[lend000]

Exactly -- economics is a science. I don't pretend that the world is perfectly modeled by classical macroeconomic laws, but the burden of proof is on the pro-minimum wage camp to disprove the laws of supply and demand in this situation (labor market), rather than the other way around.

If you are not familiar with what classical economic laws would suggest about a minimum price control on labor (minimum wage), it would

1. reduce the demand for labor

2. create deadweight loss (net value changing hands decreases)

The politicization and down-voting of ideas that people (particularly liberals, in this case) disagree with has a chilling effect. As Warren Buffett says, the human mind is best at interpreting all information such that prior conclusions remains intact.

[tuna-piano]

Not sure why you're being down-voted.

It's of course disingenuous (and insane) to say that raising the minimum wage will not cause deadweight loss. Everyone needs to understand that raising prices of almost anything will reduce the amount of that thing demanded. When price goes up, people buy less. Wages are just price and labor is a thing that people buy.

The more complicated issue, which democrats and republicans both ignore, is the elasticity of demand. Democrats love saying "Minimum wage increases are good, and they've been proven not to affect the demand for low-wage labor!" and republicans say "Minimum wage increases are bad, and they've been proven to increase unemployment!"

The real question is not if demand for labor will decrease (it will), the question is how much less low-wage labor will be purchased with a certain increase in the minimum wage, and whether policymakers consider this tradeoff good.

http://ftp.iza.org/dp3150.pdf

[AnthonyMouse]

> The real question is not if demand for labor will decrease (it will), the question is how much less low-wage labor will be purchased with a certain increase in the minimum wage, and whether policymakers consider this tradeoff good.

That is actually the false dichotomy that leads people to consider minimum wage as a good idea. Just because something might be better than nothing doesn't mean it's better than known alternatives.

Model minimum wage as a tax on employers for the difference between the minimum wage and what they would have paid without it, which is used to fund wage subsidies in the same amount to those employees.

Looked at in that way, minimum wage is obviously ridiculous. There is no reason to ever use that tax structure for anything. Even if you wanted to have the same subsidies for the same employees, it makes more sense to spread out the tax burden across everyone so that you don't have a de facto >=100% tax to hire someone who would have made half the minimum wage or less.

The only issue then is that without the disincentive to hire created by the minimum wage "tax", anyone could offer to do easy work for $.01/hour just to get the subsidy, so you might as well make the subsidy a fixed unconditional amount regardless of wages or hours.

At which point you have a UBI.

[monocasa]

> It's of course disingenuous (and insane) to say that raising the minimum wage will not cause deadweight loss.

Except that there's good data that this doesn't happen, ie. that minimum wage increases are actually associated with small increases in employment.

There's also very good data that subject of minimum wage increases is fraught with rampant publication bias.

https://www.ctdol.state.ct.us/lweab/Doucougliagos%20&%20Stan...

  In the minimum-wage literature, the magnitude of the
  publication selection bias is as large or larger, on
  average, than the underlying reported estimate. Overall,
  correcting for publication bias would transform a
  modestly negative average elasticity to a small positive
  employment elasticity.

[tuna-piano]

Honestly, I haven't looked into your claim. But just off-hand, I'm very skeptical of any evidence that minimum wage increases cause anything but a decrease (even if tiny) in employment. How many goods in the world do price increases cause an increase of demand?

Economists have a term for this type of good, "Giffen Good"[1]. And for obvious reasons, they almost never exist. When does an increase lead to a demand increase? Why would employers demand more labor with a price floor than they would without one?

[1] http://lexicon.ft.com/Term?term=Giffen-good

[monocasa]

> Honestly, I haven't looked into your claim.

You should read the article I linked. : ) It's a very solid meta-analysis including pretty much every peer reviewed article on the subject of the past few decades.

> ... When does an increase lead to a demand increase? Why would employers demand more labor with a price floor than they would without one?

The article explicitly doesn't go into why, but I can think of a few reasons.

Totally off hand, I'd put my money on the fact that businesses that employ minimum wage earners tend to also be disproportionately patroned by minimum wage earners. Add to that the fact that minimum wage earners tend to pretty much immediately spend their paychecks, you're left with businesses having their customer base with more disposable income.

Why don't employers simply raise wages themselves? Aside from the implicit information asymmetry sort of denoted by this very conversation, it doesn't make sense from a sort of game theory point of view for an individual business to go out on a limb without their competitors doing the same at the same time. In my mind, that makes it a perfect opportunity for government to step in, and add some lower bounds of acceptability. This way both employees and employers can have more success.

[D-Coder]

Who bothers to sell their goods at a loss?

A price increase increases sales, yes? My time is all I have to sell.

[JoshTriplett]

Also see http://econlog.econlib.org/archives/2017/06/yudkowsky_on_my.... for a detailed explanation of how this particular topic tends to get people talking past each other.

(The tone of that explanation does come across as elitist, because it's intentionally exaggerating to demonstrate how people "hear" certain explanations as insensitive when they're not.)

[ared38]

> I don't pretend that the world is perfectly modeled by classical macroeconomic laws

Understatement of the century. Would you tell someone working at CERN "I don't pretend Newton's laws are perfect, but..."?

> the burden of proof is on the pro-minimum wage camp to disprove the laws of supply and demand in this situation

Which previous studies of the minimum wage have consistently done (well, more accurately shown that the deadweight loss is more than offset by increased wages). That's the whole reason this article is interesting.

[tuna-piano]

Every minimum wage increase is different!

Even the staunchest free market economist wouldn't claim that a hypothetical minimum wage increase from $.10/hr to $.50/hr in Seattle would increase unemployment. And even the staunchest socialist economist would not claim that a minimum wage increase from $8/hr to $800/hr wouldn't increase unemployment.

Similarly, how can you compare an increase from $5-6 in New jersey in 2005 to one from $11 to $13 in Seattle in 2017? You can't extrapolate this stuff.

The question is not "Are minimum wage increases good in general?" the question is "Given the potential tradeoffs, is this specific minimum wage increase good?"

[ared38]

> Every minimum wage increase is different!

Sure, but

> You can't extrapolate this stuff.

Why not? I'm not saying it's like physics where we can make nearly exact models, but can't we at least make educated predictions based on previous examples, taking into account the different circumstances?

After all, in your hypothetical you already implicity modeled that a minimum wage a certain percentage of a "reasonable" wage won't hurt employment, while one much higher will.

> The question is not "Are minimum wage increases good in general?" the question is "Given the potential tradeoffs, is this specific minimum wage increase good?"

This only underscores the importance of extrapolation -- lawmakers need to be able to predict these tradeoffs to make good decisions (if extrapolation is possible).

[tuna-piano]

Fair point, I agree that extrapolation could be important here. If the effects of the $13 minimum wage are considered positive in Seattle, that would be good for the Portland government to know.

I guess my issue with your first comment is that it seemed like it was trying to consider minimum wage increases as generally good or bad, which I disagree with. I think it's much more nuanced than that, and it sounds like you agree.

The question I now read your first comment as asking is, "Why have studies shown this minimum wage increase as more harmful than other minimum wage increases? Of course, the answer is just that the elasticity of demand for low-wage labor in this case appear greater than in other cases.

The question is: what does the labor elasticity graph look like? And that's what these studies are really trying to figure out.

[lend000]

> Which previous studies of the minimum wage have consistently done (well, more accurately shown that the deadweight loss is more than offset by increased wages).

No, studies have been mixed and controversial, at best. This is just another study that shows how empirically ambiguous it is (by supporting the anti-minimum wage position), so again, I challenge the left to hold their evidence to a higher standard since it goes against common sense economics.

Regardless, the minimum wage and most other forms of welfare put forward by mostly the Democratic Party are economically foolish and distort incentives (TANF, unemployment benefits, minimum wage, mandatory social security, etc.) A very basic income is much cleaner and simpler -- I have yet to hear an argument for why our current welfare complex is superior.

[WillPostForFood]

I agree with your point about burden of proof, but economics is not a science. Setting aside economics and science, common sense demands the burden of proof go to those who say raising wages won't decrease demand.

[Avshalom]

Maybe, or maybe common sense says the burden of proof go to those who say increased consumer purchasing power won't increase demand.

Maybe common sense demands thats businesses won't pay for more employee hours than they have to in the first place and thus demand only decreases if overall revenue decreases.

I mean just saying "common sense" is as usual a way of pretending that your own biases are obviously correct.

[taw55]

> Exactly -- economics is a science

Nope. To anyone who still hasn't gotten the memo: neoclassical econ is mystery religion dressed up in poor mathematics[1]. If we held other sciences to the same norms as economics we'dd still be living in the dark ages.

[1] http://tinyurl.com/debunking-economics-digital

[Helmet]

This is utterly incorrect and not at all what the neoclassical micro/marco economic laws suggest.

For the sake of brevity, you are not making the proper distinction between demand and quantity demanded - a change in the price of labor does not change the DEMAND for labor.

[lend000]

Poor choice of wording -- in the simplest sense, you are correct. However, labor markets are far too complex to be modeled as a single commodity with a supply and demand curve, and contrary to popular belief, both supply and demand can change in the wake of a price control.

This is because there is no single supply and demand curve for labor -- instead, there are dozens of curves for specific labor markets. For instance, the minimum wage does not really affect the SDE labor market in the US, but it can literally wipe out certain markets (farm labor, for example) that typically pay below the new minimum wage, resulting in a complex new supply and demand profile, automation, etc.

[mattmcknight]

It can if there are substitutes for labor.