A surprisingly large number of smart people support raising the minimum wage. In two separate conversations this week with very intelligent people, it was argued to me:
Now, we can write books and books about each of these claims. But we don’t have to, because both can’t provably be true. Why? Argument 1 says employees have no flexibility in the labor market and that they are so attached to firms and frictions are so high that they can’t or won’t quit. Argument 2 says a major problem for employers of low-wage workers is that their workers are flighty and not committed to the job.
Which is it, if any? In the comments please do not attack either of the claims, there is plenty to say about them, I’m only interested in the consistency.
I appreciate the point you’re making is that both of these claims can’t be true simultaneously. There is, at least, a very strong tension between them.
You mention that these points were argued to you in two separate conversations. If each of the points was made by a different person there’s not necessarily any intellectual inconsistency here. It just means that at least one of them is mistaken. One can find weaknesses in both of these positions.
Or did both of your interlocutors put both of these arguments to you? If so, did you point out the apparent tension in their beliefs? Did they attempt to reconcile them somehow?
I’m not sure how one would reconcile both of these beliefs, but that’s probably because I don’t hold them. And I wouldn’t wish to strawman the positions of these people.
Just thinking out loud.
“Argument 1 says employees have no flexibility in the labor market and that they are so attached to firms and frictions are so high that they can’t or won’t quit. Argument 2 says a major problem for employers of low-wage workers is that their workers are flighty and not committed to the job.”
I don’t have a problem with both being true simultaneously.
The problem with argument 2 above, is that if high turnover has a cost, then the employer has the option to pay more. Minimum wage isn’t necessary. Furthermore, it is that gap between the wage the employer is currently paying, and the prevailing wage that will keep a worker on the job.