Try this on for size:
Evidence indicates that the price elasticity of demand for labor is quite high, at least 3. That is, an increase in average wages of 1% would lead to at least a 3% decline in the number of hours of work demanded by employers. Labor economists believe, however, that the price elasticity of supply is very low. The reason is that although a fall in the wage rate reduces the incentive to work more hours, it also makes people poorer and less able to afford leisure time. The strength of this second effect is shown in the data: the number of hours people are willing to work falls very little — if at all — when the wage per hour goes down.
It’s on p.173-4 of my edition of this. If indeed this is true, then it means:
Have a nice weekend.
I am not going to buy his book, and I will check with my government-run library to see if they have bought a copy before I order it, assuming it makes my scheduled reading list.
Thank you for extracting the subject to discuss, which leads to a question: Is the point that social security taxes should be progressive? If so, then this defeats the eighty-year old pretense that Social Security was not a welfare program, an axiom of American progressives/liberals/socialists.
Also, does Krugman imagine every small businessman, who has broken the fifty-employee nut, is like Oskar Schindler, presiding over his laborers making pots? Before Schindler found his conscience, he was a National Socialist. Has this movie shaped Paul Krugman’s idea of economic freedom, and has it led him to believe there is the Direktor and the accountant and then the workers?
The business people I know best in the first place have been subject to the same onerous payroll taxes as their employees for a good part of their lives, even though after they have found success for the company, which continues to let its employees prosper, finally passed the $115,000 cap on regressive Social Security taxes, federal unemployment taxes, et cetera. I used to keep up on this because I filed Form 940 and the rest and paid the taxes, but I am a little rusty on the new details.
I do know that is tougher to do business today, and I wish Mr. Krugman would let up, take a long cruise on a tanker, go fishing, and reflect on humility.