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"In what has become a running joke amongst those skeptical of the claim that minimum wage increases have no effect on unemployment, a recent report by the Employment Policies Institute showed that 174 of the 184 co-sponsors of a bill to raise the federal minimum wage to $15 an hour hired unpaid interns."
"In a review of over 100 studies, economists David Neumark and William Wascher found that,A sizable majority of the studies surveyed ... give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries." http://www.nber.org/papers/w12663.pdf
"Yes, minimum wages still do increase unemployment."
https://mises.org/blog/seattles-minimum-wage-supporters-ignore-facts
(Score: 4, Interesting) by TheRaven on Sunday July 30 2017, @10:01AM (3 children)
Hypothesis one: Minimum wage increases unemployment. When the minimum wage goes up, businesses are unable to gain a cost benefit support low-paid employees and so reduce their workforce. If a business gains $x/hour of value from an employee, and the minimum ways is set at $y/hour such that $y > $x, they will reduce the number of employees.
Hypothesis two: Minimum wage increases the rate at which automation becomes more cost effective. If a business gains $x/hour of value from an employee who costs $y/hour and the cost of replacing them with a machine is $z/hour, they will continue to employ humans until such a point that $y > $z.
Hypothesis one seems less likely, because businesses are run to make money and if they could continue to be profitable with fewer employees then they would do so. The effect that you should observe from hypothesis one is companies going out of business or raising prices if they can no longer make a profit with higher wages. If they are able to cut their workforce with a higher minimum wage and remain competitive, then (in most cases) they would have been able to cut their workforce with a lower minimum wage as well.
In contrast, hypothesis two seems to be directly supported by their evidence. This would be a fine argument against increasing the minimum wage if the cost of automation were constant, but this is not the case: the cost of automation is coming down all of the time and will eventually cross the point at which automation is cheaper than employing humans for a lot of occupations. Keeping minimum wage low will delay this, but won't prevent it.
sudo mod me up
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @04:15PM
So eliminating wages will give us full employment?
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @06:58PM (1 child)
>"If they are able to cut their workforce with a higher minimum wage and remain competitive, then (in most cases) they would have been able to cut their workforce with a lower minimum wage as well."
That is true, but the fact that they could cut the workforce does not mean that they would. In fact, it goes the other way. The company has a certain level of profit with a minimal workforce. If they can hire more people inexpensively, they can increase their profit, and so will do that. If the cost of workers increases because of government action, the company will reduce the work force because that will reduce the impact on the company's profit.
(Score: 0) by Anonymous Coward on Monday July 31 2017, @02:24AM
Following on the tack of TheRaven, if they were going to, wouldn't they have -already- done that?
You blockquoted the part I was going to.
they could cut the workforce
I note that since USA's minimum wage was instituted in 1938, it has been raised 22 times.
Not once has that brought about that hand-waving result.
Again: If a boss is keeping a worker on the payroll, it's because he needs that worker.
...and, at the Mondragon cooperative, when they have had a downward demand for a division's products, they moved worker-owners to another division and/or cut the hours of each worker-owner a bit.
Mondragon has never had a layoff.
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