> One of the biggest arguments against it is that raises unemployment by making more people unemployable.
This is a classic a priori economic argument, and the data do not support it. Here are some studies on the effects of minimum wage increases.
"The Florida Minimum Wage After One Year" Summary: none of the dire predictions of job losses came true, the Florida economy continued to lead the country in job growth, and the unemployment rate continued to decline steadily, while economic growth accelerated.
"Step up, not out: The case for raising the federal minimum wage for workers in every state" Summary: critics argue that, faced with rising labor costs, employers are forced to lay off workers. This claim has been carefully studied by labor economists who have found little evidence that minimum wage increases lead to significant job losses. In fact, the research unequivocally shows that the benefits to low-wage workers and their families far outweigh the costs.
"National Minimum Wage: Low Pay Commission Report 2005." Summary: The National Minimum Wage was introduced on 1 April 1999, with an adult rate of £3.60. Its introduction benefited about one million low-paid workers and had no measurable adverse effects on employment or inflation.
I recommend Alan Manning's "Monopsony in Motion", which subjects the standard economic assumptions about perfect competition to some rigorous empirical testing.
The market for labour is an imperfect market that does not behave in a simplistic manner:
* Markets for labour are relatively inflexible - it's difficult and time-consuming to look for a different job, so it's hard for employees to 'vote with their feet' by seeking employment elsewhere - especially those employees making the least money and having to work the longest hours to make ends meet.
* Because there are relatively few employers compared to a great many employees, employers have market power - they can force wages below a pure market rate because employees have limited options for alternate employment and limited opportunities to seek out those options.
* Higher wages mean lower turnover and hence lower hiring and training costs for employers, which offset the allocative distortion of paying higher than a market rate.
* At the same time, higher wages motivate employees to work harder, which raises productivity and can also help to offset the higher cost of labour.
* When already-wealthy people make more money, they tend to invest it, but when poor people make more money, they tend to spend it. As a result, a policy that increases income to the poor has a bigger impact on GDP than a policy that increases income to the rich.
* When low-income workers make more money, they depend less on government subsidies, which alleviates pressure on public expenditure.
You deserve a pat on the back for digging up research instead of simply spewing opinions like most other HN comments. Bravo. This is the gateway to reasoned argument. (Although, I notice, I am the only one replying to you.)
People pretend that their feelings about minimum wage are facts, far too often, and that kind of self-ignorant argumentation hurts everyone.
Thank you. In the interest of disclosure, I already had those references on hand, having done the research for a previous debate on a minimum wage (not on HN).
Meh, I looked through some of the links. The first one didn't resolve and no one said ANYTHING. That tells me no one looked through these links, they just upvoted the "spaghetti on the wall pile of links post".
The second link was more of an opinion piece from a progressive pro-minimum wage site.
The third one was from EPI, which has on its front page how the Sequestration cuts are dire financial problems for the country. Jeez, did someone take Jay Carney's podium notes and reprint them as actual pieces of credible journalism?
I gave up after that. A spam of useless links does not scholarship make.
This is a classic a priori economic argument, and the data do not support it. Here are some studies on the effects of minimum wage increases.
"The Florida Minimum Wage After One Year" Summary: none of the dire predictions of job losses came true, the Florida economy continued to lead the country in job growth, and the unemployment rate continued to decline steadily, while economic growth accelerated.
http://www.risep-fiu.org/reports/Florida_Minimum_Wage_Report...
"The Economics of the Minimum Wage" Summary: minimum wage increases have little or no impact on employment rates.
http://www.progressive-economics.ca/2007/01/27/the-economics...
"Step up, not out: The case for raising the federal minimum wage for workers in every state" Summary: critics argue that, faced with rising labor costs, employers are forced to lay off workers. This claim has been carefully studied by labor economists who have found little evidence that minimum wage increases lead to significant job losses. In fact, the research unequivocally shows that the benefits to low-wage workers and their families far outweigh the costs.
http://www.epi.org/content.cfm/issuebriefs_ib149
"Myth and Measurement: The New Economics of the Minimum Wage" Summary: recent increases in the minimum wage had no adverse effect on employment.
http://www.amazon.ca/Myth-Measurement-Economics-Minimum-Wage...
"States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth", Fiscal Policy Institute, 2004.
http://www.fiscalpolicy.org/FPISmallBusinessMinWage.pdf
"National Minimum Wage: Low Pay Commission Report 2005." Summary: The National Minimum Wage was introduced on 1 April 1999, with an adult rate of £3.60. Its introduction benefited about one million low-paid workers and had no measurable adverse effects on employment or inflation.
http://www.lowpay.gov.uk/lowpay/report/pdf/DTi-Min_Wage.pdf
I recommend Alan Manning's "Monopsony in Motion", which subjects the standard economic assumptions about perfect competition to some rigorous empirical testing.
http://press.princeton.edu/titles/7522.html
The market for labour is an imperfect market that does not behave in a simplistic manner:
* Markets for labour are relatively inflexible - it's difficult and time-consuming to look for a different job, so it's hard for employees to 'vote with their feet' by seeking employment elsewhere - especially those employees making the least money and having to work the longest hours to make ends meet.
* Because there are relatively few employers compared to a great many employees, employers have market power - they can force wages below a pure market rate because employees have limited options for alternate employment and limited opportunities to seek out those options.
* Higher wages mean lower turnover and hence lower hiring and training costs for employers, which offset the allocative distortion of paying higher than a market rate.
* At the same time, higher wages motivate employees to work harder, which raises productivity and can also help to offset the higher cost of labour.
* When already-wealthy people make more money, they tend to invest it, but when poor people make more money, they tend to spend it. As a result, a policy that increases income to the poor has a bigger impact on GDP than a policy that increases income to the rich.
* When low-income workers make more money, they depend less on government subsidies, which alleviates pressure on public expenditure.