$12 Minimum Wage: The Libertarian Proposal?????

OK, so if a Libertarian, and a former publisher of The American Conservative magazine, says Obama is wrong, it's not news is it, But when a Libertarian says Obama is wrong about raising the minimum wage to $10/hr.....it should be $12/hr....it got my attention.

Heres a transcript of a nice interview http://hereandnow.wbur.org/2014/03/17/unz-minimum-wage

He makes some interesting points, and he really makes a pretty good argument that conservatives should favor a big raise in the minimum wage. And he points to conservative pundits like Bill O'Reilly who favor a higher minimum wage.

So why don't we do this?

 

1.I don't think it's a libertarian doing this, but a conservative.
2. I get his argument, it's not a bad one. Inherently liberal but a conservative end. Clever. Props to him.

 

Libertarianism is about morality, first and foremost. To intervene in the employee/employer relationship with force or threats of force is immoral. Additionally, raising the minimum wage will only hurt the worst off in society the most.

 

The minimum wage is shown to reduce the equilibrium unemployment rate (i.e. because of job search frictions it ensures more mutually beneficial exchanges are secured). Those against the minimum wage are necessarily being coercive. The evidence also shows that it increases real wage rates. Your position is therefore based on error

 

Unz isn't libertarian. Where did that come from?

I've read his articles at his website and there are a few others in the conservative blog-sphere that think he has a point, but he's wrong in regards to illegal immigrants. The reason illegals are sought after is because they can be paid lower than the current minimum wage for those who are paid in cash off the books. Raising the minimum wage would only increase the desire for employers to hire illegals and pay them under the table.

 

Note there isn't any significant disemployment effect from the minimum wage. You're suggesting that legitimate price protection increases the likelihood of cheating. Harsh! Employers are typically good sorts

 

False. The minimum wage is a price floor which means that those whose labor is less valuable than the price floor will not be able to find employment. The evidence that proves this is overwhelming, as the highest unemployment rates are among young people who have the least amount of education, skills and experience. This is also quite a disaster for society as young people cannot get a start in life. They take longer to learn skills and gain experience, and are stuck living with their parents and unable to start a family until later. In Europe, several countries are facing the problem of not being able to replace their population since there just aren't enough babies being born. Your proposal will only make things worse. It is quite evil.

Nonsense and you know it. Be honest in your debates. It forces you to think harder.

It's easy to increase average rates when you chop off the poorest from the calculation. If you take the average wage of me and Lebron James, and then eliminate my job, the average wage rate looks pretty high.

 

Sounds like you don't understand supply & demand. We can only guarantee disemployment if firms are wage takers (i.e. there is a market wage such that individual firms face a perfectly elastic labour supply schedule). We know that isn't the case. There isn't a market wage (i.e. if we control for all productivity factors there is still a wage distribution). The firm is a wage maker. That is delivered easily: we merely need to refer to job search frictions or worker preferences.

Very basic error. There are numerous factors that impact on unemployment rate. You should be isolating minimum wage effect, otherwise you are making spurious conclusion. And the evidence? Let's refer to the latest review articles. First, consider Doucouliagos and Stanley (2009, Publication Selection Bias in Minimum Wage Research? A Meta-Regression Analysis, British Journal of Industrial Relations, Vol. 47, no. 2, pp. 406-428 ). This includes over 1000 employment elasticity estimates and concludes the results "corroborate [Card and Krueger’s] overall finding of an insignificant employment effect". Second, try the latest review by Wolfson and Belman. This finds that, if only latter studies are used (27 studies since 2000), positive employment effects are found.

And this is the sad truth of your stance. Rather than taking an objective analysis of minimum wage effects, you've started with an emotionalism based on ideological position. You haven't understood supply & demand (e.g. job search analysis concludes that minimum wages are required to ensure the exhaustion of mutually beneficial exchange) and you've twinned that by ignoring the evidence.

You seem to think that ignoring economic reality will be an effective tactic. It won't. That the minimum wage is required to aid exchange (and reduce equilibrium unemployment) has been understood since the work by Burdett and Mortensen (1998, Wage Differentials, Employers Size, and Unemployment, International Economic Review, Vol. 39, pp. 257-273)

This is a bogus response. There is no 'chopping off the poorest from the calculation". This is about the economic reality. We know that disemployment effects are insignificant. We therefore have to focus on any additional factors, such as wage increases simply encouraging price rises (leaving real wages unaffected). The evidence, however, shows that isn't the case. Lemos (2008, A Survey of the Effects of the Minimum Wage on Price, Journal of Economic Surveys, Vol 22 Issue 1, pp 187-212), for example, finds that price effects are small and that "policy makers can use the minimum wage to increase the wages of the poor".

 

Sorry buddy, but I don't think you quite understand economics. You see, economics is the study of human action. Humans act in order to achieve ends. You don't seem to understand supply and demand. You see, if you create a price floor that has an effect on both supply and demand. You seem to live in a magical world where prices don't matter and you can just move them around without any consequences. I live in the real world. You should try it. Here in the real world, if you set a price on someone's labor above the value of their labor, they will not be employed. Businesses that lose money don't stay in business too long. The facts are that those who are the least productive also have the highest unemployment rate. Your theory doesn't explain this fact. Mine does.

And BTW, morality has nothing to do with emotions. Morality is about right and wrong. It may make you feel good to steal from the rich and give to the poor, but it is still immoral. You need to learn about economics in the real world, buddy.

 

Note your inability to respond to any of my comments. Its factual to note that monopsony power (i.e. firms facing an upward sloping labour supply) is the norm. The only debate is over the source. A dynamic monopsony model, based on job search frictions, leads to positive employment effects. A model based on heterogeneity in worker preferences, due to firm exit effects, tends to predict insignificant effects.

Not the good idea to refer to behavioural economics. For example, that leads to a realisation that wages and productivity are endogenous. Thus, a minimum wage increase- as predicted by the efficiency wage hypothesis- can increase productivity. Here, a wage increase does not necessarily translate into an increase in unit labour costs. The Low Pay Commission have indeed reported productivity gains from Britain's introduction of minimum wages.

Afraid the knowledge deficiency is all yours. The disemployment result is entirely reliant on firms being wage takers. There must be a market wage such that firm employment decisions are entirely based on labour demand (i.e. marginal revenue productivity of labour). We know that there is no such market wage. The idea has been rejected for yonks. See, for example, See, for example, Lester (1946, Wage Diversity and Its Theoretical Implications, Review of Economic Statistics, Vol. 28, pp152–159) and Slichter (1950, Notes on the Structure of Wages, Review of Economics and Statistics, Vol. 32, pp 80–91).

Once a firm has wage making power, the same monopsony result is created: a minimum wage can recover deadweight loss, such that wages and employment both rise. It becomes a redistribution of inefficient economic rent via a reduction in underpayment.

Clearly you don't. I'm the one that has provided the latest surveys of the evidence. The evidence shows that, at worst, there are statistically insignificant disemployent effects. At best, as predicted by monopsony power, the minimum wage increases both wages and employment. The interesting aspect of dynamic monopsony is that it can be used to understand other 'real world' phenomenon: e.g. the positive relationship between wages and firm size.

I'm a consultant for SMEs and I know that these firms have not reduced employment following minimum wage hikes. I also know that my experience is consistent with the economic evidence. I also know that its all predicted by supply & demand. You haven't got a leg to stand on

You're using your ideological stance to ignore economic reality. Minimum wages aid exchange. You're therefore tacitly supporting coercion. That isn't libertarian is it now?

 

which should be a felony... punish the employer for doing such things, not the employees for wanting a living wage

 

I'd be careful with confusing the minimum wage with the living wage. The minimum wage is inherently about efficiency, given it removes inefficient underpayment. In terms of poverty, its not a particularly effective policy (given many minimum wage workers are living in non-poor households). It is ultimately a passive policy. Living wages refer to an active policy, designed to shift resources away from low wage (and low human capital investment) endeavour. For example, the government can use its contracting to only support 'high wage' firms (using it to minimise corporate welfare where much of welfare payments are effectively redistributed to the employer via low wages)

 

I am not confusing the difference, what employees want is a living wage, the min wage just sets the least a employer can pay a employee

.

 

Once again, you don't seem to understand economics very well. If you price someone's labor higher than the value of their labor, they will not be employed. It's quite simple, and you've done everything you can to obfuscate. This is reality.

Sigh. Up is down, white is black, blah, blah, blah. Dishonest, dishonest, dishonest. Shame on you.

 

Afraid you are. Minimum wages and living wages are quite different. There certainly is no way that a minimum wage can be used to eliminate working poverty.

 

Note that again you are incapable of responding to anything said. We know that there is no market wage. Economic evidence shows it. We know that your position is based on firms being wage takers. Economics evidence shows that they are wage makers.

The minimum wage merely reduces underpayment. As shown by job search analysis, those that argue against its use are necessarily supporting a coercive result. We know this as, given job search frictions, the minimum wage will reduce unemployment resulting from monopsony power.

Note that all of my arguments have been supported by empirical evidence. Note that the latest reviews of the minimum wage evidence reject your stance. Do you think there is some sort of academic conspiracy against you? Hope not! The reality is that supply & demand predicts insignificant or positive effects. Evidence confirms that.

Note that you have no valid counter. Can you show that firms face a perfectly elastic labour supply? Of course not. Given that you haven't bothered to understand how supply & demand can be applied to labour markets, you don't even realise that you need to show that.

 

I agree with you... a min wage keeps one closer to the living wage then one would be without it, but the min wage does not equal the living wage

" There certainly is no way that a minimum wage can be used to eliminate working poverty."

it can help get a closer to that point and doesn't hurt to have it in place

.

 

Certainly! Not bad for a first step!

 

You have failed, time and time again, to respond to my point. If you price someone's labor higher than the value of their labor, they will be unemployed. You will cause unemployment if you set price floors for wages for those who's labor value is less than the price floor.

QED

 

Not true! I referred directly to why your point is wrong. We know that firms are wage makers and therefore underpayment is the norm. We therefore know that the minimum wage necessarily redistributed inefficient economic rents back to the employee. Your position is based on an utopian outlook where marginal revenue productivity of labour dominates (given perfectly elastic labour supply). It is quite inconsistent with economic reality, as confirmed by the multiple empirical sources that I have referenced.

Even then your position is inconsistent with supply & demand. Suppose some workers do indeed have value below the minimum wage (which you actually can't show!). They may indeed be outweighed by the positive employment effects from removing the negative consequences of monopsony power. We know that the overall employment effects range from zero to small positive effects. This undoubtedly informs us that your position is not based on sound reasoning

 

I wasn't talking about disemployment (?). And in spite of employers being "good sorts" the cheating in regards to paying lower wages under the table goes on now. Increasing the minimum wage provides even more incentive to do that.

 

If employers are more likely to employ illegals, that should be shown through increased unemployment (given the unemployment figures reflect random sampling of legitimate labour)

Marginal changes in minimum wages have no effect on cheating. Those who cheat will always do so as they attempt to minimise costs.

 

I don't think it is a felony, but there are penalties associated with it since the employer is not paying workers comp or social security/medicare on the employee

 

I'm not sure what your point is. We already know certain employers hire illegals.

So employers don't respond to incentives. Maybe they aren't good sorts.

 

If these 'cheat' effects are significant then that would encourage negative employment effects (given that analysis refers purely to legitimate labour). That these effects aren't found therefore tells me that these 'cheat' effects aren't important.

Those that cheat will cheat no matter the legitimate minimum. The gains already exist. There isn't a positive relationship between the minimum wage and probability of cheating