Posted by: John Vandivier | June 28, 2013

Is Minimum Wage Really Still Debated?

Quarterly Journal of Economics

Quarterly Journal of Economics (Photo credit: Wikipedia)

Today I read an article from a friend of mine entitled, “Minimum Wage Increase: The Debate Continues.”

I thought to myself, “what an interesting title! I didn’t realize anyone still thought the minimum wage was a defensible policy.”

The article argued that the price elasticity of demand for labor is near 0 and therefore increasing the minimum wage, as long as we do it gradually so that we do not shock the markets too much, would benefit all.

While labor-demand elasticity is an interesting topic, and while it may be near 0, it is not 0. Here, as one example for proof of that statement, is a very good article published in 2003 from Oxford’s Quarterly Journal of Economics, written by a Harvard economist and cited over 1200 times to back that statement up.

So the pro-min wage side may argue that the negative economic effect is “small,” but they cannot argue that it is 0. This is akin to saying we are only hurting poor people a little, which is quite different from saying we aren’t hurting poor people.

The reality is that if a guy can’t get a job when min wage is $6, it is all the more difficult for him when it gets bumped to $8 or $9. Consider the following video from the great organization LearnLiberty:

Lastly, have you considered the fact that a higher minimum wage creates an incentive for more “under-the-table,” or black market, transactions and illegal immigration?

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Responses

  1. I greatly appreciate the feedback, John. While most of the blog post you cited is outdated (it has not been updated during my time at the Texas Legislature), most of the information posted remains current. Perhaps I was misunderstood; I never try to argue that elasticity is 0, but rather, that it is near 0 and that minimal increases in wage will be small. Often, less than 10% of the labor market will be affected.


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