Nah, I think I’ll let you copy/paste from the article. You don’t need HTML to do that...just a little common sense.
Never heard of “von miser.” Who is he? I have heard of John Maynard Arcane, a 3rd rate English economist who spent much of his career obfuscating economics so that 4th rate bloggers on economics could pretend to know something about the subject. He loved to take two numbers and divide one into the other so that he could claim the quotient was some sort of objective “index” or “measure” of something actually relevant to the economy. And he also loved to give these “indices” and “measures” very scientific sounding names...and then abbreviate them by their first initials, which only made the original name sound even more authoritatively terrifying. Thus, the “MEC” was his “Marginal Efficiency of Capital”, and the “MPC” was his “Marginal Propensity to Consume”. He had lots of fun thinking up things like this. You’d probably like Arcane. He was wrong about everything, but — like parsy — he gave never tired of claiming that he was just busting with common sense.
Here’s a little excerpt from a little book on Hong Kong. It casually relates to the reader that as of 1994 (when the book was published), Hong Kong had no minimum wage law and no unemployment (no “structural unemploment”, i.e., no chronic long-term unemployment). You can find the book at the following link:
“Hong Kong business
By Christine Genzberger (1994)
Page 9
Unemployment
Unemployment in Hong Kong has been so low, particularly during the past decade, that the colony can be said to have virtually no structural unemployment. Over the past 10 years, unemployment has averaged 2 percent, peaking at 3 percent during the downturn in 1985 and dropping as low as 1.3 percent in 1990. Unemployment held at 2 percent in 1992, rising to 2.1 percent in 1993 . . .
. . . Most employers provide subsidized meals and an annual bonus equal to one or two months’ salary. Larger employers often provide subsidies for transportation and health care, and award attendance bonuses. Although there is no legal minimum wage in Hong Kong, it is difficult to find workers below prevailing wage levels.”
GoodDay, who can’t help noticing that parsy is losing his touch.
Losing my touch! I have not yet begun to teach! I’ve just been very busy the last few days and haven’t felt very good to boot. I promise to follow up later with more info.
parsy, who has to run for the moment
Okay, here’s you some cut and paste from the wiki article, which is very balanced, IMHO.
“So the basic theory says that raising the minimum wage helps workers whose wages are raised, and hurts people who are not hired (or lose their jobs) because companies cut back on employment. But the situation is much more complicated than the basic theory can account for.
Complicating factors
One complicating factor is possible monopsony in the labor market, whereby the individual employer has some market power in determining wages paid. Thus it is at least theoretically possible that the minimum wage may boost employment. Though single employer market power is unlikely to exist in most labor markets in the sense of the traditional ‘company town,’ asymmetric information, imperfect mobility, and the ‘personal’ element of the labor transaction give some degree of wage-setting power to most firms.[12]
Standard theory criticism
Gary Fields, Professor of Labor Economics and Economics at Cornell University, argues that the standard “textbook model” for the minimum wage is “ambiguous”, and that the standard theoretical arguments incorrectly measure only a one-sector market. Fields says a two-sector market, where “the self-employed, service workers, and farm workers are typically excluded from minimum-wage coverage… [and with] one sector with minimum-wage coverage and the other without it [and possible mobility between the two],” is the basis for better analysis. Through this model, Fields shows the typical theoretical argument to be ambiguous and says “the predictions derived from the textbook model definitely do not carry over to the two-sector case. Therefore, since a non-covered sector exists nearly everywhere, the predictions of the textbook model simply cannot be relied on.”[13]
An alternate view of the labor market has low-wage labor markets characterized as monopsonistic competition wherein buyers (employers) have significantly more market power than do sellers (workers). This monopsony could be a result of intentional collusion between employers, or naturalistic factors such as segmented markets, information costs, imperfect mobility and the ‘personal’ element of labor markets. In such a case the diagram above would not yield the quantity of labor clearing and the wage rate. This is because while the upward sloping aggregate labor supply would remain unchanged, instead of using the downward labor demand curve shown in the diagram above, monopsonistic employers would use a steeper downward sloping curve corresponding to marginal expenditures to yield the intersection with the supply curve resulting in a wage rate lower than would be the case under competition. Also, the amount of labor sold would also be lower than the competitive optimal allocation.
Such a case is a type of market failure and results in workers being paid less than their marginal value. Under the monopsonistic assumption, an appropriately set minimum wage could increase both wages and employment, with the optimal level being equal to the marginal productivity of labor.[14] This view emphasizes the role of minimum wages as a market regulation policy akin to antitrust policies, as opposed to an illusory “free lunch” for low-wage workers.
Another reason minimum wage may not affect employment in certain industries is that the demand for the product the employees produce is highly inelastic;[15] For example, if management is forced to increase wages, management can pass on the increase in wage to consumers in the form of higher prices. Since demand for the product is highly inelastic, consumers continue to buy the product at the higher price and so the manager is not forced to lay off workers.
Three other possible reasons minimum wages do not affect employment were suggested by Alan Blinder: higher wages may reduce turnover, and hence training costs; raising the minimum wage may “render moot” the potential problem of recruiting workers at a higher wage than current workers; and minimum wage workers might represent such a small proportion of a business’s cost that the increase is too small to matter. He admits that he does not know if these are correct, but argues that “the list demonstrates that one can accept the new empirical findings and still be a card-carrying economist.”[16]
Debate over consequences
Various groups have great ideological, political, financial, and emotional investments in issues surrounding minimum wage laws. For example, agencies that administer the laws have a vested interest in showing that “their” laws do not create unemployment. So do labor unions, whose members’ jobs are protected by minimum wage laws. The presence of these powerful groups and factors means that the debate on the issue is not always based on dispassionate analysis. Not only that, but it is extraordinarily difficult to separate the effects of minimum wage from all the other variables that affect employment.[5]
On the other side of the issue, low-wage employers such as restaurants finance the Employment Policies Institute, which has released numerous studies opposing the minimum wage.[17]
There is more and they discuss all your many grievances but I like this, and think it to the point:
Today, the International Labour Organization (ILO)[7] and the OECD[19] do not consider that the minimum wage can be directly linked to unemployment in countries which have suffered job losses. Although strongly opposed by both the business community and the Conservative Party when introduced in 1999, the minimum wage introduced in the UK is no longer controversial and the Conservatives reversed their opposition in 2000.[34] A review of its effects found no discernible impact on employment levels.[35]
Since the introduction of a national minimum wage in the UK in 1999, its effects on employment were subject to extensive research and observation by the Low Pay Commission. The Low Pay Commission found that, rather than make employees redundant, employers have reduced their rate of hiring, reduced staff hours, increased prices, and have found ways to cause current workers to be more productive (especially service companies).[36] Neither trade unions nor employer organizations contest the minimum wage, although the latter had especially done so heavily until 1999.
parsy, who is getting his touch back
And heres some more for you from same wiki article, this time relating to the empirical studies:
Empirical studies
Economists disagree as to the measurable impact of minimum wages in the ‘real world’. This disagreement usually takes the form of competing empirical tests of the elasticities of demand and supply in labor markets and the degree to which markets differ from the efficiency that models of perfect competition predict.
Economists have done empirical studies on numerous aspects of the minimum wage, prominently including:[3]
Employment effects, the most frequently studied aspect
Effects on the distribution of wages and earnings among low-paid and higher-paid workers
Effects on the distribution of incomes among low-income and higher-income families
Effects on the skills of workers through job training and the deferring of work to acquire education
Effects on prices and profits
Until the mid-1990s, a strong consensus existed among economists, both conservative and liberal, that the minimum wage reduced employment, especially among younger and low-skill workers.[9] In addition to the basic supply-demand intuition, there were a number of empirical studies that supported this view. For example, Gramlich (1976) found that many of the benefits went to higher income families, and in particular that teenagers were made worse off by the unemployment associated with the minimum wage.[37]
Brown et al. (1983) note that time series studies to that point had found that for a 10 percent increase in the minimum wage, there was a decrease in teenage employment of 1-3 percent. However, for the effect on the teenage unemployment rate, the studies exhibited wider variation in their estimates, from zero to over 3 percent. In contrast to the simple supply/demand figure above, it was commonly found that teenagers withdrew from the labor force in response to the minimum wage, which produced the possibility of equal reductions in the supply as well as the demand for labor at a higher minimum wage and hence no impact on the unemployment rate. Using a variety of specifications of the employment and unemployment equations (using ordinary least squares vs. generalized least squares regression procedures, and linear vs. logarithmic specifications), they found that a 10 percent increase in the minimum wage caused a 1 percent decrease in teenage employment, and no change in the teenage unemployment rate. The study also found a small, but statistically significant, increase in unemployment for adults aged 20–24.[38]
Wellington (1991) updated Brown et al.’s research with data through 1986 to provide new estimates encompassing a period when the real (i.e., inflation-adjusted) value of the minimum wage was declining, due to the fact that it had not increased since 1981. She found that a 10% increase in the minimum wage decreased teenage employment by 0.6 percentage points, with no effect on either the teen or young adult unemployment rates.[39]
Some research suggests that the unemployment effects of small minimum wage increases are dominated by other factors. [8] In Florida, where voters approved an increase in 2004, a follow-up comprehensive study confirms a strong economy with increased employment above previous years in Florida and better than in the U.S. as a whole.[9]
[edit] Card and Krueger
In 1992, the minimum wage in New Jersey increased from $4.25 to $5.05 per hour (an 18.8% increase) while the adjacent state of Pennsylvania remained at $4.25. David Card and Alan Krueger gathered information on fast food restaurants in New Jersey and eastern Pennsylvania in an attempt to see what effect this increase had on employment within New Jersey. Basic economic theory would have implied that relative employment should have decreased in New Jersey. Card and Krueger surveyed employers before the April 1992 New Jersey increase, and again in November-December 1992, asking managers for data on the full-time equivalent staff level of their restaurants both times.[40] Based on the employers’ responses, the authors concluded that the increase in the minimum wage increased employment in the New Jersey restaurants.[41]
Card and Krueger expanded on this initial article in their 1995 book Myth and Measurement: The New Economics of the Minimum Wage (ISBN 0-691-04823-1). They argued the negative employment effects of minimum wage laws to be minimal if not non-existent. For example, they look at the 1992 increase in New Jersey’s minimum wage, the 1988 rise in California’s minimum wage, and the 1990-91 increases in the federal minimum wage. In addition to their own findings, they reanalyzed earlier studies with updated data, generally finding that the older results of a negative employment effect did not hold up in the larger datasets.
Critics, however, argue that their research was flawed.[42] Subsequent attempts to verify the claims requested payroll cards from employers to verify employment, and found that the minimum wage increases were followed by decreases in employment. On the other hand, an assessment of data collected and analyzed by David Neumark and William Wascher did not initially contradict the Card/Krueger results,[43] but in a later edited version they found that the same general sample set did increase unemployment. The 18.8% wage hike resulted in “[statistically] insignificant—although almost always negative” employment effects.[44]
Another possible explanation for why the current minimum wage laws may not affect unemployment in the United States is that the minimum wage is set close to the equilibrium point for low and unskilled workers. Thus in the absence of the minimum wage law unskilled workers would be paid approximately the same amount. However, an increase above this equilibrium point could likely bring about increased unemployment for the low and unskilled workers.[11]
[edit] Reaction to Card and Krueger
Some leading economists such as Greg Mankiw do not accept the Card/Krueger results,[45] while others, like Nobel laureates Paul Krugman[46] and Joseph Stiglitz do accept them,[47][48] In 1995, the Republican Staff of the Joint Economic Committee of the United States Congress published a study critical of Card and Krueger’s work. They note that it conflicts with other studies done on minimum wage laws within the United States over the past 50 years.[49] According to the JEC analysis, minimum wage laws have been shown to cause large amounts of unemployment, especially among low-income, unskilled, black, and teenaged populations, as well as cause a host of other mal-effects, such as higher turnover, less training, and fewer fringe benefits.
According to economists Donald Deere (Texas A&M), Kevin Murphy (University of Chicago), and Finis Weltch (Texas A&M), Card and Krueger’s conclusions are contradicted by “common sense and past research”. They conclude that:[50]
“ Each of the four studies examines a different piece of the minimum wage/employment relationship. Three of them consider a single state, and two of them look at only a handful of firms in one industry. From these isolated findings Card and Krueger paint a big picture wherein increased minimum wages do not decrease, and may increase, employment. Our view is that there is something wrong with this picture. Artificial increases in the price of unskilled laborers inevitably lead to their reduced employment; the conventional wisdom remains intact. ”
Nobel laureate James M. Buchanan famously responded to the study in the Wall Street Journal:
...no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimum scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.[51]
Alan Krueger responded in The Washington Post:[52]
More was at stake here than the minimum wage — the methodology of public policy analysis was also at issue. Some economists, such as James Buchanan, have simply rejected the notion that their view of economic theory possibly could be proved wrong by data.
Paul Krugman, moreover, states that Card and Krueger “found no evidence that minimum wage increases in the range that the United States has experiences led to job losses. Their work has been attacked because it seems to contradict Econ 101 and because it was ideologically disturbing to many. Yet it has stood up very well to repeated challenges, and new cases confirming its results keep coming in.”[53]
[edit] Neumark and Wascher
David Neumark and William L. Wascher took a leading role in the debate over the work of Card and Krueger, of which they were strongly critical. In a 2008 book, they backed up their criticism with a survey of over 300 studies, which, they concluded, supported their position and left Card and Krueger, as “outliers”.[3] The studies, taken from many countries and spanning many viewpoints, covered a period of over 50 years, primarily from the 1990s onward. According to the authors, a large majority of the studies show negative effects for the minimum wage; those showing positive effects are few, questionable, and disproportionately discussed.
Neumark and Wascher emphasize three conclusions: First, and contrary to Card and Kreuger, they concluded that studies since the early 1990s have strongly pointed to a “reduction in employment opportunities for low-skilled and directly affected workers.” Second, they concluded some evidence that the minimum wage is harmful to poverty-stricken families, and “virtually no evidence” that it helps them. Third, they concluded that the minimum wage lowers adult wages of young workers who encounter it, by reducing their ultimate level of education. They summarized their conclusions in a “scorecard,” showing the effects they considered, a summary of the evidence they found, and their evaluations of the strength of their conclusions based on that evidence. A partial summary of the scorecard is presented below:
[edit] Statistical Meta-analyses
Several researchers have conducted statistical meta-analyses of the employment effects of the minimum wage. Card and Krueger analyzed 14 earlier time-series studies and concluded that there was clear evidence of publication bias because the later studies, which had more data and lower standard errors, did not show the expected increase in t-statistic (almost all the studies had a t of about two, just above the level of statistical significance at the .05 level.[54] Though a serious methodological indictment, opponents of the minimum wage virtually ignored this issue; as Thomas C. Leonard noted, “The silence is fairly deafening.”[55] More recently, T.D. Stanley has criticized their methodology, suggesting that their results could signify either publication bias or the absence of an effect. Using a different methodology, however, he concludes that there is statistically significant evidence of publication bias and that correction of this bias shows no relationship between the minimum wage and unemployment.[56] In 2008, Hristos Doucouliagos and T.D. Stanley conduct a similar meta-analysis of 64 U.S. studies on disemployment effects and concluded that Card and Krueger’s initial claim of publication bias is still correct. Moreover, they concluded, “Once this publication selection is corrected, little or no evidence of a negative association between minimum wages and employment remains.”[57]
[edit] Surveys of economists
Until the 1990s, economists generally agreed that raising the minimum wage reduced employment. This consensus was weakened when some well-publicized empirical studies showed the opposite, but others consistently confirmed the original view. Today’s consensus, if one exists, is that increasing the minimum wage has, at worst, minor negative effects.[58]
According to a 1978 article in the American Economic Review, 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers.[59]
A 2000 survey by Dan Fuller and Doris Geide-Stevenson reports that of a sample of 308 American Economic Association economists, 45.6% fully agreed with the statement, “a minimum wage increases unemployment among young and unskilled workers”, 27.9% agreed with provisos, and 26.5% disagreed. The authors of this study also reweighted data from a 1990 sample to show that at that time 62.4% of academic economists agreed with the statement above, while 19.5% agreed with provisos and 17.5% disagreed. They state that the reduction on consensus on this question is “likely” due to the Card and Krueger research and subsequent debate.[60]
A similar survey in 2006 by Robert Whaples polled PhD members of the American Economic Association. Whaples found that 37.7% of respondents supported an increase in the minimum wage, 14.3% wanted it kept at the current level, 1.3% wanted it decreased, and 46.8% wanted it completely eliminated.[61]
Surveys of labor economists have found a sharp split on the minimum wage. Fuchs et al. (1998) polled labor economists at the top 40 research universities in the United States on a variety of questions in the summer of 1996. Their 65 respondents split exactly 50-50 when asked if the minimum wage should be increased. They argued that the different policy views were not related to views on whether raising the minimum wage would reduce teen employment (the median economist said there would be a reduction of 1%), but on value differences such as income redistribution.[62] Klein and Dompe conclude, on the basis of previous surveys, “the average level of support for the minimum wage is somewhat higher among labor economists than among AEA members.”[63]
In 2007, Daniel B. Klein and Stewart Dompe conducted a non-anonymous survey of supporters of the minimum wage who had signed the “Raise the Minimum Wage” statement published by the Economic Policy Institute. They found that a majority signed on the grounds that it transferred income from employers to workers, or equalized bargaining power between them in the labor market. In addition, a majority considered disemployment to be a moderate potential drawback to the increase they supported
So, goodday, the point of all this is that things ain’t as simple as you would have all believe. There are studies that back up your position and studies that back up mine. The issue isn’t as black and white as you and other simplistic minded folks assume.
Now that I am back to form, I will follow up with an explanation of why YOUR theory and reality do not compute!
parsy, who is laying it on you now! (and don’t you dare come back with some more dang von Miser theory stuff. Please try to address the issues.)
Losing my touch, huh? So now let me give you some more of my mind. (I have enough to go around.)
The two prior responses show you first how theoretically the typical minwage analysis could theoretically be flawed. Next, with empirical backup, you can see there is evidence that the theoretical has actually occurred. Now let me show you once again why and how the von Mises analysis is less than satisfactory.
Review von Mises, the part where he goes into the marginal productivity theory:
“the wages paid by the employer for every type of labor are exactly as high as the increment of value that it adds to the materials in production. Wages cannot rise any higher than this because, if they did, the employer could no longer make a profit and hence would be compelled to discontinue a line of production that did not pay.”
That stuff just doesn’t happen 99.99% of the time. Such a thing would be exceedingly difficult to measure. Your average economist could not do it, much less your typical nincompoop business manager.
Think about it. Bob owns a restaurant. He thinks he needs to hire one more dishwasher. How does he go about figuring the “increment of value” such a dishwasher would add?
He can’t and he doesn’t. How then does he know what such a dishwasher is worth?he doesn’t. He just knows that Joe, down the street pays minimum wage for his, so Bob will pay the same. The same thing goes for waiters, cooks, servers, bookkeepers, greeters, etc.
They are simply being paid what someone else in the business is being paid. It is a “class” thing, not an economic analysis thing. You see, it isn’t that von Mises is stupid, or even wrong. Von Mises is simply irrelevant to what is going on.
parsy, who hopes he is finally getting thru to you.