The whole bit about “raising the minimum wage actually hurts poor peolpe” is a neat little Econ 101 trick, but it doesn't always withstand scrutiny past Econ 101, and it grows old very quickly. So before you congratulate yourself on the brilliance of your contrarian position, look at some slightly more advanced models, and do a bit of research. Maybe read “Why Wages Don't Fall During a Recession,” by Yale economist Truman Bewley. Then leave the libertarian fantasy world behind.

If a person is so unqualified that he can't be hired for a minimum wage job (let's call this person a “schmo”), there are plenty of off-the-books jobs available to him: Sweeping and helping out in a small store; assisting a small-time contractor or handyman; doing off jobs for people. Those sorts of jobs generally, though not always, pay less than minimum wage (let's call it $5/hr for sake of reference), thus the needs of schmoes are taken care of.

Meanwhile, if you get rid of the minimum wage, it will just allow the sorts of larger scale employers now bound by the minimum wage to convert huge numbers of jobs to $5/hr jobs, doing two things: further impoverishing the workers who'd been earning the minimum wage, and flooding what had previously been the schmo job market with higher-skilled workers (because not everyone who'd been working at McDonalds for minimum wage will want to work there for $5/hr; some of them, if that's all their making, will decide they feel like doing previously-schmo jobs.

Oss

Will, you know perfectly well that all the decent research on this suggests that the kind of minimum wage laws we have produce virtually no effect on unemployment. The produce virtually no effect on long-term growth. But they make a profound difference in the lives of millions of people.

Murgo is almost certainly right that if you “Raise the minimum wage to $10, $11, $12 per hour,” you'll see some negative employment consequences. Nobody's doing that. Let's talk about reality here, to the extent we're able to perceive reality given the econometric tools that exist.

After looking into it and thinking about Wills claims that there are better ways then minimum wage I have to say that indeed I'm inclining to think that Will made a good point.

As far as I'm concerned massive wage and wealth inequality are bad things for a host of reasons one of which is economic inefficiency. The second thing that matters to me is recognizing the fact that policy DOES effect the degree of inequality. So it bothers me when some one claims that if a policy effects wealth distribution then it is bad. This is absurd in my opinion because EVERY policy effects wealth distribution it's just a matter of how much, in which direction and how fair and efficient it is. The simple minded idea that all wealth is always a result of being more efficient or productive is non-sense.

We are the wealthiest country ever . In America there is no reason a hard working person shouldn't be able to feed, house and send his kids to college for an honest weeks work. We can do better and the answer certainly does not have to be socialism but it certainly is not unbridled capitalism.

The answer is good policy and I thank you all for making me think there is a better way then simply increasing minimum wage. I pledge to learn more on the issue.

Contemporary American liberals display a particularly distasteful brand of vitriol whenever someone asks whether the minimum wage actually performs as advertised. It's a dull, dull empirical question. Do low-wage workers fare better of worse under the minimum wage than under a large-EITC program? Or wage subsidies? Or straightforward transfer payments? In this case, mind you, the question comes from Will Wilkinson, who has publicly endorsed a guaranteed minimum income. Apparently, support for a minimum income — untethered to a requirement that *employers* pay the minimum income through hourly wages — represents a kind of anarcho-capitalism.

One might even point to this kind of response as strong evidence that support for the minimum wage really is, in part, altruistic signaling. I can't think of having read a liberal political pundit or blogger (that is, someone outside the academy) provide an explanation of why we don't — and should expect to — see the rise in unemployment that one should expect. We get lots of comments to the effect that “This is more complicated than Econ 101,” and that there *is* such an explanation, but the actual explanation is always conspicuously absent.

Armchair speculation on the merits: Surely there are *some* labor markets in the United States in which transaction costs give employers a kind of psuedo-monopsony power. Likewise, I can see how systematic discrimination in the labor market would depress wages in a way that the minimum wage could repair. I imagine that these effects are frequently quite large, and that's probably why the minimum wage's negative effects are not as large or as uniform as one would predict in a well-functioning market. But that story, alone, doesn't justify dismissing the unemployment objection. At the very least, one would have to argue that factors depressing wages are large enough and pervasive enough, and alternatives sufficiently unpalatable, that the benefits of an increase in the federal minimum wage outweigh increased unemployment in particular industries, regions, or segments of the labor market. But, of course, I haven't said anything that hasn't already been said above. As always, one should turn to the evidence.

Actually, those Danish policies I mentioned would also lead to an upward shift in labor demand curves as well. I must have been just focusing on the increased bargaining power and opportunity cost of working for a specific employer, without adding in the effect that each worker's marginal product would also be boosted for that employer, shifting up that employer's demand.

I don't think the bad faith argumentation charge is fair, here.

Will goes on to write: “It works as altruistic signaling because the people receiving the signal don't understand economics either.”

Notice the “either”. He's not claiming that the signalers are knowingly promoting policies to hurt the poor. He's saying that they don't understand economics enough to know, but they do know that advocating minimum wage increases works to transmit certain messages.

This also applies to “taking” the value of property for environmentalist concerns.

Why not spread the costs broadly, if the cause has a broad benefit?

I agree with the substantive point here (wage subsidies rather than minimum wage), but it is bad faith argumentation to accuse others of bad faith argumentation. “Support for minimum wages is dumb” would be a less assumption-laden way of putting it. “Pure signaling” is presumably taking a position purely for its signalling value, which seems like an uncharitable characterization of the motivations of minwage-supporters.

Nevertheless, your content-to-garbage ratio is impressive given the depths of the flame war at this point.

“If this is libertarian faith, then libertarian faith is just the same thing as giving a shit and knowing what you're talking about. So, yes, the law of demand is God. Defy it and it will smite you.”

Bartlett's-worthy! I love it when Will gets political about something (and I mean by “political” in a very specific/”philosophic” sense, having something to do w/…thumos…).

I know that Denmark is a mixed economy. But, you are right, “socialist” is a strong term and “welfare state” is certainly better. But you must admit that with socialized health care, childcare, education, job training, etc., Denmark is more socialist than the U.S.

I know that *nothing* is truly free, not even “free” social services. But “free” is what we tend to call things that have no monetary marginal cost, and (as you well know) that is what I meant.

I don't care if you think that I am a liberal. Just know that I don't like to label myself or anybody else. To label yourself is to limit yourself. When you label others and their arguments you're being lazy, as you're saving yourself the work of understanding the difference between what that person is saying and the usual argument of some group you have in mind. All that I ask is that you do not generalize what I say with that of other people.

Thanks for asking for a clarification of what I meant by,

“As such, these policies all lower the distortions of imposing a minimum wage by lowering the number of people who would be on and outside of the margin created by the distortion.”

I admit that was a bit sloppy. Here's another attempt to say the same thing:

Since these policies all increase either the marginal product and/or the bargaining power of labor, they also decrease the market distortion of instituting a minimum wage.

The idea is that these policies all increase the wages that labor would be able to successfully negotiate for in an unregulated market. With less people below any given wage level, once a minimum wage is imposed there are less people who lose their jobs (i.e. there is less distortion). (One might illustrate this as an upward shift in the labor supply curve.)

So you DO understand the difference (maybe?). It just didn't seem that way in your previous answer.

BTW, Denmark is a very capitalist country with a vibrant private sector. Let's not call it “socialist”. A welfare state? Yes. But not socialist. There is a difference in most respects. And, if you search out info, you'll see Denmark has some kinks in the armor and have had to address some of the overgenerosity of their benefits.

Anyway,

Denmark's “free” institutions that you mention are not “free” at all. They pay heavily in income taxes…50% and higher. It's not “FREE”.

As for what Will thinks about it, I don't know. You'll have to wait for him to answer.

This is a little speculative:

“As such, these policies all lower the distortions of imposing a minimum wage by lowering the number of people who would be on and outside of the margin created by the distortion.”

Not so sure you're drawing accurate conclusions.

And I have read you're site. You strike me as a liberal…I used to be one. Sorry, nothing to take offense to. If you aren't just say so. As for me, I'm libertarian for the most part. No secret. But I'm totally nonpartisan.