20 February 2013

In Which I Finally Break Down and Talk about the Minimum Wage

[0] We accept that increasing the price of (almost*)
Not certain luxuries or Giffen goods.
everything else results in less of it being bought. People on both sides accept this, else why would Obama want to raise tariffs on imported tires or institute a carbon tax? The weight of proving low-productivity labor is an exception to this rule is a big one, and thus requires big evidence.

[1] Despite what the Krugmans of the world claim, both sides of this debate can point to large bodies of numerical evidence to support their positions. This statistical draw does not meet my standards for extraordinary claims requiring extraordinary evidence.

[2] The study most pointed to on the Left is Card & Krueger, which has several flaws. I am not the best one to explicate them, but they include survivor bias, limited samples, an unknown counterfactual, high causal density, and a focus solely on the amount of employment rather than employment conditions. Some of these factors are peculiar to their work, others are the inevitable result of studying a system as complex as a modern market economy, and others apply generally to any understanding of the physical world, which is a problem we've been wrestling with since 1689.

[3] Re: working conditions — an employer could respond to a rising minimum wage by hiring fewer people, or he could work existing employees harder. Fewer breaks, fewer people scheduled each shift, no employee discounts, etc. This is very difficult to represent numerically in such studies, but it is also very real. I am skeptical of people who brush this aside lightly.

[4] Let's assume arguendo that the negative effects of a minimum wage are, ceteris paribus, very small. This is good, but we know ceteris is not paribus. We have many, many regulations each of which may suppress employment. Even assuming the effect of any one of them is small, the effect of all of them together might be quite large. In order to conclude that the small negative effect of increasing the wage floor is not a problem you must still make a much larger assumption: that the effects of regulations sum linearly. I doubt they do.

A little higher wages here, some extra corporate taxes there, plus some tariffs on inputs, plus some higher medical insurance "insurance" costs, plus a bit more for worker's comp,*
plus some extended unemployment, plus some "consumer protections" that no consumers wanted, etc., etc., etc. We're sold all of these things one at a time, and are assured that the negative consequences of that particular program are hardly noticeable. But add them all up and pretty soon you've got a boiling frog.

[5] Many minimum wage opponents have been trotting out "If $9/hr is good, why not $90? Or $900???" This has gotten condemned by many of the more sophisticated commenters on both sides of this issue as being fatuous. And it is. But there's a good point concealed in there anyway

Everyone agrees that a minimum wage of $0.00001/hr would have no noticeable effect. We also agree that $90/hr would have a huge adverse effect. So somewhere in the middle we need to go from "no effect" to "big effect." I see no reason to believe this doesn't follow a typical dose-response relationship: as we increase the dose, the harm will also increase monotonically.

It's possible the relationship looks like the blue curve below and going from $7.25 to $9.00 won't matter. But it's also possible it looks like the red curve, and in that case it matters very much. We don't know how the response curve is shaped, so we don't know if we're safely on that flat part at the left or not.


What the "why not $90?!" people are doing is getting their opponents to concede that sooner or later wage floors are very bad. Whether they know it or not, this is a necessary set-up for the rest of the argument: "what gives you confidence that the pain is later and not sooner?" It moves the debate from "what kind of a lady do you think I am?" to "we've already established that; now we're haggling over price."

[6] Even accepting for the sake of argument that a $9 minimum wage has no ill effects on employment, I object on moral grounds. If I said in the context of an immigration debate "If Person A wants to work for Person B, and B wants to hire A, what business of it is mine?" a Leftist would pat me on the back. If I say that in this context I'd get a tirade about exploitation of the workers. I don't think we have the right to tell someone willing to work for $7 that they can't do that. It's simply not my place to interject myself between two consenting adults like that.

[7] I find minimum wages not only intrusive but magnificently arrogant intellectually. A worker can produce some amount of product. This makes their labor worth some number of dollars. Redefining wages by fiat doesn't change that. It's the economic equivalent of thinking you can make your house warmer by scratching out the numbers on your thermostat and writing in higher ones.

Prices are just signals. You can't change reality by imposing your will on a map of that reality.

[8] I find supporters of the minimum wage selfish. Yes, selfish. Minimum wage proponents want to help low-wage workers but they aren't interested in doing it themselves. They're being generous with other people's money which isn't generosity at all. The employer paying someone $7 is at least giving him $7. Obama wants him to have $9. But what is Obama paying him? Nothing. Why is it the responsibility of the guy who's already paying him something to pitch in even more?

There are millions of people who want Mr. Low Productivity Worker to have $9, but they sure as shit don't want it to be their $9 he gets.

Not only do they want to shift the responsibility of getting Mr. LPW $9 away from themselves, they aren't even content to shift that responsibility onto society as a whole. No, they want to shift the responsibility onto the one entity who is already doing more to help Mr. LPW than anyone else.

[9] Obama has called numerous times for more people, especially young people, to volunteer, even proposing that they be required to do so. In what way is a wage of $0/hr acceptable, and a wage greater than $9 is acceptable, but anything in between is an affront to human decency? You need a world view very different from my own to square that circle.

[10] One final thing that bothers me is Obama asserting in the SotU that a $7.50 wage is unacceptable because you can't raise a family of four on that income. Are the only jobs that are supposed to exist ones where you can raise a family of four? What if you don't have two kids? What if you're a kid yourself? Are we going to start re-writing every law so that it best suites a couple with two kids, or just the ones Mr Obama wants to change anyway?

Merely mentioning the word "family" is a pathos missile that politicians fire indiscriminately at us, since they know it will bypass our prefrontal cortices to explode directly in our amygdalae in a shower of warm-and-fuzzy feelings. People have got to start seeing through this.

1 comment:

  1. It's amazing the lack of scrutiny these proposals get from the media. Why is an increase from $7.50/hr to $9/hr considered the magic bullet for lifting families out of poverty? Nine dollars an hour at full time employment still leaves a family of four about $4000-5000 short of the poverty line. If minimum wage is really meant to assure a "living wage", then shouldn't the minimum wage at least meet the totally subjective "poverty line" that government trots out ad nauseam? I fail to see how raising a family will be that much different on $18,720 vs. $15,600.

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