# Think Tank > Austrian Economics / Economic Theory >  Minimum Wage Vicious Cycle

## Xerographica

The Nobel Prize liberal economist Paul Krugman recently argued that we need more government because people tend to make poor education/career decisions.  Shortly after reading Krugman's case for bigger government, I read an article in the LA Times about how some people in the Philippines were lured to America with the false promise of high wages. 

Somewhat inspired by this very popular blog entry... A Week of Shorter Rod Drehers... I patched together some relevant snippets from Paul Krugman...

*Krugman*: The world economy is a system -- a complex web of feedback relationships -- not a simple chain of one-way effects
*Krugman*: Wages, prices, trade, and investment flows are outcomes, not givens
*Krugman*: Wages are a market price--determined by supply and demand
*Krugman*: Money still talks — indeed, thanks in part to the Roberts court, it talks louder than ever
*Krugman*: Raise minimum wages by a substantial amount
*Krugman*: 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
*Krugman*: Your decision to stay in school or go out and work will shape your lifetime career
*Krugman*: Now, the fact is that people make decisions like these badly
*Krugman*: Bad choices in education are the norm where choice is free
*Krugman*: He and his unwary readers imagine that his conclusions simply emerge from the facts, unaware that they are driven by implicit assumptions that could not survive the light of day

If you'd like the context, just click the links.  As you can see... Krugman used to be an opponent of minimum wages... but now he's a proponent. 

From my perspective, a minimum wage is a problem because it doesn't accurately communicate the demand for unskilled labor in any given area.  This increases the chances that people will make really bad career/education decisions.  Here's how I've illustrated this...



And here's another attempt...



My drawing skills aren't that great... but hopefully you should get the idea that, in this drawing, the US has more than enough people pushing brooms (unskilled labor).  In economics... "more than enough" means that there's a surplus.  Usually when there's a surplus of something the price will accurately communicate this information to the entire world.  A low price says "hey, we have more than enough!".  This important information helps people make informed decisions.  When this important information changes, people's decisions will change accordingly.  So in order for the US to have ended up with such a massive surplus of unskilled labor... something must have gone wrong with the price system.  And that something is the minimum wage.  A minimum wage says, "hey, we don't have enough unskilled labor!". 

A minimum wage creates a vicious cycle.  When wages falsely signal that the US has a shortage of unskilled labor... this increases the chances that people will make big mistakes.  Students are more likely to make the big mistake of dropping out of school and unskilled immigrants are more likely to make the big mistake of risking their lives to move here.  The logical consequence of so many people making big mistakes is an increase in poverty... which is then used to justify an increase in the minimum wage. 



So what would happen if we eliminated minimum wages?  I'm guessing that wages for unskilled labor will decrease.  And I'm sure that proponents of a minimum wage would guess the same thing.  Right?  Because if we eliminated the minimum wage... and wages didn't decrease... then there wouldn't be a need for a minimum wage. 

If proponents of a minimum wage want to guess that eliminating the minimum wage would result in a huge decrease in wages... then, assuming that they are correct, this huge decrease would reveal that there is indeed a huge surplus of unskilled labor in the US.  This would conclusively confirm the problem with lying to people about the demand for unskilled labor (aka "a minimum wage"). 

Would chaos ensue if we learned that there actually was a huge surplus of unskilled labor in the US?   Well... no.  Take China for example.  They used to have a huge surplus of cheap labor... but now they don't...




> Costs are soaring, starting in the coastal provinces where factories have historically clustered (see map). Increases in land prices, environmental and safety regulations and taxes all play a part. The biggest factor, though, is labour. - The Economist, The end of cheap China


Wages in China _really_ didn't skyrocket because of a minimum wage... they skyrocketed because of the massive demand for cheap labor...




> While corporations may look elsewhere for still cheaper labor, there are no more Chinas out there.  Other countries that establish themselves as low-wage havens will soon be overwhelmed by the inflow of capital from the United States, Europe, Japan, and now China. They cannot possibly have the same dampening effect on wages in the United States over the next three decades as did China and other developing countries in the last three decades. - Dean Baker, Living in the Short-Run: Comment on Capital in the 21st Century


In case you didn't actually dig through all those Krugman articles that I shared earlier, I'll point out that he vociferously argued against the idea that the massive increase in the global supply of cheap labor had anything to do with wages stagnating in the US.  Eventually he acknowledged that perhaps there were some issues with his "implicit assumptions".  

Let's review!  Here are two possibilities of eliminating the minimum wage here in the US...

1. Wages don't plummet.  Then there's really no point in having a minimum wage. 
2. Wages do plummet.  Then the US "will soon be overwhelmed by the inflow of capital from the United States, Europe, Japan, and now China". 

We really don't help _anybody_ by giving people bad directions.  If you truly want to help poor people... then start a business.  Give poor people a better option (builderism).  _Especially_ if you have a strong theory that some existing business is making a stupid mistake.  Put your strong theory to the test by starting a business that doesn't make the same stupid mistake.  Maybe you want to argue that starting a business is too difficult?  Well there you go.  You've successfully identified a huge problem.  It's a huge problem when it's too difficult to give poor people better options.  Please figure out how to make it easier for somebody as intelligent as yourself to start a business.  And if you can't figure it out... then please have some respect for anybody who does manage to successfully start and run a business that employs/serves *any* amount of people.

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## Zippyjuan

> From my perspective, a minimum wage is a problem because it doesn't accurately communicate the demand for unskilled labor in any given area. *This increases the chances that people will make really bad career/education decisions*.


Did you make your career decision based on what the minimum wage was?  Did you decide not to go to school so you could have a minimum wage job?  Do you know of others who have? 

(note that about two percent of all workers receive the Federal Minimum wage)

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## Spikender

> Did you make your career decision based on what the minimum wage was?  Did you decide not to go to school so you could have a minimum wage job?  Do you know of others who have? 
> 
> (note that about two percent of all workers receive the Federal Minimum wage)


The unavailability of unskilled jobs in an area might cause someone to seek higher education that doesn't have the will for it. Happens all the time. If the minimum wage helped cause this shortage, then clearly there is an issue.

Also, how many workers receive just barely over the minimum wage? What does your point about the amount of people on minimum wage even mean? What relevancy does it hold?

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## oyarde

> Did you make your career decision based on what the minimum wage was?  Did you decide not to go to school so you could have a minimum wage job?  Do you know of others who have? 
> 
> (note that about two percent of all workers receive the Federal Minimum wage)


And that two percent should be kids living with parents for the most part .

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## PRB

> Did you make your career decision based on what the minimum wage was?  Did you decide not to go to school so you could have a minimum wage job?  Do you know of others who have? 
> 
> (note that about two percent of all workers receive the Federal Minimum wage)


plenty of people made the decision to take loans based on govenrment propaganda that any education is worth the debt.

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## Zippyjuan

So if we had lower wages, fewer people would want an education.

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## erowe1

> Did you make your career decision based on what the minimum wage was?  Did you decide not to go to school so you could have a minimum wage job?  Do you know of others who have? 
> 
> (note that about two percent of all workers receive the Federal Minimum wage)


I don't see the connection between your questions and what you quoted and bolded.

Do you dispute what he said?

The biggest effect of the minimum wage isn't just in the number of people who work for that wage, it's in the much larger group of people who aren't working at all because the MW makes it illegal for them to sell their labor at a low enough price for others to want to purchase it.

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## Zippyjuan

If just two percent of all jobs pay the Federal Minimum Wage, changing that minimum (unless it was raised significantly) will not have much impact on the total number of jobs available.

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## PRB

> So if we had lower wages, fewer people would want an education.


Why? Doesn't $#@! wages motivate getting a degree? Oh wait, are you telling me people are smart enough to know they can't pay back their debt and see through the lies that any education is better than none or all education will lead to higher pay?

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## PRB

> If just two percent of all jobs pay the Federal Minimum Wage, changing that minimum (unless it was raised significantly) will not have much impact on the total number of jobs available.


you assume raising minimum wage won't affect people who are currently paid more than MW.

Example, if MW is $7 now. And there are people paid $8, $10, $12, $15.

If liberals get their way and magically made MW $15, what do we do to people who are making $8, 10, 12, 15? Keep paying them $15? Does that mean people will jump to work those $7 jobs today because it's "easier" work for the same pay? 

What if we paid everybody more, $7 guy gets $15, $15 guy gets $23. How would that NOT affect employment?

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## angelatc

> Did you make your career decision based on what the minimum wage was?  Did you decide not to go to school so you could have a minimum wage job?  Do you know of others who have? 
> 
> (note that about two percent of all workers receive the Federal Minimum wage)


You are perhaps ignoring the unemployed in the equation?

 Price ceilings create shortages, and price floors create surpluses.  A minimum wage creates a surplus of unskilled labor.
.

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## Weston White

I think these theories on wages really only apply in an agrarian society, being that the non-agrarian are afforded no options other than to work for their own competency, regardless of what their level of wages arerealizing only that the lower their wages the longer they must work each day and the more jobs they will beholden to.  Of course social justice programs effects the equation of this as well.

These theories do not really consider the modern practice of exporting manufacturing and assembly occupations or telemarketing and Internet tech to low wage competing nations, or the rise of machine automation, only the local point-of-sale service and processing industries.

The notion that Americans are not working because their pay is too low, instead favoring immigration so that they may instead sit at home in protest is baseless.

This is why China is has been increasing its wages, which were extremely low, and in comparison to the United States still is (i.e., $4,755 annual average)China is forcing its farmer dwelling peasants to become urban factory grunts: Chinas Great Uprooting: Moving 250 Million Into Cities

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## erowe1

> If just two percent of all jobs pay the Federal Minimum Wage, changing that minimum (unless it was raised significantly) will not have much impact on the total number of jobs available.


I don't see how that follows. Even if that 2% were the only people it affected, is that not a lot?

And I still can't tell what your point is.

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## heavenlyboy34

> I don't see how that follows. Even if that 2% were the only people it affected, is that not a lot?
> 
> And I still can't tell what your point is.


I can tell you this much-I'm beginning to question zip's claims of having a degree in economics...

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## Zippyjuan

We can look at recent examples.  In 2006, the minimum wage was $5.15 an hour. http://money.cnn.com/interactive/eco...ge-since-1938/
By 2008, that was raised in steps to $6.55 an hour. 

In 2006, there were 133 million jobs in the country.  https://research.stlouisfed.org/fred2/series/PAYEMS

In 2008, there were 138 million jobs. (But then the effects of the recession hit). 

Today there are 141 million jobs and the Federal minimum wage is $7.25. 

Did the number of jobs go down after the minimum wage was raised?

1995- 1997, Federal Minimum wage was raised from $4.25 to $5.25.  People employed went from 116 million in 1995 to 131 million by 2000 (allowing time for the wage changes to take effect). 

1989- 1991, Federal Minimum Wage raised from $3.35 an hour to $4.25 an hour.  Employed people went from 107 million to 112 million by 1993.

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## erowe1

> We can look at recent examples.  In 2006, the minimum wage was $5.15 an hour. http://money.cnn.com/interactive/eco...ge-since-1938/
> By 2008, that was raised in steps to $6.55 an hour. 
> 
> In 2006, there were 133 million jobs in the country.  https://research.stlouisfed.org/fred2/series/PAYEMS
> 
> In 2008, there were 138 million jobs. (But then the effects of the recession hit). 
> 
> Today there are 141 million jobs and the Federal minimum wage is $7.25. 
> 
> Did the number of jobs go down after the minimum wage was raised?


That's hard to tell from your post, since you didn't give numbers that correlate with MW increases. Just from those numbers we can see that with the lower MW, the number of jobs went up by 5 million in 3 years. And after it was raised, that number only went up 3 million in 7 years. So all else being equal, the MW looks like it was harmful for the economy. And conspicuously you say as an aside, as though it has nothing to do with the topic, "(But then the effects of the recession hit)."

The recession isn't a cause. Raising the MW is a cause. Recession is an effect.

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## Zippyjuan

> The recession isn't a cause. *Raising the MW is a cause. Recession is an effect.*


Are you claiming that the economic crisis (resulting from the bursting housing bubble and bad lending practices) was actually caused by increasing the minimum wage?  

Note that I also updated to provide more data on previous minimum wage increases.

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## Xerographica

> Are you claiming that the economic crisis (resulting from the bursting housing bubble and bad lending practices) was actually caused by increasing the minimum wage?


If the minimum wage isn't a problem then neither are free-riders...

Let's try and visualize things...



Is this a better market?  Gabe (the gay) is paying Alex (the atheist) for a cake.  Isaac, who's wondering what to do with his life, is observing this exchange take place.  Because neither Alex nor Isaac are omniscient... they can't see how much Gabe values the cake.  All they can see is how much he pays for the cake.  Only Gabe knows that he values the cake a lot more than he's paying for it.

By sharing the wrong information, Gabe increases the chances that Isaac will do the wrong thing (not supply cakes).  Garbage in, Garbage out.



Is this a better market?  In this scenario Gabe is paying a lot more than he values the cake.  Gabe is lying again.  This increases the chances that Issac will do the wrong thing (supply cakes).  Garbage in, Garbage out.

X < Y = free-rider problem
X > Y = forced-rider problem 

A minimum wage is an example of the forced-rider problem.

Let's think about water.  Is Isaac always going to value water equally?



In the Sahara... Isaac is suffering from a severe shortage of water (dehydration).  In Niagara... Isaac is suffering from a severe surplus of water (drowning).  Therefore, he values water very differently in these two very different circumstances...

Y1 > Y2

Whether it's water, cake, labor, a Netflix show or national defense... what we pay should accurately communicate our valuations.  This increases the chances that other people will do the right things.  Otherwise, we all end up with more of what we want less and less of what we want more.

Accurate information = treasure in, treasure out
Inaccurate information = garbage in, garbage out

Coincidentally, Alex Tabarrok recently shared some relevant thoughts in his review (Is Capitalism Making Us Stupid?) of Joseph Heath's new book _Enlightenment 2.0_...




> Advertising may sometimes trick us into buying products that dont serve our interests, but the more we are tricked the greater the incentive to become informed. In the market, we can act on information to improve our purchasing decisions. In politics, it doesnt pay to be informed because as individuals we have nearly zero power to improve collective decisions. In the market, information is power. In politics, information is impotent.


Also...




> Heaths conservatism makes him unwilling to suggest radical ideas. But big problems often need radical solutions. Voting, for example, reduces the cost of ignorance and irrationality. Raise the cost and people become more informed and rational. When pollsters ask Democrats and Republicans factual questions such as did inflation fall during Reagans presidency or were weapons of mass destruction found in Iraq, they answer in a highly partisan manner. But partisan bias greatly diminishes when voters are told that they will be paid if they answer correctly. Betting is a more reliable guarantor of objectivity than voting. Or, as I once wrote, A bet is a tax on bull$#@!.

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## erowe1

> Are you claiming that the economic crisis (resulting from the bursting housing bubble and bad lending practices) was actually caused by increasing the minimum wage?


Of course raising the minimum wage had a negative effect on the economy and had to be a factor in causing and worsening the recession.

And what is it you're trying to claim? You point out that it's actually true that the raising of the minimum wage did precede a major recession, and somehow that counts as evidence that raising the minimum wage is not bad for the economy because you point to some other cause for the recession?

So where is your evidence that raising the minimum wage is not bad for the economy?

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## PRB

> I don't see how that follows. Even if that 2% were the only people it affected, is that not a lot?
> 
> And I still can't tell what your point is.


his point is that there's only 2% directly affect, if that were true, I'd say it's not a lot, not at all. But the reality is, it's not just the people paid only min wage that are affected, it's people who are MW now, and people paid between $1-5 if not $1-10 more that will also be affected. 

If somebody makes MW+$5 today, and MW is raised by $5, are we going to pay him the same? Or a few bucks more?

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## PRB

> Of course raising the minimum wage had a negative effect on the economy and had to be a factor in causing and worsening the recession.


When was the last time it was raised prior to the recent ones in 2013/14? 2006? 2001?

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## angelatc

> We can look at recent examples.  In 2006, the minimum wage was $5.15 an hour. http://money.cnn.com/interactive/eco...ge-since-1938/
> By 2008, that was raised in steps to $6.55 an hour. .


Wait - what? Hold right there.

 2008 was one of the worst economic periods most of us have had the absolute displeasure to live through.  Of course the rise in the minimum wage didn't single-handedly pop the housing bubble, but simple logic seems to indicate that it is indeed probable that *artificially inflated wages* were some of the culprits in the run up of *artificially inflated housing prices.*

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## Paul Or Nothing II

> 1995- 1997, Federal Minimum wage was raised from $4.25 to $5.25.  People employed went from 116 million in 1995 to 131 million by 2000 (allowing time for the wage changes to take effect).


Is it really that hard to understand that if there's no MW then the people employed in 1995 would have been 116 million + workers whose potential wages are below $4.25; similarly, in 1997, it would have been 131 million + workers whose potential wage is below $5.25? Really, it's not that hard to understand!

I don't know why you can't grasp the basic fact that the moment MW is raised, at least some of people whose wages lie in between $4.25 to $5.25 could IMMEDIATELY be facing a lay off because their labor isn't worth the price; not to mention, newer workers whose potential wage is below $5.25 can't enter the workforce. Moreover, as I've already pointed EVERYONE whose labor is worth less that MW is kept out of the workforce. That's a loss of productivity for the economy, plus, these people will add to the unproductive consumers in the economy with all the socialist programs out there!

I know you'd now go back to your usual defense that people kept out of workforce due to MW are only a small fraction of the workforce (I disagree but let's presume it is an insignificant numbers of people) but why should even ONE PERSON's right to work, his right to be self-sufficient & productive member of the society be taken away? It's still injustice to treat even one person unjustly, & here we're probably talking about millions. Why should even one person be treated unjustly just so that the liberals can feel better about themselves?

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## PRB

> Wait - what? Hold right there.
> 
>  2008 was one of the worst economic periods most of us have had the absolute displeasure to live through.  Of course the rise in the minimum wage didn't single-handedly pop the housing bubble, but simple logic seems to indicate that it is indeed probable that *artificially inflated wages* were some of the culprits in the run up of *artificially inflated housing prices.*


Don't you think the artificially loose mortgage rules were the main and primary culprit? I mean, let's say artificial wages were inflated, and it hasn't gone down at all (ok, maybe, if you count unemployed people as making zero and took an average), wages gone up, but loans were not made easier, would there have been a bubble? Would the bubble only be caused by sudden unemployment and slowly reinflated by people who had jobs? After all, if it wasn't for out of control loans, what else would promote quick inflate, quick pop, quick deflate?

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## Lord Xar

I was under the impression that many union contracts have the aside that a union workers wage is tied to minimum wage in that if the minimum wage goes up, so does their pay. So, it is rather dishonest to say "well, only 2% of workers work for minimum wage...and that is all that is affected..". Others have brought up the point that if Jim is working $15/hr painting houses as a skilled laborer, and minimum wage is raised to $15 (or whatever) - how is his skill quantified now. Is he now gonna make equal to min. wage? No.

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## Zippyjuan

> When was the last time it was raised prior to the recent ones in 2013/14? 2006? 2001?


1997 was the last raise prior to 2006. From my earlier post: 




> 1995- 1997, Federal Minimum wage was raised from $4.25 to $5.25. People employed went from 116 million in 1995 to 131 million by 2000 (allowing time for the wage changes to take effect). 
> 
> 1989- 1991, Federal Minimum Wage raised from $3.35 an hour to $4.25 an hour. Employed people went from 107 million to 112 million by 1993.


There was not a decline in employment following those increases.

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## PRB

> 1997 was the last raise prior to 2006. From my earlier post: 
> 
> 
> 
> There was not a decline in employment following those increases.


at least not immediately.

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## erowe1

> There was not a decline in employment following those increases.


There was a decline relative to what would have happened without those MW increases.

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## NorthCarolinaLiberty

> There was not a decline in employment following those increases.



So are you for or against minimum wage?  I figure that a progressive like you would be for it, but please clarify.

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## Zippyjuan

> There was a decline relative to what would have happened without those MW increases.


Was there? Evidence to support the theory?

Yes, some employers were hit with higher labor costs.  But how did they respond to those costs?  Did they pass the costs along in the form of higher prices?  Did they lower their own profit margins?  Did they reduce the hours worked by current employees or did they fire employees?  

On the other hand, now those people who had minimum wage jobs have more money to spend on things and that helps to create more jobs.  Do they offset the ones reduced by higher labor costs?  

Between 1995 and 1997, the Federal Minimum wage rose one dollar per hour.  Chart of what happened to jobs:



http://www.massbudget.org/report_win..._creation.html

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## Zippyjuan

> at least not immediately.


I included jobs for several years after the increase went into effect. There was no decline. You can check my links above.

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## erowe1

> I included jobs for several years after the increase went into effect. There was no decline. You can check my links above.


When there is a decline, you say that it was from some other factor.

When there is not a decline, you disregard other factors.

It's not possible in real-life examples to separate out the effect of the minimum wage from all the other things that affect the economy. But we know for sure, as a mathematical certainty that is proven beyond any shadow of a doubt that raising the minimum wage costs jobs.

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## PRB

> When there is a decline, you say that it was from some other factor.
> 
> When there is not a decline, you disregard other factors.
> 
> It's not possible in real-life examples to separate out the effect of the minimum wage from all the other things that affect the economy. But we know for sure, as a mathematical certainty that is proven beyond any shadow of a doubt that raising the minimum wage costs jobs.


I'm willing to concede that if the raise is only a nickel or a dime, the effect is hard to notice. But you gotta be kidding if you think a raise for $5 to $15 as liberals are demanding will have no effect on employment.

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## Zippyjuan

> When there is a decline, you say that it was from some other factor.
> 
> When there is not a decline, you disregard other factors.
> 
> It's not possible in real-life examples to separate out the effect of the minimum wage from all the other things that affect the economy. But we know for sure, as a mathematical certainty that is proven beyond any shadow of a doubt that raising the minimum wage costs jobs.


Well, if there is mathematical certainty (which I am sure you can share with us)....




> It's not possible in real-life examples to separate out the effect of the minimum wage from all the other things that affect the economy


Real life is what matters.  Yes, there are other things which effect the economy and since raising minimum wage in the past has not led to job losses, then the minimum wage effect must not be very large on the overall economy. 

Sticking with the year chosen earlier of 1995, there were 125 million people employed. http://www.dlt.ri.gov/lmi/laus/us/usadj.htm  If two percent were paid the Federal Minimum wage, that means that applied to 2.5 million of them. Many minimum wage jobs are part time but some may be full time.  I will figure an even 30 hours a week worked on average for them.  Adding one dollar an hour costs $30 a week to an employer.  Is that a lot of money?  That will depend on his margins.  Let's figure 50 weeks a year (two weeks off also to keep numbers simple). $30 a week is $1,500 a year more (before taxes). 

So what is the impact on the overall economy? GDP in 1995 was $7.7 trillion (about half what it is today) and 2.5 million minimum wage workers times $1500 a year is $3.75 billion (which is now a bigger number) comes out to 0.05% of GDP.

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## Zippyjuan

> I'm willing to concede that if the raise is only a nickel or a dime, the effect is hard to notice. But you gotta be kidding if you think a raise for $5 to $15 as liberals are demanding will have no effect on employment.


You are right- the larger the increase, the bigger the impact.  I have not heard calls for raising the minimum wage by $15 an hour though.

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## erowe1

> Well, if there is mathematical certainty (which I am sure you can share with us)....


Sure.






> Real life is what matters.  Yes, there are other things which effect the economy and since raising minimum wage in the past has not led to job losses, then the minimum wage effect must not be very large on the overall economy.


There has never been an instance where raising the minimum wage didn't result in job losses compared to what the employment level would have been if the minimum wage weren't raised.

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## Zippyjuan

It depends on elasticity- the slope of the lines for demand for labor and supply of labor. If demand is inelastic, changes in prices (for labor or anything else) do not lead to changes in demand.  If elasticity is high, then small changes in price can lead to large changes in demand.  




> There has *never* been an instance where raising the minimum wage didn't result in job losses* compared to what the employment level would have been if the minimum wage weren't raised.*


which is impossible to measure.  Remember also that while higher labor costs may mean fewer jobs offered by some employers, the higher wages people get also leads to more spending on goods meaning higher demand and need for more labor to produce those additional goods. Or if an employer is able to pass along the higher labor costs to his customers, he may not decrease his workforce (in total hours or total numbers of workers).   There is no absolute "this will lead to fewer jobs".

A ten percent hike in the minimum wage does not lead to an automatic ten percent decline in minimum wage jobs. As you said earlier, once you move to the real economy and out of the classroom, there are many other factors also at work.

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## PRB

> You are right- the larger the increase, the bigger the impact.  I have not heard calls for raising the minimum wage by $15 an hour though.


Not "by" but "to". http://fightfor15.org/april15/

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## Zippyjuan

> Not "by" but "to". http://fightfor15.org/april15/


Ah. 




> But you gotta be kidding if you think a raise for $5 *to* $15 as liberals are demanding will have no effect on employment.


Thought you meant increases of $5 an hour up to a $15 an hour increase.  Sorry. (Fed minimum wage is only $7.25 currently so I assumed an increase of those amounts since raising it $5 would not get it to $15).

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## paleocon1

We can get rid of the minimum wage once the Border is sealed and the rent seeking 14th amendment corporate person is abolished. Good idea also to eliminate rent seeking law/regulation in the professions- especially medicine and law.

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## PRB

> We can get rid of the minimum wage once the Border is sealed and the rent seeking 14th amendment corporate person is abolished. Good idea also to eliminate rent seeking law/regulation in the professions- especially medicine and law.


in other words, we can have less government after we have more government?

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## NorthCarolinaLiberty

> in other words, we can have less government after we have more government?


More like _your_ words rather than _other_ words, at least with the border (I don't know what he means elsewhere).  The border guards are not actually on the border.  They are at internal roadblocks up to 100 miles inside the border.  I have documented on this forum how roadblocks are ineffective.  I documented how Richard Stana of the DHS said the goal is to secure 30% of illegal activity at the border, leaving 70% unsecured.

So, your more government is actually people getting their head out of their ass and doing some real work.  That would amount to less government.

I don't even care about this issue, but anyway, you're a fake libertarian on this site just trying to troll.  Your love of big government is also well documented.  If any new members want more detail, then just let me know.  PRB's posting speaks for itself, but there are other gems he's posted.

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## PRB

> More like _your_ words rather than _other_ words, at least with the border (I don't know what he means elsewhere).  The border guards are not actually on the border.  They are at internal roadblocks up to 100 miles inside the border.  I have documented on this forum how roadblocks are ineffective.  I documented how Richard Stana of the DHS said the goal is to secure 30% of illegal activity at the border, leaving 70% unsecured.
> 
> So, your more government is actually people getting their head out of their ass and doing some real work.  That would amount to less government.
> 
> I don't even care about this issue, but anyway, you're a fake libertarian on this site just trying to troll.  Your love of big government is also well documented.  If any new members want more detail, then just let me know.  PRB's posting speaks for itself, but there are other gems he's posted.


On what basis do you conclude i am a fake libertarian? Just because I won't tell you about muh gunz?

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## NorthCarolinaLiberty

If anybody is interested in PRB's misdeeds, then just let me know.  He and I have discussed this at length, so I am only addressing other members here.  Thanks.

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## PRB

> If anybody is interested in PRB's misdeeds, then just let me know.  He and I have discussed this at length, so I am only addressing other members here.  Thanks.


In other words, you won't answer my questions, because you can't. You can only fool people (most likely in private) where I can't respond and hope that people will buy your lies. 

I ask you time and time again to provide evidence, the best you can do is accuse me of lying because I didn't tell you about muh gunz. I asked you to prove I am a liberal, Democrat, Jew, paid shill, fake libertarian, and the best evidence you can cook up are

1. I didn't tell you about muh gunz
2. I said in a conversation that I belittle people (not always, not everybody)
3. I admit that sometimes I troll

I didn't ask you about my "misdeeds" I asked you what basis you have for calling me a fake libertarian and other names you are so fond of.

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## NorthCarolinaLiberty

> You can only fool people (most likely in private) where I can't respond and hope that people will buy your lies.



If anyone is interested, then please feel welcome to post right on this forum.  Thank you.

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## Paul Or Nothing II

> If anyone is interested, then please feel welcome to post right on this forum.  Thank you.


Ok, let me volunteer (since I do have an affinity for voluntaryism )

Libertarianism, like any label out there isn't always easy to pin down since there are even socialists like Chomsky who call themselves Libertarian(-socialist) but nonetheless, since I've seen PRB sneak in liberal agenda into the discussion on more than one occasion (although I'll also concede that I've seen him defend "libertarian" positions a couple of times as well), I'm curious to know what other generally "anti-freedom" ideas he espouses.

Honestly, I don't know if he's an anti-liberty troll or not but I think if a person has defended a view on one occasion & opposed the same view on another occasion, within a fairly short space of time, then I think it's highly likely that such an individual isn't genuine & could very likely be a troll.

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## PRB

> Ok, let me volunteer (since I do have an affinity for voluntaryism )
> 
> Libertarianism, like any label out there isn't always easy to pin down since there are even socialists like Chomsky who call themselves Libertarian(-socialist) but nonetheless, since I've seen PRB sneak in liberal agenda into the discussion on more than one occasion


DO quote which occasion. Please, thanks. 




> (although I'll also concede that I've seen him defend "libertarian" positions a couple of times as well), I'm curious to know what other generally "anti-freedom" ideas he espouses.
> 
> Honestly, I don't know if he's an anti-liberty troll or not but I think if a person has defended a view on one occasion & opposed the same view on another occasion, within a fairly short space of time, then I think it's highly likely that such an individual isn't genuine & could very likely be a troll.


What's a good example, you're not a liar or child molester like NorthCarolinaLiberty, so I expect you to know the answer.

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## Paul Or Nothing II

> DO quote which occasion. Please, thanks. 
> 
> What's a good example, you're not a liar or child molester like NorthCarolinaLiberty, so I expect you to know the answer.


I didn't even call you a troll & you're getting all wound up......Nonetheless, I'm not inclined towards petty fights.

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## NorthCarolinaLiberty

> (although I'll also concede that I've seen him defend "libertarian" positions a couple of times as well)...,



I've never seen him defend a liberty position.  Never.

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## PRB

> I didn't even call you a troll & you're getting all wound up......Nonetheless, I'm not inclined towards petty fights.


I apologize, I read that to say you were accusing me of "if a person has defended a view on one occasion & opposed the same view on another occasion, within a fairly short space of time, then I think it's highly likely that such an individual isn't genuine & could very likely be a troll."

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## PRB

> I've never seen him defend a liberty position.  Never.


That must explain why you keep calling me a "pretender" or "faker" since I never appeared to defend a liberty position???

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## NorthCarolinaLiberty

> The Nobel Prize liberal economist Paul Krugman recently argued that we need more government because people tend to make poor education/career decisions.  Shortly after reading Krugman's case for bigger government, I read an article in the LA Times about how some people in the Philippines were lured to America with the false promise of high wages. 
> 
> Somewhat inspired by this very popular blog entry... A Week of Shorter Rod Drehers... I patched together some relevant snippets from Paul Krugman...
> 
> *Krugman*: The world economy is a system -- a complex web of feedback relationships -- not a simple chain of one-way effects
> *Krugman*: Wages, prices, trade, and investment flows are outcomes, not givens
> *Krugman*: Wages are a market price--determined by supply and demand
> *Krugman*: Money still talks  indeed, thanks in part to the Roberts court, it talks louder than ever
> *Krugman*: Raise minimum wages by a substantial amount
> ...



So anyway, back to the thread and the people who are here to legitimately discuss it.  Plus rep to the OP.  I like the simplicity of the circular drawing and other diagrams.

If there are any other legit or non-lying people who'd like to discuss, then I'd like to hear.  I even welcome opposing viewpoints, as long as they're genuine.

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## Slutter McGee

> Did you make your career decision based on what the minimum wage was?  Did you decide not to go to school so you could have a minimum wage job?  Do you know of others who have? 
> 
> (note that about two percent of all workers receive the Federal Minimum wage)


This is actually been a proven fact. I can point you to several well known academic studies that demonstrate this. Granted the effect is on the margins for a just binding minimum wage (small increase) rather than a strictly binding in which these effects become more pronounced.

Still the results have been statistically significant.

Slutter McGee

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## Slutter McGee

> If just two percent of all jobs pay the Federal Minimum Wage, changing that minimum (unless it was raised significantly) will not have much impact on the total number of jobs available.


You are right. Change in Employment = Change in Hiring Rate - Change in Separation Rate. With increases in the MW the separation rate drops along with the hiring rate, so on the aggregate there is usually only a small decrease in employment...some studies say not at all. But there are still negative effects. Job creation rate does drop, Businesses substitute away from teenage labor, but not to adult labor...rather to teenage labor with a lower marginal utility of a dollar and a higher marginal product. In other words they substitute away from poor kids to middle class kids who are better educated.

It also hurts small businesses with lower turnover far more. High turnover business can decrease the marginal expense of hiring new workers as turnover slows and actually increase employment. 

I realize that all these effects are on the margins. On the aggregate you are right about a small increase. But you still can't ignore that they are real effects.

Slutter McGee

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## Slutter McGee

> What if we paid everybody more, $7 guy gets $15, $15 guy gets $23. How would that NOT affect employment?


I agree with what you said before about increases in MW affecting others above MW. But this situation might actually not affect employment. Across the board increase in wages is going to affect prices the same way. You are talking about a situation where Keynesian theory would probably hold true.

Sorry, to keep posting one after another. I am late to this, and just going down the thread responding to what I see. Far easier than trying to combine a bunch of posts.

Slutter McGee

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## Slutter McGee

> You are perhaps ignoring the unemployed in the equation?
> 
>  Price ceilings create shortages, and price floors create surpluses.  A minimum wage creates a surplus of unskilled labor.
> .


Pretty much what everyone thought until the mid 90's. Even after factoring in the fact that Employment is relatively inelastic. Most estimates are around .125 but I have seen them go as high as .3. So you are looking at a 1 to 3% decrease in employment for every 10% increase if that holds true. The classical model doesn't really show this when modeled.

Basically you are completely correct for large increase in the MW, but it simply doesn't hold true for small increases.

Slutter McGee

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## Slutter McGee

> Sure.
> 
> 
> 
> 
> 
> There has never been an instance where raising the minimum wage didn't result in job losses compared to what the employment level would have been if the minimum wage weren't raised.


Sorry Erowe, I hate to agree with Zippy, but he is right on this. That classical model hasn't held true when actual research is shown....but only for small increases. There are still negative effects though.

Slutter McGee

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## PRB

> I agree with what you said before about increases in MW affecting others above MW. But this situation might actually not affect employment.


Everybody being paid more won't affect employment??




> Across the board increase in wages is going to affect prices the same way. You are talking about a situation where Keynesian theory would probably hold true.


Keynesian or not, across the board increases WILL affect prices AND employment, I don't know what you're disagreeing about.

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## Slutter McGee

> Everybody being paid more won't affect employment??
> 
> 
> 
> Keynesian or not, across the board increases WILL affect prices AND employment, I don't know what you're disagreeing about.


Prices sure, but you are talking about a 1 time increase in the money supply dolled out to EVERYONE equally. Not going to really effect employment. Inflation and wages adjust in the long run. 

Of course there is going to be negative effects, but in your scenario Prices are not going to be sticky. You are not looking at a huge decrease in employment. Now just increasing the Minimum Wage way up...sure. absolutely you are right. But not with accross the board increases in wages.

Slutter McGee

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## TommyJeff

This post has such great information. Thanks to all

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## PRB

> Prices sure, but you are talking about a 1 time increase in the money supply dolled out to EVERYONE equally. Not going to really effect employment. Inflation and wages adjust in the long run. 
> 
> Of course there is going to be negative effects, but in your scenario Prices are not going to be sticky. You are not looking at a huge decrease in employment. Now just increasing the Minimum Wage way up...sure. absolutely you are right. But not with accross the board increases in wages.
> 
> Slutter McGee


how many dollars is "way up" vs "tolerable"?

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## Warrior_of_Freedom

Ok so the US has a surplus of unskilled labor. Wouldn't that be directly related to the mass immigration of people with unskilled labor entering the United States? Hence, taking jobs. That's why even if the minimum wage is removed, it will do nothing to increase the quality of life for everybody because for anyone who will not mop vomit off the floor for 3 dollars an hour, a desperate immigrant will do it. 

When the country doesn't have the infrastructure to support so many more people immigrating to it, all it can do is bring everyone else down with it.

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## PRB

> Ok so the US has a surplus of unskilled labor. Wouldn't that be directly related to the mass immigration of people with unskilled labor entering the United States? Hence, taking jobs. That's why even if the minimum wage is removed, it will do nothing to increase the quality of life for everybody because for anyone who will not mop vomit off the floor for 3 dollars an hour, a desperate immigrant will do it. 
> 
> When the country doesn't have the infrastructure to support so many more people immigrating to it, all it can do is bring everyone else down with it.


which would in turn make the country less appealing to newcomers.

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## Slutter McGee

> how many dollars is "way up" vs "tolerable"?


If I had the answer to that I might win a Nobel. Nobody knows exactly where that line is to make the distinction between just binding and strictly binding. Small increases simply don't lead to less employment. The studies show this.

Slutter McGee

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