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Would Small Minimum Wage Increases Raise or Have No Effect on Employment?

Il Quarto Stato

That is the current question—would (small) minimum wage increases have no effect on employment because labor-supply curves are steep, or would they boost employment by curbing employers with monopsony power from pushing both wages and employment below their competitive equilibirum values? Yet you would not know it from the very sharp and good-hearted ex-New York Times labor beat reporter Steven Greenhouse. What is he doing? He is, I think, reflexively saying "both sides!": Steven Greenhouse: "Some argue that it's foolish to support a higher minimum because it could reduce employment. But there's a huge debate among economists on this. One school—see David Neumark—finds that a higher minimum reduces employment. The other—see Arin Dube—finds little effect on employment...

Now this is simply wrong. The majority of economists believe that raising the minimum wage from its current level would significantly boost the incomes of the working poor and have little adverse effect on employment. A large minority of economists believe that raising the minimum wage would actually increase employment—that employers currently use their monopsony power to push wages and employment below their competitive equilibrium values, and that a higher minimum wage would reduce their ability to do this and so boost both. The majority and the large minority all, however, agree that there is uncertainty here. It is only a small minority of economists who follow David Neumark on this—who are confident that a higher minimum wage now would have a noticeable negative effect on employment. Thus Steve gets it wrong.

Why? I think it is because a career spent working at the New York Times has drilled into him the idea that he must be "fair", and "fairness" means (a) finding a position usually attributed to Democrats, (b) finding a position usually attributed to Republicans, and (c) presenting them both even-handedly, without affect or winky-winky as to which is most likely to be correct.

And this is a very unfair thing to do to your readers:

So I reacted, on Twitter: There's no debate on whether minimum wages at their current level are discouraging employment. They don't. The debate is over whether (a) there is a very small effect that we cannot statistically see that is vastly outweighed by wage gains to the working poor, or (b) higher minimum wages boost employment because they diminish the monopsony power of employers, who like to cut wages below the competitive equilibrium maximum-employment value when they can. People like David are stubbornly refusing to mark their beliefs to market. But that does not mean you should tell your readers that there are "both sides" here. Opinions of the shape of the earth do differ. But the round-earth and the flat-earth positions should not be set out as equally reasonable.


#shouldread #publicsphere #equitablegrowth #labormarket #minimumwage #highlighted
https://www.bradford-delong.com/2018/12/would-small-minimum-wage-increases-raise-or-have-no-effect-on-employment.html
https://www.typepad.com/site/blogs/6a00e551f08003883400e551f080068834/post/6a00e551f080038834022ad384ce7d200c/edit

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