The Huffpo and the minimum wage cheerleaders have now gone off the deep end. If you simply SAY that someone “demolishes” a classic argument, does that make it so? And just look at how uber-sophisticated and intelligent that post is. WHAT classic argument? It’s not like anyone tells us. Is it the classic moral argument against it? And that argument is? Is it the theoretical one? Which one? There are several classics that I bet if the author were asked couldn’t tell us exactly what he meant. And what about the empirical one? Oh, I bet he can just ignore the piles of research that show downward sloping demand curves or that TANSTAAFL and just “demolish” it because, you know, some guy who won a Nobel Prize thinks fast food line cooks are hard to replace.
But, really, that ain’t an argument. That ain’t science. And it’s not even clear it makes sense in its own right. I love how sure they are about how irreplaceable low wage workers are (sort of strange argument given their low wages) and how it is just assumed that this is a good way to help low wage workers. It’s not. Krugman of course knows that.
Not that I was ever threatening to put others out of business, but I simply don’t understand how ANYONE starts and keeps a small business these days. Any notion I may have had of venturing out on my own is long since gone – there’s no way I would put up with this legal environment, and quite frankly the sanctimony of “those working for the oppressed.” Go suck an egg, quite frankly.
Here is an image of the hockey rink I frequent and am affiliated with:
It is a “mom and pop” place. Now, it’s not struggling much as far as I can tell, but I am sure the mega-plex down the street that has 4 rinks and is run by a major corporation would LOVE to see the minimum wage increased to $15.
Here is a place I love to get subs, soup, breakfast pizza, donuts and the occasional growler:
Mike and Kerrey, the owners, are super people, and would be happy to take your calls asking them what would happen to them if they were forced to pay everyone at least $15.00 per hour. Once again, I am sure the Applebees and major pizza chains down the road wouldn’t mind at all – nor would the nearby Wegmans. These are real people. Hard working people. And they employ full time workers and kids needing a few extra bucks. They take care of their customers and the place is a pleasure to go in. They have done more for the “low wage” worker than any freakin’ pundit or writer for the HuffPo. These are the people you are telling must add over $15,000 per FTE per year in costs too. I don’t bet, but I don’t think Kerrey and Mike clear too much more than that for themselves in a year. God damn miserable capitalist pigs that they are.
UPDATE: A former student of mine sends me this passage from the Krugman (via Mark Perry at the AEI) that I read when I was an undergraduate myself. It’s plausible, of course, that he’s seen the preponderance of new evidence and theories and has changed his mind, just like most people.
The living wage movement is simply a move to raise minimum wages through local action. So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment.
This theoretical prediction has, however, been hard to confirm with actual data. Indeed, much-cited studies by two well-regarded labor economists, David Card and Alan Krueger, find that where there have been more or less controlled experiments, for example when New Jersey raised minimum wages but Pennsylvania did not, the effects of the increase on employment have been negligible or even positive. Exactly what to make of this result is a source of great dispute. Card and Krueger offered some complex theoretical rationales, but most of their colleagues are unconvinced; the centrist view is probably that minimum wages “do,” in fact, reduce employment, but that the effects are small and swamped by other forces.
What is remarkable, however, is how this rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda–for arguing that living wages “can play an important role in reversing the 25-year decline in wages experienced by most working people in America.” Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects.
In short, what the living wage is really about is not living standards, or even economics, but morality. Its advocates are basically opposed to the idea that wages are a market price–determined by supply and demand, the same as the price of apples or coal. And it is for that reason, rather than the practical details, that the broader political movement of which the demand for a living wage is the leading edge is ultimately doomed to failure: For the amorality of the market economy is part of its essence, and cannot be legislated away.
UPDATE #2: Lest anyone misunderstand my real feelings, I WANT to see the minimum wage increased, you should know that. Remember, I am a fundamentally mean person that hates human beings, so if I believe my own bullshit, raising the minimum wage is a great way to inflict some pain. The only problem as far as I see it is that since I really hate poor people, the minimum wage isn’t really going to do too much damage to them, very few poor people earn the minimum wage. Perhaps more seriously, if it weren’t for the impacts on small businesses and those who may never get a job or see their hours cut or see their benefits reduced or see their working conditions suffer or see themselves replaced by a machine in 10 years or just see desire for the products they make go away, I’d probably want to see a nice stiff increase. Most students don’t believe anything I say that they didn’t see and hear in their lifetimes, so this would be a nice chance for some living history.
Of course, Krugman (who as we know won his Nobel prize in international trade, which HufPo doesn’t mention) doesn’t address the main problem with increasing the price of anything, mainly you drive down the demand for that good. Krugman might think that demand for low wage labor is 100% inelastic (it clearly isn’t because of unemployment), but let’s just address the “main argument” against raising the minimum wage. Even if these workers aren’t replaceable right now, that doesn’t mean they wouldn’t be replaced sooner than they would have been replaced otherwise. This is a classic case of Krugman failing to see the unseen, and there is no way to “prove” that he’s wrong for not incorporating the impact this will have on future low wage employment.
I have a lot of good memories from Thomas Creek, including a few major upsets in the playoffs, although Perinton’s squads usually got the better of us…
I particularly appreciate reading this: “but I am sure the mega-plex down the street that has 4 rinks and is run by a major corporation would LOVE to see the minimum wage increased to $15.”
EXACTLY! Destroying competition through legislation is the cornerstone of Cronyism, and the minimum wage does more to enable cronyism than any policy that comes to mind. And yet ‘liberals’ like Krugman advocate for such policies. Yikes. Infuriating and heartbreaking.
this bit too: “Not that I was ever threatening to put others out of business, but I simply don’t understand how ANYONE starts and keeps a small business these days. Any notion I may have had of venturing out on my own is long since gone – there’s no way I would put up with this legal environment”
I have come to the same conclusion. In my opinion, if you are in New York, the only way for a small enterprise in New York to survive is to file as a non-profit. Even that is tough – I run farmers market and the Cornell Cooperative Extension (aka New York State) visited (in a eco-friendly tiny car), and advised me that I needed to tell my vendors what they can charge for their produce, so that separate produce vendors wouldn’t have to compete with each other. Also they told me we needed a detailed legal document that outlined the ‘rules’ of the market, and that are market wasn’t organized enough. Hmmmm. Then of course we have to deal with the village as well. And the town.
The cost of raising the minimum wage is an opportunity cost. The business not started because someone wasn’t sure they would be able to cover the labor costs.
How do you measure the GDP of businesses that never opened?
In Italy they create new GDP if they need to boost the numbers, they make it up as needed. Recently they added in hooker income. I believe we do the same thing, but will defer to WC’s word on that. So, if unopened business income would make Jack Lew look good, as opposed to anemic, they might do it.
Scott, when the extension service or anyone comes in to the farmers’ market and tells your vendors to sell anything at a minimum price, isn’t that illegal as hell? I thought that is what we call price fixing, even if the vendors themselves conspire, but are lucky enough to have a third party enforcer doing the deed on behalf of some of the vendors. (I am not disagreeing with you here, just asking.)
Yes, to me that is state-enforced price-fixing, which would seem to be quite illegal. However, dealing with these characters, my reaction has changed from getting angry to faking indifference. I suppose I could make a stink, but the truth is I would be yelling at an old lady who probably doesn’t understand why I am upset in the first place. Instead, I nod along and say “thats a great idea,” don’t act on it, and then the market continues in its’ curious way of organizing itself in a way that benefits everyone involved. Its actually quite satisfying to sit back and watch it happen while expending minimal effort.
thank you for you interest Harry 🙂
“my reaction has changed from getting angry to faking indifference”
Fantastic. It’s how I get through the days now!