sense to eliminate the minimum wage entirely and instead increase the EITC to supplement low wage earners?

EITC will only be available to independent filers so that way teens won't be eligible -- I would expect their unemployment would plummet which would then give them more work experience and job skills, giving them a head start.

Don writes:

Once upon a time, many Union contracts included automatic ties to minimum wage, ie, if minimum wage goes up by $1.75, so do union wages.

There is more to this story than people caring what McDonalds pays teenagers.

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