Minimum Wage

[billvon 2,991]

>Studies have shown that an increase in the minimum wage doesn't lead to an
>increase in unemployment.

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July 6, 2011, 6:00 am 42 Comments
How to Create Jobs and Cut the Deficit
By CASEY B. MULLIGAN

Another federal minimum-wage increase would not, as some proponents promise, create jobs, but would reduce employment.

A few months ago, The New York Times editorialized that America’s minimum-wage workers “need a raise.” The Center for American Progress said a higher federal minimum wage “encourages spending, investment and economic growth.”

Many economists expect the minimum wage, if it has any effect, to raise employer costs and thereby reduce employment, especially among people who are likely to work in minimum-wage jobs, like part-time workers.

.....

To investigate the possibility that the July 2009 wage increase stopped further increases in part-time employment and perhaps affected other employment categories, I estimated a monthly model of national part-time and full-time employment per capita for each of 12 demographic groups distinguished by race, gender and age (white and nonwhite, male and female, and 16 to 19 compared with 20 to 54 and 55 and over), using data from before the increase.

I used the model to forecast part-time and full-time employment for each demographic group for August 2009 through December 2010. The aggregate deviation of the part-time predictions from the actual was added to the red line to arrive at the aggregate part-time prediction shown as the chart’s blue line.

After falling 9.3 million during the recession through July 2009, aggregate full-time employment fell another 1.8 million by the end of the year and remained below July 2009 levels at the end of 2010. Some people dismissed from their full-time jobs probably had trouble finding another suitable one, and some of them worked part time while they searched.

Consistent with this story, my estimates predicted that part-time employment would have continued to increase during the second half of 2009 because, before the increase, part-time employment tended to increase with full-time job losses.

The actual and predicted data depart dramatically beginning in September 2009, with actual part-time employment 1.2 million below predicted part-time employment by December and averaging 975,000 part-time positions below what was predicted over the months August 2009 to December 2010.

A small number of these job losses were offset by possible increases in full-time employment (relative to what it would have been – more on this next week). I find the total job loss from the July 2009 minimum-wage increase to be about 800,000.

If raising the minimum wage reduced employment by 800,000, cutting it back to its early 2009 level is likely to increase employment by 800,000. That would add a bit to government revenue as some of those people moved from unemployment benefits to tax-paying workers.
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[kallend 2,027]

Quote

>Studies have shown that an increase in the minimum wage doesn't lead to an
>increase in unemployment.

=========================
July 6, 2011, 6:00 am 42 Comments
How to Create Jobs and Cut the Deficit
By CASEY B. MULLIGAN

Another federal minimum-wage increase would not, as some proponents promise, create jobs, but would reduce employment.

A few months ago, The New York Times editorialized that America’s minimum-wage workers “need a raise.” The Center for American Progress said a higher federal minimum wage “encourages spending, investment and economic growth.”

Many economists expect the minimum wage, if it has any effect, to raise employer costs and thereby reduce employment, especially among people who are likely to work in minimum-wage jobs, like part-time workers.

.....

To investigate the possibility that the July 2009 wage increase stopped further increases in part-time employment and perhaps affected other employment categories, I estimated a monthly model of national part-time and full-time employment per capita for each of 12 demographic groups distinguished by race, gender and age (white and nonwhite, male and female, and 16 to 19 compared with 20 to 54 and 55 and over), using data from before the increase.

I used the model to forecast part-time and full-time employment for each demographic group for August 2009 through December 2010. The aggregate deviation of the part-time predictions from the actual was added to the red line to arrive at the aggregate part-time prediction shown as the chart’s blue line.

After falling 9.3 million during the recession through July 2009, aggregate full-time employment fell another 1.8 million by the end of the year and remained below July 2009 levels at the end of 2010. Some people dismissed from their full-time jobs probably had trouble finding another suitable one, and some of them worked part time while they searched.

Consistent with this story, my estimates predicted that part-time employment would have continued to increase during the second half of 2009 because, before the increase, part-time employment tended to increase with full-time job losses.

The actual and predicted data depart dramatically beginning in September 2009, with actual part-time employment 1.2 million below predicted part-time employment by December and averaging 975,000 part-time positions below what was predicted over the months August 2009 to December 2010.

A small number of these job losses were offset by possible increases in full-time employment (relative to what it would have been – more on this next week). I find the total job loss from the July 2009 minimum-wage increase to be about 800,000.

If raising the minimum wage reduced employment by 800,000, cutting it back to its early 2009 level is likely to increase employment by 800,000. That would add a bit to government revenue as some of those people moved from unemployment benefits to tax-paying workers.
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Why should we believe Mr. Mulligan's estimate any more than the OP's opinion?

...

The only sure way to survive a canopy collision is not to have one.

[billvon 2,991]

>Why should we believe Mr. Mulligan's estimate any more than the OP's opinion?

Believe whatever you like.

Consider this, though - if you raised the minimum wage to $100 an hour, even the doubters here would likely agree that it would reduce employment as small businesses could not afford an order of magnitude increase in their labor costs.

So the question becomes - do lesser increases have lesser (or zero) impacts? I think that is unlikely. It is unlikely that there is a breakpoint where you can say "at $20 an hour it will hurt employment but at $19.99 an hour it will not."

[masterrig 1]

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Then businesses will relocate of their services overseas and that will give the leftists something to whine about. Funny how they like to complain about problems their policies create.

Surely those worthy, wealthy "JOB CREATORS" wouldn't stoop to be job destroyers.

(Oh yes, they certainly would. Then they stash their extra cash in the Cayman Islands.)

Bottom line... GREED! They don't want to earn their billions over time, they want it NOW.


Chuck

[kallend 2,027]

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>Why should we believe Mr. Mulligan's estimate any more than the OP's opinion?

Believe whatever you like.

Consider this, though - if you raised the minimum wage to $100 an hour, even the doubters here would likely agree that it would reduce employment as small businesses could not afford an order of magnitude increase in their labor costs.

So the question becomes - do lesser increases have lesser (or zero) impacts? I think that is unlikely. It is unlikely that there is a breakpoint where you can say "at $20 an hour it will hurt employment but at $19.99 an hour it will not."

Could be like the Laffer curve, with a slope that changes sign at some value. Then we can argue for decades about where that point is.

...

The only sure way to survive a canopy collision is not to have one.

[jcd11235 0]

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So the question becomes - do lesser increases have lesser (or zero) impacts? I think that is unlikely.

The most comprehensive study I've seen suggests that increases in minimum wage (typical increases, not up to $100/hr that you mentioned) have a small positive effect on employment. So, if we accept that an increase in the minimum wage to $100 would decrease employment (sounds reasonable), the intermediate value theorem tells us that there exists a non-zero increase in minimum wage for which the net effect on employment is zero.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[jcd11235 0]

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Could be like the Laffer curve, with a slope that changes sign at some value. Then we can argue for decades about where that point is.

I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[sundevil777 102]

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Then businesses will relocate of their services overseas and that will give the leftists something to whine about. Funny how they like to complain about problems their policies create.

Surely those worthy, wealthy "JOB CREATORS" wouldn't stoop to be job destroyers.

(Oh yes, they certainly would. Then they stash their extra cash in the Cayman Islands.)

It is NOT the purpose of a business to create jobs. The purpose is to make a profit. Trying to make creating jobs a priority will result in less of both.

It is no surprise that a liberal academic would make that mistake.

People are sick and tired of being told that ordinary and decent people are fed up in this country with being sick and tired. I’m certainly not, and I’m sick and tired of being told that I am

[SkydiveJonathan 0]

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>Why should we believe Mr. Mulligan's estimate any more than the OP's opinion?

Believe whatever you like.

Consider this, though - if you raised the minimum wage to $100 an hour,

The figure being debated is $10 an hour - not $100.

[SkydiveJonathan 0]

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Could be like the Laffer curve, with a slope that changes sign at some value. Then we can argue for decades about where that point is.

I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

About $15 an hour.

[sundevil777 102]

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Could be like the Laffer curve, with a slope that changes sign at some value. Then we can argue for decades about where that point is.

I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

Where do you think that point is for % taxes vs revenue generated. Obama admitted that he didn't care that his desire to raise the tax on capitol gains would reduce the tax revenue generated.

People are sick and tired of being told that ordinary and decent people are fed up in this country with being sick and tired. I’m certainly not, and I’m sick and tired of being told that I am

[kallend 2,027]

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Could be like the Laffer curve, with a slope that changes sign at some value. Then we can argue for decades about where that point is.

I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

Where do you think that point is for % taxes vs revenue generated.

54% tax rate according to the IMF. Would increase revenues by 17.5%

...

The only sure way to survive a canopy collision is not to have one.

[billvon 2,991]

>The figure being debated is $10 an hour - not $100.

Right. In science, engineering and math, it is common to take the limits of a function to determine how it behaves at the extremes. What is the effect if there is no minimum wage? What it it's $100 an hour? (or choose your own favorite large number.) Now you have the ends of the graph; the center of the graph will lie between those two points.

[billvon 2,991]

>the intermediate value theorem tells us that there exists a non-zero increase in
>minimum wage for which the net effect on employment is zero.

So the question becomes - how do you determine that limit, and what sensitivities come into play? What zeroes out those sensitivities below a certain level?

In other words, it is a financial fact that if you have $100 an hour available for your labor costs, you can hire 10 people for $10 an hour or 20 people for $5 an hour - and if the company is labor limited, and can get the same employees, the company with more employees will out-compete the company with less. There thus must be a compensating factor that makes it more expensive for the company to hire more people.

[rehmwa 2]

Unless you're dealing with asymptotic limits. Then the center of the graph will lie outside those two points.

or on top and bottom

sometimes, the center will lie all around the ends

or in Seattle

...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

[sundevil777 102]

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Could be like the Laffer curve, with a slope that changes sign at some value. Then we can argue for decades about where that point is.

I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

Where do you think that point is for % taxes vs revenue generated.

54% tax rate according to the IMF. Would increase revenues by 17.5%

I think many would find themselves already at or close to that level if you consider all taxes.

There is not a consensus about where that max is in the curve is (some say it is more than 70% at the very least), and it definitely is not the same for different types of income. Capital gains has a much earlier max, as people with money to invest are often taking a substantial risk, and taxes reduce the potential reward without reducing that risk. When people earn income by wages they don't have that influence on their actions. However, libs dislike that reality so much that they don't care about the goal of raising tax revenues for the unending new ways that they can think of for government to spend it, they instead just want to punish the wealthy, and let the poor know they've done it on their behalf.

People are sick and tired of being told that ordinary and decent people are fed up in this country with being sick and tired. I’m certainly not, and I’m sick and tired of being told that I am

[kallend 2,027]

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Could be like the Laffer curve, with a slope that changes sign at some value. Then we can argue for decades about where that point is.

I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

Where do you think that point is for % taxes vs revenue generated.

54% tax rate according to the IMF. Would increase revenues by 17.5%

I think many would find themselves already at or close to that level if you consider all taxes.

There is not a consensus about where that max is in the curve is (some say it is more than 70% at the very least), and it definitely is not the same for different types of income. Capital gains has a much earlier max, as people with money to invest are often taking a substantial risk, and taxes reduce the potential reward without reducing that risk. When people earn income by wages they don't have that influence on their actions. However, libs dislike that reality so much that they don't care about the goal of raising tax revenues for the unending new ways that they can think of for government to spend it, they instead just want to punish the wealthy, and let the poor know they've done it on their behalf.

According to the IMF, the curve for capital gains is very flat.

However, I don't view taxes as punishment, I view taxes as a necessary means to raise the revenue to run the country effectively. On the whole I prefer living in the USA to, say, Somalia or Sierra Leone where government is practically non existent.

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The only sure way to survive a canopy collision is not to have one.

[jcd11235 0]

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Could be like the Laffer curve, with a slope that changes sign at some value. Then we can argue for decades about where that point is.

I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

About $15 an hour.

How did you arrive at that figure?

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[jcd11235 0]

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Could be like the Laffer curve, with a slope that changes sign at some value. Then we can argue for decades about where that point is.

I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

Where do you think that point is for % taxes vs revenue generated.

Higher than current rates.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[jcd11235 0]

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So the question becomes - how do you determine that limit, and what sensitivities come into play? What zeroes out those sensitivities below a certain level?

Good questions. The gaming industry has begun hiring (or contracting) economists to study the virtual economies in their games. These economies have the advantage (with respect to being studied) of having every transaction recorded. It will be interesting to see what is learned over the next few years that can be extrapolated to economies in the real world.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[StreetScooby 5]

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or in Seattle

You have mad math skillz

We are all engines of karma

[SkydiveJonathan 0]

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Could be like the Laffer curve, with a slope that changes sign at some value. Then we can argue for decades about where that point is.

I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

About $15 an hour.

How did you arrive at that figure?

It's a conservative estimate. $20 inflation proofed will more likely do the trick.

[jcd11235 0]

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I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

About $15 an hour.

How did you arrive at that figure?

It's a conservative estimate. $20 inflation proofed will more likely do the trick.

So, you didn't use any sound methodology to get your number; you just made a wild ass guess.

$20 would be WAY too high, and would certainly reduce employment.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[SkydiveJonathan 0]

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I was thinking that same thing recently. I've no insight regarding the location of the zero derivative point, though.

About $15 an hour.

How did you arrive at that figure?

[livendive 8]

A curious thought that just occurred to me, no I haven't thought it through yet.

What would be the positive and negative impacts of having a variable minimum wage indexed to the local cost of living. It seems to me that there would be a short-term spike in urban sprawl, but at some point things would stabilize and a working couple might be able to afford a small apartment near their work, no matter where that job was. A sizable percentage of relatively unskilled labor positions would move out out of the cities, but the more highly compensated folks that stayed would still require retail and service people around them. There would probably have to be some controls in place to keep employers from abusing employee commutes ("Your office is in Redding, but we expect you to commute to a job site in San Francisco for the next six months, with no travel time or mileage reimbursement")

Blues,
Dave

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