tag:blogger.com,1999:blog-2830084253401570472.post4717149516555693283..comments2024-03-28T09:22:36.967+13:00Comments on Offsetting Behaviour: Minimum wages and povertyEric Cramptonhttp://www.blogger.com/profile/15831696523324469713noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-2830084253401570472.post-86672219846210216132011-01-22T14:22:40.664+13:002011-01-22T14:22:40.664+13:00Not everyone is savvy enough to negotiate their ow...<i> Not everyone is savvy enough to negotiate their own conditions, especially the low skilled whose options for employment are limited. </i><br /><br />what do you mean by their own conditions? there will always be a lowest quintile, who must deal with the lowest conditions.<br /><br /><br /><i> If the minimum wage is increased, marginal labour saving capital equipment becomes economical, thus making the whole workforce more productive (including minimum wage earners). While there may be a short term cost of unemployment where some marginal jobs have disappeared, the overall change in productivity will lead to growth in demand for labour, which will then offset any small declines.</i><br /><br />this claim is not backed up by history. Ultimately a minimum wage leads to a reduction in the demand for labor and an increase in the supply of labor in the relevant market — usually, the market for low-skill workers. It removes the ability of some workers to compete by accepting lower wages and shuts them out of the labor force. As a result, it reduces job opportunities for these workers.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-33880582349477068172011-01-11T13:36:22.516+13:002011-01-11T13:36:22.516+13:00Doesn't that require that firms are stuck at l...Doesn't that require that firms are stuck at local optima - they could do better individually by moving to more capital-intensive processes? Or are you reckoning on some kind of network effect?<br /><br />On market power - that's possible, and especially so with monopsonistic employers. But isn't that an argument not for minimum wages but for minimum work conditions, which tend to be handled through health and safety regs anyway?Eric Cramptonhttps://www.blogger.com/profile/15831696523324469713noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-33212698368836202972011-01-11T12:42:46.419+13:002011-01-11T12:42:46.419+13:00Most discussion on the minimum wage misses some ve...Most discussion on the minimum wage misses some very important flow-on effects, as is the case here. <br /><br />If the minimum wage is increased, marginal labour saving capital equipment becomes economical, thus making the whole workforce more productive (including minimum wage earners). While there may be a short term cost of unemployment where some marginal jobs have disappeared, the overall change in productivity will lead to growth in demand for labour, which will then offset any small declines.<br /><br />Also, there is the issue of the market power of employers hiring unskilled, and typically uninformed, workers. Not everyone is savvy enough to negotiate their own conditions, especially the low skilled whose options for employment are limited.Cameron Murrayhttps://www.blogger.com/profile/08737859133901303110noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-68632248757467580582011-01-09T20:51:32.375+13:002011-01-09T20:51:32.375+13:00I will want to re-check Neumark and the metastudie...I will want to re-check Neumark and the metastudies though. This stuff seems set to be important here....Eric Cramptonhttps://www.blogger.com/profile/15831696523324469713noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-23363177237842608002011-01-09T15:59:10.770+13:002011-01-09T15:59:10.770+13:00@Anon: Eric's point is a good one. Minimum wag...@Anon: Eric's point is a good one. Minimum wages have little effect on overall employment levels, their effects get lost in the noise, but do effect certain groups, eg the low-skilled or young workers, within the labour force. Hence Neumark and Wascher write<br /><br />“Minimum wages reduce employment of low-skilled workers; adverse effects even more apparent when research focuses on those directly affected by minimum wages.”Paul Walkerhttps://www.blogger.com/profile/13731003529546075700noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-23440712716242093192011-01-08T20:53:16.937+13:002011-01-08T20:53:16.937+13:00@Anon: The metastudies are talking about overall e...@Anon: The metastudies are talking about overall employment, not employment of marginal groups, right? I can buy it on overall employment in the US: the minimum wage isn't binding on enough folks for small changes to show up in overall figures.Eric Cramptonhttps://www.blogger.com/profile/15831696523324469713noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-89567185622875412022011-01-08T14:58:40.247+13:002011-01-08T14:58:40.247+13:00Hi Paul. They reach these conclusions through thei...Hi Paul. They reach these conclusions through their (admittedly expert) reading of the evidence. No statistical analysis of the accumulated evidence is undertaken. <br /><br />Take a look at the meta-analyses that have been done on the topic. A completely different answer emerges: There is no evidence that min wage in the US has had an adverse effect on employment. <br /><br />Now, this does not mean that it doesnt have an effect in the US. Just means that it has not been established in the literature.<br /><br />Perhaps the effect is too small to be detected by available data and estimators. <br /><br />The whole min wage evidence issue seems to me to be similar to the climate change 'science'. Lots of people taking a certain position - man causes climate change, min wages cause unemployment. <br /><br />The evidence for both is rather weak.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-58400127510059739692011-01-08T14:29:53.948+13:002011-01-08T14:29:53.948+13:00"The Neumark and Wascher survey is not that i..."The Neumark and Wascher survey is not that impressive."<br /><br />Looks pretty straightforward to me.<br /><br />In chapter 9 “Summary and Conclusions” Neumark and Wascher write<br /><br /> “Three conclusions, in particular, stand out. First, as indicated in chapter 3, the literature that has emerged since the early 1990s on the employment effects of minimum wages points quite clearly – despite a few prominent outliers – to a reduction in employment opportunities for the low-skilled and directly affected workers”. (p. 286)<br /><br />Also from Table 9.1 page 287 when dealing with the effects on employment, under the ‘Summary of evidence’ heading Neumark and Wascher write<br /><br /> “Minimum wages reduce employment of low-skilled workers; adverse effects even more apparent when research focuses on those directly affected by minimum wages.”<br /><br />In short: minimum wages increase unemployment for marginal workers.Paul Walkerhttps://www.blogger.com/profile/13731003529546075700noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-16107047575691711582011-01-08T09:49:02.558+13:002011-01-08T09:49:02.558+13:00The Neumark and Wascher survey is not that impress...The Neumark and Wascher survey is not that impressive. Seems like they see what they want to see.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-39491861233757219902011-01-08T09:21:32.619+13:002011-01-08T09:21:32.619+13:00Doh! Will correct.Doh! Will correct.Eric Cramptonhttps://www.blogger.com/profile/15831696523324469713noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-16782998033974946592011-01-08T08:52:40.264+13:002011-01-08T08:52:40.264+13:00Thanks Eric. But that was posted by Stephen Gordon...Thanks Eric. But that was posted by Stephen Gordon, not me. I wouldn't want to steal his credit.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-44474221476264131542011-01-08T08:51:10.833+13:002011-01-08T08:51:10.833+13:00With respect to how results in NZ would differ: th...With respect to how results in NZ would differ: the greater the proportion of minimum wage earners who are second earners whose earnings bring their families out of poverty, the more a minimum wage increase increases poverty. The more minimum wage earners that are sole earners and whose earnings don't reach the poverty line, the more a minimum wage increase reduces poverty.Eric Cramptonhttps://www.blogger.com/profile/15831696523324469713noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-91221670361503244422011-01-08T08:48:17.569+13:002011-01-08T08:48:17.569+13:00Most US minimum wage changes are small so teasing ...Most US minimum wage changes are small so teasing out the effects can be tough. Hit Neumark and Wascher for the best survey.Eric Cramptonhttps://www.blogger.com/profile/15831696523324469713noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-68055076554671103552011-01-08T07:53:52.615+13:002011-01-08T07:53:52.615+13:00"The general consensus of the academic econom..."The general consensus of the academic economic literature is that minimum wages increase unemployment for marginal workers."<br /><br />True. However, it has been remarkably difficult to prove this proposition empirically. For the US, the accumulated evidence does not support this proposition.Anonymousnoreply@blogger.com