Want to help the poor? Don’t waste your time with the minimum wage

Stephen Gordon reviews the evidence on the minimum wage

Barack Obama has proposed increasing the U.S. minimum wage, and the discussion is spilling over to Canada. There are two things one needs to know about the minimum wage, employment and poverty in Canada:

1. In Canada the link between minimum wage increases and lower employment levels is stronger than in the U.S. The famous Card-Krueger study of events along the Pennsylvania-New Jersey border in 1992 found that an increase in the minimum wage actually led to an increase in employment. Subsequent work has challenged that conclusion, but as far as I can tell, U.S. studies generally find that the link between (small) changes in the minimum wage and changes in employment has been fairly weak.

The Canadian literature on the link between minimum wages and employment looks very different. For one thing, empirical studies that use Canadian data are able to exploit variations in the minimum wage both across time and across provinces (in the U.S., on the other hand, the minimum wage is largely driven by changes at the federal level). Estimates for the effect of minimum wage are generally stronger than those in the U.S., and as Morley Gunderson notes in his 2005 survey of the literature:

While there are substantial differences across the different Canadian studies, the following generalisations emerge:

  • The earlier Canadian studies (based on data prior to the 1980s) tended to find adverse employment effects that were in the range of US consensus estimates, and sometimes higher, where a 10% increase in the minimum wage would give rise to a 1-3% reduction in employment.
  • Studies based on data to include the 1980s tended to find smaller effects that were at the lower end of the consensus range, and possibly zero, as was often also the case in the US.
  • However, some more recent studies using different and more sophisticated methodologies as well as more recent data (e.g., Baker, Benjamin and Stanger 1999, Yeun 2003, Baker 2005, Campolieti, Fang and Gunderson 2005a, b, Campolieti, Gunderson and Riddell, forthcoming) find larger adverse employment effects at the higher end and beyond the consensus range, especially in the longer run. The elasticities typically range from -0.3 to -0.6 for teens (slightly lower for young adults), implying that at 10 percent increase in the minimum wage would lead to a 3 to 6 percent reduction in the employment of teens. The fact that they use different data sets and methodologies suggest that these results are robust.
  • Overall it appears that the Canadian studies tend to find adverse employment effects that are at least as large and likely larger than US studies; certainly none find positive employment effects as occasionally occurs in the US.

Using Card-Krueger to support calls for a minimum wage increase in Canada isn’t just cherry-picking: it’s cherry-picking from an entirely different orchard.

2. Minimum wage increases do not help the poor. You often hear the phrase “blunt instrument” when people describe the connection between increasing the minimum wage and reducing poverty and/or income inequality. The problem is that the statistical link between “earning minimum wage” and “being in a low-income household” is almost nil. Most of the people in low income households fall into two categories: those who don’t work, and those who earn above minimum wage but are constrained in the number of hours they can work. Minimum wage increases don’t help them. On the other hand, the majority of the people who do earn minimum wage live in households where there are other earners and are not in poverty. (There is some concentration of minimum wage workers in households with below-median incomes, even if they aren’t in poverty.)

Most of the literature reviewed by Morley Gunderson in 2005 was focused on the disemployment effects of the minimum wage. Since then, research efforts have become more focused on the link between minimum wage and poverty. Here are a few of the findings:

  • Minimum wage increases as an anti-poverty policy in Ontario: “Even without any negative employment effects, planned increases in Ontario’s minimum wage will lead to virtually no reduction in the level of poverty.” See here for a summary.
  • Les travailleurs au salaire minimum vivant sous le seuil de faible revenu au Québec: “Ces augmentations du salaire minimum auraient eu toutefois peu d’effets sur les inégalités de revenus.” (“These increases in the minimum wage would have had little effect on income inequality”). This study is summarised (in English) here.
  • Teen employment, poverty and the minimum wage: Evidence from Canada: “[A] 10% rise in the minimum wage is also significantly associated with a 4%-6% increase in the percentage of families living under Low Income Cut Offs (LICOs) …  [A] higher minimum wage may paradoxically result in a significant negative shock to household income among low-income families.” (Emphasis added)
  • The (non) impact of minimum wages on poverty: Regression and simulation evidence for Canada: “We … find that minimum wages do not have a statistically significant effect on poverty and this finding is robust across a number of specifications. Our simulation results … find that only about 30% of the net earnings gain from minimum wage increases goes to the poor while about 70% “spill over” into the hands of the non-poor. Furthermore, we find that job losses are disproportionately concentrated on the poor. Our results highlight that, political rhetoric not-withstanding, minimum wages are poorly targeted as an anti-poverty device and are at best an exceedingly blunt instrument for dealing with poverty.”

As anti-poverty strategies go, increasing the minimum wage is at best pointless. A far more effective strategy for helping low-income workers would be to campaign for strengthening the Working Income Tax Benefit.

 




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Want to help the poor? Don’t waste your time with the minimum wage

  1. Foolishness and old data.

    • Based on what? Just because you disagree does not make it wrong.

    • It is a truth universally acknowledged that data no-one has seen must support whatever opinion one chooses to hold.

  2. Theory – reason is becausesince you can’t live on minimum wage anyway, everyone trulydependent on it died of starvation years ago. Those still alive reflect the actual minimum wage for their area.

  3. Interesting. Since, as you point out, the problem with minimum wage is more that people aren’t working enough hours rather than working at too low a wage, might the solution be to reduce the legal work-week?

    It sounds counter-intuitive, but some of our largest productivity gains came when we decided that a legal work week was 40 hours and no more. Why? Because it forced businesses to hire more people to keep up with demand. This has a wealth of effects including giving more people money to meet their needs (thus increasing demand and giving businesses meeting those needs opportunities to expand), forcing employers who have to hire more people to make their positions more attractive (ie, higher wages), and does so without disadvantaging those who are already working too few hours. If anything, the increased opportunities may benefit them, as they might be see their wages increase to keep them in the position, and may be reclassified as full-time with attendant benefits — to say nothing of perhaps being able to find a second position.

    And this doesn’t even speak to some of the benefits that might accrue from people having a lower level of work related stress.

    • Other way around. Higher productivity made it possible to work less. (Or, equivalently, some of the productivity gains were taken in the form of leisure.)

      • Had that been the case, I don’t believe unions would have been needed to force the government to create that legislation over the objections of business.

        • Yes, productivity growth means machines and energy do more of the heavy lifting. So if we have a functioning economy, where all segments of society benefit from productivity and economic growth, workers will have to work less hours over time.

          Unfortunately, due to the past 30 years of free-market reforms, we had an economic tide that only raised the yachts: only the rich got the benefits; living standards were downsized for everyone else.

          Keynes figured in 1936 we should have a 15 hour work week by now. Clearly, free-market ideology derailed that progress (and also caused a second global economic meltdown in 2008; the first was in 1929 which led to the development of Keynesian economics that created modern living standards in the post-war era.)

          So yes, we do need labor regulations that limit the work week over time to ensure workers share in progress (and others that prevent a global “race to the bottom.”)

          • Keynes got a lot of things wrong.

          • Actually, during the post-war era, using Keynesian economics we had an economic tide from which all segments of society benefited. This created modern living standards which were unprecedented in history. We had moderate levels of inequality and much higher productivity and economic growth.

            Not only that, but back then governments paid their bills. Debt was paid down from 100% to 17% in Canada; 135% to 35% in the US. Over the past 30 years of failed free-market reforms, debt has shot back up to 85% in Canada and 103% in the US. The period also ended in a global economic meltdown we have yet to recover from.

            Countries in northern Europe, like Sweden and Germany stuck with the mixed-market system and have among the strongest economies in the developed world.

            Perhaps you can elaborate on what Keynes got wrong? Clearly he got the most impressive results in economic history. Free-market purists got everything wrong with ideology entirely self-serving to businessmen.

          • Yes, Germany is in GREAT shape. It’s in the news everywhere.

          • “Yes, Germany is in GREAT shape. It’s in the news everywhere.”

            They are in great shape. They have a 6% GDP trade surplus founded on value-added exports. (Canada has a 3% GDP trade deficit.) Germany’s recovery coming out of the 2009 was stronger than Canada’s and they also have lower debt.

          • The 6% German trade surplus was founded on a low Euro exchange rates driven by low interest rates. Ask the rest of the Eurozone how that worked out.

          • That’s so true! we need ask a fundamental question: Why do we accept a economy system that provides unbalanced, unfair benefits to the extreme few rich over the rest of us and perpetuate the result again and again after each single boom-and-bust cycle?

            It’s time that we have to re-negotiate a fair deal for all of us. We need change the economic system essentially, from the ownership of investment to distribution of the wealth created in the whole society.

          • Yes a free-market economy is essentially a pyramid scheme that inevitably collapses. We don’t need to make radical changes. We just have to find the right compromises (like restoring progressive taxation.)

            But it does have to include some degree of redistribution of wealth. That’s because the historical reality is that a free-market system puts all the wealth and power in the hands of a few who can exploit and oppress the masses. That destroys an enormous amount of economic and human potential (both in developed and developing countries.) Centrist regulations are required to provide stability, sustainability and equality of opportunity.

            (A free-market economy is really economic anarchy that causes periodic chaos, both economic and political. It most certainly is not self-regulating; not even close.)

          • How much more “progressive” do you wish to get, Karl? Wealth redistribution is theft. The only “fair” tax is a flat tax, with no deductions. Those awful “rich people” tend to start business and hire “poor” people to work for them; I haven’t heard much about how many people the poor employ.

            In the US, the top 1% of earners pay 39% of all income taxes, the top 25% pay 86% and the top 50% earners pay 97% of all taxes. How much more “progressive” do you want, Komrade? How much of a person’s income do you feel you have a right to take, exactly?

          • You say the top 1% of earners pay 39%, but you fail to put down what percent of the income of those earners that is. It is considerably less than the average working stiff, if you care to look.
            Many top companies pay virtually no taxes yet still receive tax benefits. Tens of trillions of dollars have been funnelled out of the US economy in the last three decades into tax havens.
            Also, I’m sorry. But nobody “earns” a billion dollars. You seldom become a billionaire through hard word or ingenuity but through ruthless manipulation and exploiting somebody else’s ingenuity.
            These people are the biggest scoundrels, and hypocrites to boot.

          • Yeah, let’s just do that. How will we do it, Comrade?

            Please explain how to avoid the fundamental issues of scarcity and completely reform the very idea of exchange.

            Go on.

          • You were born in the wrong country, in the wrong era. You would have loved the soviet union in its heyday. They perfected the communist ideal of distributing misery equally to the citizenry, excepting those who were highly placed in the Party. But hey! At least it was “fair”. Heh, I wonder into what demographic you’d fall.

          • Yes, why not just enforce a 1 hour work week? That way the bad, productive people would be forced to also be bored like the good, lazy people, and find more ways to create problems, do drugs, expect everyone else to do everything for them, etc

          • So you’re arguing that the 40 hour work week is an unconscionable restriction on employers now?

          • You might look at the experience of France in reducing the length of its work week. How’s that working out for them? Did they achieve the full employment nirvana as a result? Unfortunately the experiment failed.

          • What nonsense. How *is* that working out for them? You haven’t provided any evidence that suggests it isn’t. Fact is France ranks #7 OECD in productivity, Canada ranks #17.

            The problem with France is that they have gone over the top with social benefits. They rank #1 in the world in social spending (Canada ranks #23, the US #25.) They need to cut back some to become more competitive. Canada and the US need to go in the other direction.

          • Really? France presently has over 10% unemployment., and youth unemployment at over 22%.

          • France’s high natural unemployment rate is not related to its work week. Germany has similar restrictions negotiated through its union system. It also has a lower work week according to the OECD in average hours actually worked by worker. (Total Hours per year / 52; Unemployment rate Oct 2012 OECD)

            1) Netherlands 26.5; 5.5%
            2) Germany 27.1; 5.4%
            3) Norway 27.4; 3.5%
            4) France 28.4; 10.4%
            5) Denmark 29.3; 7.7%
            16) Canada 32.7; 7.4%
            23) US 34.4; 7.9%

            http://stats.oecd.org/Index.aspx?DatasetCode=ANHRS

          • Yes

      • On May 1, 1926, auto maker Henry Ford voluntarily instituted the eight-hours-a-day, five-days-a-week work schedule for his factory workers. Three months later, he instituted the work policy for his office workers. Ford’s research made it clear that worker productivity and reduced production costs qualified the 40-hour work as a success. Ford also praised the shorter work week for providing employees with more social time.

        and

        In the early 1900s, Ford Motor… discovered that the “sweet spot” is 40 hours a week–and that, while adding another 20 hours provides a minor increase in productivity, that increase only lasts for three to four weeks, and then turns negative

        the long hours result in work that must be scrapped or redone

        and

        There were a solid five decades of industrial research that proved, beyond a doubt, that if you wanted to keep your workers bright, healthy, productive, safe and efficient over a sustained stretch of time, you kept them to no more than 40 hours a week and eight hours a day.

        knowledge workers actually have fewer good hours in a day than manual laborers do — on average, about six hours, as opposed to eight.

        Sounds more like the other way around to me.

        • Can you provide your source, please?

          • Thanks for that. I traced some of it back to the original articles, and came away with this piece, which I think nicely counters Gordon’s assertion: “Unions started fighting for the short week in both the UK and US in the early 19th century. By the latter part of the century, it was becoming the norm in an increasing number of industries. And a weird thing happened: over and over — across many business sectors in many countries — business owners discovered that when they gave into the union and cut the hours, their businesses became significantly more productive and profitable. ”

            Production follows the cut, which is what I said.

            Stephen, do you have data that can refute this?

  4. Clearly minimum wage needs to keep up with inflation, at least.

    But another way to boost disposable income for the working poor is on the benefits side. After decades of corporate downsizing, workers have few of the benefits they had 30 years ago. Corporations have turned many full-time jobs into part-time ones to cheat workers out of wages and benefits. (Private pensions have all but disappeared.)

    So in terms of healthcare-related benefits, Canada has about 70% public. What we should do is downgrade some healthcare benefits from one-tier to two-tier and upgrade other benefits like prescriptions, dental and eye care from private to two-tier. (The second tier would be general coverage like what is offered to seniors, the disabled and welfare recipients.)

    If all workers have decent benefits, they will be healthier, more productive and have more disposable income to save, invest and spend.

  5. The logic is really quite simple. People just want to cling onto their ideology regardless of the amount of damage it will cause because ultimately they will not have to endure the fallout. The poorest among us welcome job opportunities and the ability to move up in the world. Why do we refuse to let people help themselves?

    • This is really simply another way of saying “why do we refuse to let corporations help themselves to anything they can get?”

      The answer is because people need to eat while corporations only need to compete.

      If a corporation offers more than it absolutely has to to get the quality/skill of employee that it requires, it will be undercut by another corporation that is only offering what it absolutely has to. Not hiring a person means the corporation doesn’t expand, which presents risks in the long term, but not in the short term.

      At the same time, a person who doesn’t take a job because the pay is too low risks having no job at all, and thus no way to afford necessities. This presents risks in the short-term which trump the concerns of the long-term.

      Thus our entire system is weighted toward paying people subsistence level wages or worse. What balances out this weighting is our legislation.. all of which control the “free” contracts that can be put into place between corporations and employees, as an acknowledgement that these contracts are not “free” at all, but rather the result of weighted systems.

      • You seem to be ignoring the other side of the equation. If one is offered a low salary, they are free to look elsewhere for a higher one. It is not unknown for companies to compete for skilled labor, nor for skilled workers to leave for a higher paying job. Labor mobility is more that setting wage levels.

        • And that of course is essentially a lie. Here’s an analogy for ya:

          You’re dying of thirst in the dessert. I offer you a glass of water in exchange for ten years of indentured servitude.

          “That’s unfair!” you say.

          “You’re welcome to walk another ten miles to the oasis if you like.” I reply.

          So you accept the water, and now you do as I say.

          Sound fair to you? No? Gee, why would that be?

          • Yes, that’s EXACTLY like our employment situation in Canada. How did I ever miss it.

            In your world, Phil, apparently nobody ever shifts to a better paying job or gets a raise.

          • Well it’s not like I thought you’d agree with me, so I figured I’d be dramatic in my example.

            The bottom line is that paying people an hourly wage that could never be enough to live on, is taking advantage of need and desperation.

            And you’re okay with that because it doesn’t affect you.

            As far as this nonsense about raises and new jobs, I’m not concerned for the people who are upwardly mobile. I’m concerned for the large number of working poor who, because of their life circumstances, would have a much harder time of it, essentially for no good reason.

            We need to have certain basic values in this country, among them of course being the responsibility to work, but also that we don’t pay subsistence wages to ANYONE.

            No economic argument required: It’s simply immoral to do so.

          • No, of course I do not want to have people living on subsistence wages. But some of the arguments above (not all yours) are missing the point that the minimum wage group is not static. People move in and out of this income category for all sorts of reasons.

            The ones we should worry about, and that I think you are referring to, are those that are perpetually in that working poor group. Raising minimum wages arbitrarily or abruptly (I’m not talking about keeping pace with inflation), is a hammer that strikes all of the minimum wage jobs, rather than targeting a specific group.

            For some businesses, it can mean reducing the number of their workers, which naturally impacts the most sensitive that we should be concerned about. Is it more immoral to hire fewer workers? Hence, the stats that minimum wages increases do very little to help the working poor.

          • I wouldn’t dismiss your point certainly, which is why I don’t suggest that minimum wage should be “comfortable” per se, only that as a starting point it should at least be high enough that working 40+ hours does not leave someone in abject poverty.

            On your final point I’d re-emphasize that paying 8 people properly in leui of paying 10 people too little is a preferable stance for many reasons, so it isn’t always as simple as saying more “jobs good, less jobs bad”.

            Beyond that though I agree in general with the idea that the minimum wage is a minor issue. I just think it only becomes a minor issue when it is set properly in the first place.

          • That is the flaw in your argument: deciding how much to peg the MW. Because everyone will have different needs, depending on their own situation, and this is why the market should define what people’s worth is in terms of wages, not some faceless government agency.

            And your liberal pronouncement that “paying 8 people properly in leui of paying 10 people too little is a preferable” is great if you’re one of the 80%, but not so hot if you’re a student or immigrant in the 20% looking for experience or to build a resume. No offense, but who are YOU or anybody else to decide what those demographics should be?

          • >>> it should at least be high enough that working 40+ hours does not leave someone in abject poverty
            Right. The only ones who should be left in abject poverty are those whose low level of experience, skills, and productivity make them unemployable at the mandated starting wage. In other words, the ones who ought to be left in abject poverty are precisely the ones the law set out to help in the first place.

          • >>>paying 8 people properly in leui of paying 10 people too little is a preferable stance for many reasons
            Not to the 2 workers who remain unhired. I suppose you simply find some other government program for them, such as welfare.
            In any case, it’s fantastically presumptuous to decide for everyone, en masse, what is or is not “preferable”.

          • No, it isn’t like our employment situation in Canada.. specifically because we have legislation and programs in place that prevent it from becoming so. Pretty much everything in our labour laws category, for starters. On top of that, social welfare and employment insurance also work to lessen this weighting toward corporations.

            Considering that this exactly jibes with what I said about legislation addressing the imbalance of power, I suggest that you’re mistaken about me missing the other side of the equation.
            ===

            However, let’s go into more detail about companies competing for skilled labour, as you’re right, there can be some upward pressure on wages there. I submit, however, that such upward pressure is always temporary unless our economy has a negative level of unemployment.

            Why? Because anywhere there’s an increased demand/increased wages for a particular skill or ability set there will be an increased supply of people to fill that demand, seeking those higher wages. Further, since every market only reaches equilibrium once the market has been *oversupplied* (as the point where the equilibrium is cannot be foreseen until some amount of supply is unrequired), then there will be, eventually, an oversupply of every high demand area of labour. This will lead, without intervention of other factors such as unions or legislation, to a reduction in those wages because companies can then rely on the over-supply of labour’s short-term needs to survive to put pressure on wages back down. (“Sorry Mike, we either have to cut your wage or let you go and hire Starvin’ Joe over there who’ll work for a buck less than you — it’s the times.”)

          • You make the common error in assuming that free market capitalism is a zero-sum game. A healthy economy may stumble or encounter contractions or adjustments, but as long as the means exist for private sector growth, economies will do just that, and long-term, “oversupplying” the market with labour won’t be an issue.

            It’s only when punitive taxation and regulations interfere with market forces and incentives to invest that you start to see stagnation in employment, as witness what has happened south of the border.

    • “People just want to cling onto their ideology regardless of the amount of damage it will cause”

      Yes, and given all the damage free-market ideology has caused over the past 30 years, including a global economic meltdown we have yet to recover from, it’s time to abandon it and return to practical centrist economics which got incredible real-world results (presently in northern Europe and during the post-war era in North America.)

      • Utter nonsense. Nothing has caused more personal gain and prosperity than free market capitalism. Nothing.

        As for “incredible real-world results” in europe, apparently you’re not current with the financial situations of most all european countries, including the UK, Spain, Greece, et al. They practice socialized capitalism, but it’s hardly free market. In fact, north america hasn’t practiced true free market capitalism in decades, otherwise there would be no stimulus packages, or subsidies to solar companies, Fanny/Freddie or a thousand other ways governments impede the natural self-governing forces of a free market.

  6. Maybe if you raised the minimum wage we can keep Canadians working and foreign workers can be limited. There is absolutely no reason to have every fast food and coffee shop in Canada being almost completely run by foreign workers who barely speak our language

    • That’s just plain dumb. No one is importing foreign workers for coffee shops.

      They’re not foreign workers, they are immigrants. They are working. They are paying taxes. We need more.

      • We need more immigration and less foreign temporary workers. Better to have them spend their money in our country producing GDP and jobs than have it flowing out of the country, which is Harper’s current policy. In fact, Harper is allowing corporations to hire foreign temporary workers at a 15% discount which is terrible for job creation and wages in Canada.

        • That’s not quite true and doesn’t apply at all to coffee shops workers. The foreign worker policy is intended to mitigate short-term labor shortages, and the employers have to cover travel, room and board. There is little or no discount over Canadian workers. Moreover, this is not a new policy: farms in Quebec and Ontario have been using foreign workers for harvest time for many years.

      • Tim Hortons “is a company a lot of Canadians identify
        with and it is very proudly a Canadian brand,” says Howard Ramos, an
        associate professor of sociology at Dalhousie University in Halifax.

        “But it’s also a company that is a pioneer in hiring
        and abusing temporary foreign workers and so for this reason I think it’s
        important to highlight Tim Hortons as an exemplar of how the temporary foreign
        worker program has changed and expanded.”

        http://www.cbc.ca/news/canada/story/2012/12/11/f-temporary-foreign-worker-program-tim-hortons-canada.html

        In 2008, a representative of Tim Hortons’ licensing company,
        TDL Group Inc., told the federal citizenship and immigration committee that the
        company had more than 600 temporary foreign workers at stores across Canada,
        with another 400 arriving later in the year.

        • I stand corrected. However, why is this abusing foreign workers and is this really a problem in a company that hires many thousands?

  7. Regardless whatever your analysis is, when an economic system can only make the rich richer while the others get poorer or stagnation, it’s the time to yank the economic system because we just can’t sustain a society by this kind of economic system.

    Options are between Change it to benefit all or collapse of the society everybody, including the rich, suffers,

    • What does “yank the economic system” mean? Why not just have the government set everyone’s wage, including yours? That would surely be “fair”, wouldn’t it?

  8. I’m still waiting for that economic action plan to kick in, just heard another ad…any day now.
    What if an increase in minimum wage was combined with a small business tax reduction?

  9. I couldn’t agree more, raising minimum wage is a farse.

    Getting rid of mass immigration, something both the left and right love, would have a huge impact on private sector enumeration.

    The left and right appear to agree on one thing, competing for private sector employee’s is bad.

    I’m not surprised, considering big union and big business are the biggest beneficary of the mass immigration fraud.

    • Don’t know where you get your info, but we seriously need mass immigration. As the relative proportion of elderly in our population increases, we need the influx on new younger workers that our birth rate has not and will generate in sufficient numbers.

      Neither the left or the right is against immigration.

      • Immigration of skilled workers is beneficial; we don’t need more unskilled people scratching for work. And even immigration of skilled migrants is a long-term loser when chain migration is permitted and unfettered: you bring in the young engineer or scientist from wherever, and he and his wife later bring over both sets of grandparents to siphon our tottering and groaning public services without having to pay a dime into the system. Not a recipe for success, long-term.

  10. Professor Gordon, I don’t believe your last two sentences are justified by what comes before them. Any assistance provided by the minimum wage would be better than none. It would clearly have some effect.

    Readers should also consult these (admittedly American) sources for a different perspective.
    http://krugman.blogs.nytimes.com/2013/02/16/minimum-wage-economics/
    http://www.nextnewdeal.net/rortybomb/interview-dube-eitc-and-minimum-wage-complements
    http://www.cepr.net/index.php/blogs/beat-the-press/charles-lane-doesnt-like-the-minimum-wage
    I would be particularly interested in a response to Dean Baker’s arguments. And if Paul Krugman supports a minimum wage hike, it is likely a good idea.

    • Yes there are always two sides to the story, especially when it comes to economics. Some economists pretend their interpretations are indisputable or the result of science. Fact is many economists are agenda-driven and politically motivated which is why macroeconomics has (so far) failed to develop into a science.

      (Free-market economists believe unfettered self-interest is self-regulating. So wouldn’t it be in their self interest to cook data and promote policies that are self-serving?)

  11. Flat tax of 10% for everyone. Why are the hard and/or smart workers supposed to pay for all the roads, cops, and healthcare, when the other people use it just as much or more?

    • Police and roads are services that rich people rely on more to keep their standard of living than poor people do. The poor person relies on the road to his job and back for his standard of living. The rich person relies on that, plus the roads that enable his shipping and receiving. He buys more stuff, he relies more on the roads to get that stuff to him, and more on the police to protect his stuff once he has it.

      More importantly, however, we tax the rich people more because it causes them to suffer less. 33% of 300,000 per year still leaves 200,000 per year to live on. That’s a pretty good lifestyle by almost anybody’s metric. 10% of 18,000 leaves 16,200. That’s perhaps doable.. if you assume the truck doesn’t break, the kid doesn’t need braces, the dog doesn’t get hit by a car, or whatever.

      • Depends entirely on when that flat tax kicks in. For example, let’s say a 10% tax with a $15K basic deduction. Some making $18K pays only $300 income tax. The guy making $300K pays $28,500 in income tax. A 30% flat tax would yield $1000 and $85,500 respectively.

        You can do the math, the higher the basic deduction, the more progressive the level of taxation, even with a flat tax. The main benefit is that it removes the disincentive for working more since there is no such thing as moving into higher tax brackets.

        • Nobody stops earning money for fear of going into a higher tax bracket. That is a 1970s argument. Canada only has 3 tax brackets. So that argument no longer applies.

          • Please stop inserting reality into the fantasy-based theory of your opponents.

          • I agree that a flatter tax rate is less of an issue here, I was merely providing a general argument. However, my point stands that a flat tax provides less disincentive to earn the “next dollar”, and can be beneficial for low income families by setting higher basic deductions.

          • So your argument is that if a person has a choice between earning $10 and paying $1 in tax (net $9), or earning $11 and paying $1.50 in tax (net $9.50) they’ll choose the lower tax option?

            Really?

          • there are poverty traps though. Tax brackets alone don’t account for other social supports like GST refunds, WITB and provincial benefits which are clawed back or abruptly vanish based on differing clawbacks and thresholds

      • That’s mostly nonsense.

        The “rich” person pays for the higher use of those roads via gasoline taxes to run his shipments, or to vendors who pass along those costs as shipping fees.

        Who are YOU, or anybody, to decree what a “pretty good metric” is for people to keep their earnings? You socialists are all too willing to punish achievers and entrepreneurs to salve your ideals of “social justice”, but punishing someone for innovation, perseverance and hard work is immoral.

        • Ah. Brilliant logic.

          If you think gasoline taxes are enough to pay for our transportation infrastructure, you’re simply ignorant. However to think that vendors shipping charges go to pay for our transportation infrastructure is simply moronic. And that’s without even going into the various other systems our society has in place to protect people which almost all skew toward protecting the “achievers and entrepreneurs” beyond everybody else.

          Even those systems which control poverty. Imagine if they weren’t there. You think the poor would quietly lie down and die if they couldn’t get enough to eat? So did the nobility of France in the late 1700′s or so. That worked out well for them, didn’t it?

          Get a clue, then try again.

          • No, Marxist, check your facts and run your brain before your keyboard.

            Highway/road repair would be much easier to fund if the gasoline taxes weren’t stolen to pay for public transportation, one of the biggest subsidized losers running, after renewable energy. Our roads would be in much better condition if gas taxes weren’t siphoned to pay for the TTC, GO Transit, or other highly subsidized public transit.

            As you have difficulty reading for context, let me make it easier for your to understand: if you buy something that is shipped to you, the shipper pays for gasoline (hence gas taxes for road repair) and those costs that are passed along to you, the buyer. Or did you think the shipper eats those costs because you’re such a pleasant individual?

            In a fair, non-redistributionist society, people pay in proportion to the public services they consume; all else is wealth redistribution or legalized theft. Do you think a rich man should pay more for his local police, than a low wage earner? Why? Is his life somehow worth “less” if he doesn’t pony up more cash? This is why income taxes are a bad idea to pay for things like roads, and better replaced with consumption taxes by those who use the infrastructure.

            As for systems that control poverty, many of them make things worse for the poor, and not better. Or are you completely ignorant of the swamp that is Aboriginal Affairs? Ten billion or so spent yearly, and natives live in hovels and must boil their water to live. How well our “poverty control system” works for them, eh? Our welfare system has morphed from a social safety net to a hammock, and woe be unto he that dares challenge it, or suggest that welfare recipients be encouraged to find jobs.

            Before redistributionists such as you came into the picture, there were more charitable organizations, fraternal societies, and people tended to give more to charities and to help their neighbour. Not nearly as much, now; high taxation for our “just society” leaves far less to give privately to others, and the common thought is why bother giving, when the government is taking care of things? Except that they don’t “take care of things”, and a dollar given to a charity will go further towards the intended recipient than the grossly inefficient charitable organs of government would ever provide.

      • Still doesn’t make it fair. Many people could work their way up to a higher income if they really tried.

    • Depends on whether you think that money is made in a bubble of their own creation.

      Depends on whether you believe resources and societal capacity exists for the strong to take advantage of the weak.

      Depends on whether you believe that those in a position to make a lot of money do so entirely on the basis of their “superiority” to others.

      Depends on whether you think that the lottery of life circumstances and basic nature is a mystical judgement call of some type in which people are supposed to suffer from the inadequacies they had no part in creating.

      Depends on whether you believe in the fundamental value of the human person and whether we have a responsbility as a society to advocate for human dignity.

      Taxes, people, resources etc are society’s common pool of assets. Those who benefit greatly from it owe a debt to society, because without that society those people would not have what they have.

      • Wow Phil….I personally know a few millionaires. They earned their money. At one point they were facing bankruptcy. They all took BIG risks. A few of them are very CHEAP with their money. They rarely travel. They don’t spend much on luxuries. Could each of us earn our money the way they did…absolutely BUT we would have to take risks too and we would have to go without any perks…no eating out in restaurants – EVER. No renting movies, etc. Now I also know of a millionaire who earned his million through inheritance. His name is Justin Trudeau. I am not sure what risks he took or how much he denied himself.

        I think, Phil, you have to rethink your assumptions that everyone who is “rich” has taken advantage of someone else to get there. If you google where the most millionaires in the US live. You will find it is a place that is overwhelmingly populated by scientists who earn $60K a year. There are making good investments and spending NO money. If they went to school in the US, they either went for free because they had fantastic grades or they paid through the nose. How do they owe society a debt because they spend no money on themselves?

        • Oh by the way Phil, read the story of Sam Walton, the man who started Walmart after a least a dozen business failures. Read the story of Stephen King who had his first novel published after multiple refusals. Read about the skidrow drunk who started Second Cup. These people persisted. They weren’t ‘superior’ in luck or any other way except that they refused to give up no matter how many times they were beaten down.

          • Great comments, kudos.

        • I think, HI, you have to rethink your assumptions about what you read in Phil’s comment.

          As a hint, I’d suggest you read just the first and last paragraphs of his post again, and sit down and have a good long think about what they might mean together.

          • Okay Thwim, I will read Phil’s comment over again…perhaps several times. Meanwhile, you can explain to me why a family with two adults who each multiple jobs to get “rich” should be punished because they don’t fit the mold of your “feel put upon by an employer and want a decreased work week”. In Alberta a few years ago there was a nurse who made $400K. There was actually about 5 in the multiple hundreds of thousands bracket. A full time nurse typically makes $88K, however, we are always short and there is overtime to be had if somebody wants it. Are you and Phil going to say that this nurse owes that money made on their own sweat to someone else and should pay it back to someone who won’t go out and work as hard as them because they worked so hard for it? Explain that to me because I apparently don’t understand despite my re-reading Phil’s comment multiple times. You see, Thwim not every “rich” person is a corporation. Some are hard working employees.

          • The answer is contained within what I told you to read.

            However, since that’s giving you trouble, I’ll provide you the short version:

            Society is more than one person.

          • Despite their histrionics, that’s exactly what they believe.

        • Unfortunately HI you’re not actually responding to what I’m saying, so your comment diverges away from my point entirely.

          Everything each of us has, especially these days, is a direct result of the existence of society and the state it is in, the very means by which people can realize their dreams.

          Some of us, including myself, are in more of a position and are more capable of realizing those dreams.

          That doesn’t justify paying other people subsistence wages.

          I myself received more of an inheritance than Trudeau, based on his divulging of his finacial situation, and I’ve made far more money than him in my life so far, as far as I can tell. I don’t consider Trudeau “rich” let alone some poor sap making $60K. I perhaps qualify, but then I’m not complaining about it am I?

          I recognize that if not for student loans when I was young, the kindness of strangers and the willingness of society to provide the means early on, I would not be where I am today, inheritance or no inheritance.

          I make good money, and while I’m sometimes livid at the way governments spends that money, I never feel like I’m being asked for more than what is fair, in terms of taxes and the like. They just need to stop blowing it down the sink hole.

          • Gee Phil, I think you just identified yourself as part of the “1 percent”. I don’t know if that was a good thing to do on this blog.
            As for paying people “subsistence wages”, I live in a province where no one makes the minimum wage. If you offered it, you wouldn’t get an employee. Restaurants are paying $15.00/hr. in Calgary. I can’t imagine what they pay in Fort McMurray and Cold Lake where housing is expensive and workers are in very short supply.
            I want to ask you what you feel about people getting very high wages during a boom time due to short supply of workers. Is that justified?

          • Well you know me HI, I’m willing to take my lumps when people make good points, but for those tempted into ad hominems or appeals to authority on the basis of things like race, income, partisan politics etc, I find it fairly easy to dismiss their robotic responses. I prefer to have a real conversation.

            On topic, I know what you’re driving at so I’ll skip to the point: I’m not fond of government getting overly involved in people’s business. I’m an old school progressive conservative in that regard.

            The thing is, there is one appropriate area for government: regulation.

            I view the minimum wage as a necessary regulation to offset the pressures on business to compete with other firms in this regard. As I’m intimately aware, one of the largest costs to business is labour. The company that can get that down often wins out in the long run, so there is incredible pressure on business to limit those costs.

            What’s good for business though is not necessarily good for society in many cases.

            A properly set minimum wage alleviates pressure on businesses to compete with their unethical counterparts, just as environmental regulation alleviates pressure on businesses to underfund their waste remediation, as firm’s with less moral fibre are want to do in jurisdictions that allow them to get away with it.

            The business world is incredibly competitive. Without a solid set of ground rules we leave people vulnerable to the inevitable unscrupulousness of some people.

          • “…I want to ask you what you feel about people getting very high wages during a boom time due to short supply of workers. Is that justified?…”

            As far as this bit above, business will pay as little as they can. If they’re paying that much, then clearly it’s because they have to. They’ve self identified and therefore self justified the pay rate.

            That pay rate will eventually drop too, and thank god there’s a minimum to keep future competition from empoverishing the average person when they are vulnerable.

            How much is a human life worth?

            That’s the underpinning question that drives the perceived value of human work and human dignity.

          • If you sell your house, do you try for the maximum price you can get, or do you let the first buyer lowball you and be satisfied with that?

            No? Ahh… you want to get the most dough you can find, eh? Same with business. Same with employees. A marketplace will accomplish that quite efficiently, and much more fairly than the government.

            Your previous comment dovetails nicely with the obama mantra, “You didn’t build that”. How unsurprising.

          • Nobody relies on selling their house to put food on the table next week.

            Most people do rely on their employment for that, however.

          • *sigh*

            It’s the same principle, whether selling a house, car or running a business.

            Why do you think companies hire people? Answers beginning with “Because it’s their societal duty” are graded a zero score, and those that include “people help the company make money” get full marks.

            High labor costs cause a company to either reduce its workforce, automate and likewise reduce its workforce (perhaps paying more to those who stay) or contract the work to other locales where the labor is cheaper. So having a minimum wage puts people out of work here, and employs them elsewhere.

            Reducing taxes on businesses and individuals boosts the economy and raises government income: this was proven by Bush 43, Reagan and even JFK. The government’s focus should be on lowering taxes, reducing punitive and useless regulations, and encouraging investment in the private sector, both nationally and internationally. The more private sector jobs that are created makes for higher competition for labor, which increases demand for same: wages must necessarily rise, and this benefits the working poor more than some arbitrary minimum wage.

            An environment that encourages private sector economic growth is a very good thing for everyone involved, including low wage earners. Yes, this implies that business owners who risk their investment to start or run a company stand to make more money than those who punch a clock and work on the shop floor, but that concept is only “unfair” to those with an entitlement mentality who have never risked a dime to fund any business venture in their lives. The US used to have a truly entrepreneurial culture, when the “American Dream” was alive and well; contrast that to what they have today: almost 50% of the country paying no income taxes, a growing parastical public sector and a shrinking private sector. Not the recipe for long-term economic success for anyone, including the working poor.

          • No. It’s very explicitly not the same principle. If you can’t understand that, you clearly have absolutely no idea how the world works for most people.

            Incidentally, your crap about Bush and Reagan is exactly that. Crap. PBO studies showed that when gov’t taxes decline, gov’t income declines. Not as much as the direct tax loss would imply — so there was some marginal increase in business — but they did lose.

            As for the “American Dream” stuff.. go talk to Ron Waller, he’ll provide some basic history stats that your education sorely needs.

            An environment that encourages private sector economic growth is a good thing, I highly agree. However, you’ve completely ignored my earlier post, where I outline how our system, if fully unfettered as you seem to be arguing, is designed to ultimately lead to a complete destruction of the middle class, with the population being divided into the indentured serfs, and the owning nobility. Which is why I pointed you to France in the late 1700s so you could see where that leads.

            Unless we get so much private enterprise going that we actually have a negative unemployment rate, wages for the workers will inevitably decline as companies compete against one another for who can pay the lowest to get their talent, and people end up having to settle if they want to eat. That’s where your example of the house falls down. People need to eat, and that short term requirement trumps the long-term requirement of holding out for another job. If you’re selling your house to afford to put food on the table.. do you really wait a month or two to get the right price before you eat?

          • PBO propaganda notwithstanding, the examples I listed did increase government income; it arises via more taxpayers, not fleecing a smaller amount of taxpayers for more cash. Government income may decrease with a decrease in taxation, depending on where you sit on the Laffer curve, which isn’t normal in shape, centering around the 50% rate, by the way.

            If you want to see destruction of the middle class, you have a real-life experiment to watch, south of the border. They are having the perfect storm of increasing taxation, over-regulation, increasing public sector rolls and pay/benefits for same, and a shrinking private sector. This is leading to more people laying about, inside the wagon, and fewer private sector people pulling it.

            Grab some popcorn, it’s going to be interesting.

      • Spoken like a true communist.

        • Yup, the promotion of fairness, equality of opportunity, dignity of the human being etc. REAL communist that.
          Perhaps you should open a history book, but then I understand why you haven’t. Reality might just blow your mind, and then what would you do?

          • “fairness” is a communist concept. It is entirely subjective and impossible to define. Same with “dignity of the human being”. The rest of your points are straight out of the communist manifesto. Go ahead, Mr Karl Marx, take a look. You’re a true advocate of the class struggle.

          • “Fairness” is a concept that exists across pretty much every value system devised by humans. Exactly what constitutes fairness varies from culture to culture, but the concept itself is pretty much universal.

          • Wow, you are such a genius. The concept of fairness exists, it was not invented by Phil King. Now I know how I understood the word. I thought I heard it before somewhere.

          • well, clearly more clever than you if you think it is purely a communist concept. You do know labelling people “commie” is no different than calling someone fascist or nazi, right? – you lose by default.

          • More genius from you. My lucky day. I’m overwhelmed. Apparently I lose, because I called a communist a communist. What can you call someone in the Communist Party of Canada? What can you call the Cuban, Chinese or N Korean government? What can you call someone who advocates the ideas from the Communist Manifesto? Don’t answer, genius, it’s rhetorical. Apparently calling a communist a communist is a concept that is difficult for KeithBram to comprehend.

          • Have never seen Phil declare allegiance to the other CPC. Does your right-wing philosophy automatically make you fascist?

            You used to make some intelligent comments on here but lately you are sounding more & more like the CPC trolls. Heck, you make even Orson look good…

          • When a guy writes a comment with a bunch of points straight out of the communist manifesto, then what can you do? Seriously, I’ll call a spade a spade any day. And there are no CPC trolls, most of the conservatives that have been here a while left these blogs a long time ago, I’m one of the only ones left. You can’t even label a troll correctly… a troll is someone who won’t go away, not the hordes of conservatives who are long gone and won’t come back. You haven’t even noticed! What a laugh. There are plenty of trolls of the other variety here, however. I’ve not changed the slightest bit.

          • Liberals/the left don’t believe in “equality of opportunty”, they only believe in equality of outcome. That’s the problem.

          • Absolutely, that’s why they’re obsessed with income inequality rather than income mobility.

          • Hint: A person with more resources has more opportunity than one without.

          • You prove my point: you believe everyone must have equal “resources” to try to make it on their own. Nobody can make it using their own brainpower, hard work and perseverance: you must steal private property from those who are successful to “guarantee” everyone a shot.

            Which is patently ridiculous. Know any successful business owners who did well on their own, starting from humble beginnings to building successful ventures? There’s lots of them, and they didn’t need the socialist, patronizing hand of government to propel them into success.

            Be honest: you wet your pants at obama’s “YOU DIDN’T BUILD THAT!” moment, didn’t you?

          • No, I don’t believe that, so kindly piss off instead of trying to put words in my mouth. There’s a difference between acknowledging that more resources provide more opportunity and thinking that everybody requires equal resources to make it.

            A person who can afford a phone has better employment opportunities than one who cannot. A person who has a car has better employment opportunities than one who doesn’t. Do you dispute this?

            And yes, pretty much everybody in our society needs our society to start a business. They need protection for their assets, protection for their ideas, aid in transportation and communication infrastructure, stability of the nation around them to ensure a customer base that can purchase their products or services, a whole wealth of things that society has provided. No, a government guy in a suit doesn’t drive up and give them a cheque, but they make use of and rely on the things this society provides.

            Known any Hell’s Angels? There’s many reasons successful business owners were able to do well on their own.. and one of them is because most of them don’t wind up knowing any Hell’s Angels.

            Now, perhaps when you grow up and get beyond scatological insults, you’ll be able to take a wider view and realize how the world really works.

          • Oh, Dear. Our panties are all in a twist, are they?

            Your resource straw man is just that: a straw man. Anybody can use a library PC to make a resume, and employment centers have these things called, er, “telephones” that unemployed folk may use to do arcane things like “book interviews” and make “cold calls” to prospective employers. Or is it my job to give them a blackberry with a boffo data plan to help them along? Get real.

            But I’ll still play along. Are there wealthy lawyers and bankers working on Bay Street that don’t drive and take the TTC? Guess there would be “no benefit” to having a car in that case. Or perhaps they are privileged because they wear $1500 suits to the job; should taxpayers bus the unemployed or disadvantaged to Harry Rosen for a wardrobe makeover?

            We DO need government institutions in a productive society: police and fire departments to protect ourselves and physical assets, and courts to enforce contracts. I’ve not disputed that, but I don’t believe funding them should be a tiered proposition. Transportation is a legitimate government function, and I support it. I just don’t think that somebody driving a BMW on the #407 should pay a higher fee to use the road than the dude in the rusted ’67 VW Microbus. Perhaps you feel differently; it’s how a socialist would rationalize things.

            I have no idea how the Hells Angels figure into this thread, and I’ve yet to see an entrepreneurial business plan that covers the Angels in some interesting Appendix or other. I think you’re grasping at straws.

            Now excuse me, as I must “get beyond scatalogical insults” while I “kindly p1ss off”.

      • In the words of someone on Blazing Saddles, “Could you repeat that, sir?”

  12. This comment was deleted.

    • Yeah, personal anecdotes are always more reliable than stats!

      • There are many interpretations of the stats. Minimum wage is not an issue in Canada because ours is average among first-world countries. The Americans’, however, is much lower than ours.

        When it comes to economics there is no authoritative interpretation of stats. One has to look around and get the other side of the story. (Fact is free-market libertarian economists are actually opposed to the minimum wage altogether.)

        A breakdown of the hourly minimum wage rate in OECD countries http://www.theglobeandmail.com/report-on-business/economy/economy-lab/data-room/a-breakdown-of-the-hourly-minimum-wage-rate-in-oecd-countries/article8609365/

      • Oh please, the author was obviously careful only to use certain stats and debate certain points, all of which are meant to lead the reader to one conclusion. The author may have convinced themselves, but I see too many issues swept under the rug to buy it for a second.

        Essentially, most of the arguments in the article are besides the point.

        • Fine so present YOUR evidence, since you have obviously researched this in depth, judging from your comment above.

          • I made my arguments earlier and laid out some of the aspects of this issue that I believe are being ignored.

            Having a cold calculated argument over why it’s okay to pay people subsistence wages in a country as well off as ours, is an exercise in cerebral wanking.

            This is an ethical issue as much as it is a business issue.

          • Yes, who cares about the actual results, as long as your elitist guilt is assuaged. All that matters is your feelings, not the actual well-being of the poor.

          • You’re not responding to anything I’ve said or any of the opinions I hold. Your interpretation is predicated on how you choose see the world around you. In essence your comment is a mirror of you alone.

            Since my entire point throughout my comments here has centered around ensuring a balanced opinion that doesn’t fixate soley on select data points or preconceived notions that disregard important basic principles and the crushing reality of some people’s lives, I can only assume you have an axe to grind with the world and are therefore lashing out.

            That’s unfortunate, since you could clearly do better than that. Good luck.

      • Stats are like bible quotes. You can always find ones you need to suit your purpose.

    • Because why should women and children of colour get to eat. F*35 the poor.

      • Gee, that’s a pretty worthwhile observation, and beneficial to the issue. Where did you study economics?

    • Economists have agreed for a long time that minimum wage has dis-employment effects, and most of them are liberals who believe in a lot of government intervention to help the poor. But they’ve been much more critical of the minimum wage than the average person is. There’s a large minority of economists that have come to the view that a sufficiently low minimum wage has none or negligible disemployment effects. More would say that it has more than negligable disemployment effects, but its worth the cost compared to nothing, but not worth it if less costly anti-poverty programs could be implemented instead.

      Basically labor economists have very different views of minimum wage from the average person’s view that it is basically money from the pockets of rich people into the pockets of poor people.

      Poor people support higher minimum wage just like the average person does. It doesn’t mean that minimum wage actually helps them.

      • Economists are shills for capitalism, gtfo. They’re not scientists and economics is not a science. Anyone with a brain knows this.

        What a weird fantasy world economists live in. They talk about people choosing to enter the work force. Most people never have that choice.

        It’s one thing to talk about things in the abstract, but it’s another to dismiss any real world application as having no bearing on reality, and then making it sound like it’s just a big game.

        I guess it IS a big game for those who have never needed to worry about putting food on the table, & never had to worry about having the table.

        • Economic laws – supply and demand, for example – are as immutable as the law of gravity, your socialist rants notwithstanding. It’s social tinkerers and government fiat that helps keep people poor, not free market capitalism. The socialist systems you admire don’t help the poor, but only create more of them.

          • lol yes of course, that is such bullshit because there are other fudge factors that are not immutable and totally political – i.e. private property, the state and the whole legal framework that govern commerce backed by men with guns.

            The conceit that it’s ‘the laws of nature’ is nonsense.

          • If you think the laws of Supply and Demand are “political”, you are stupider than even your posts indicate. And possibly dangerous, if you are sentient enough to find a voting booth on Election Day.

            Ever sold anything privately, Brainiac? A car, or house, perhaps? Did you have a hard time selling it because the price was too high? Then you created a surplus because your pricing reduced demand for whatever you tried to sell, and it only moved when you reduced your asking price, raising demand. Or maybe you even priced it competitively, causing a bid war between interested buyers, who – gasp – showed an increased demand for the limited supply.

            I’m puzzled at how you could not understand such a simple foundational concept, yet are able to turn on a computer and type on a website. Mindless comments, to be sure, but typing nonetheless.

            Supply/demand/pricing phenomena is also easily proven by any first-year university or highschool calculus student, when reviewing the pricing min/max derivative problem: it is fact, proven mathematically, and not open to knee-jerk leftist hysteria.

        • When someone stands up and proclaims, “all the experts are wrong”, and doesn’t know what the experts are saying, I don’t assume the experts are biased.

          As far as methodology goes, price theory has been the strongest aspects of economics. You don’t even have to venture very deep to figure out that if you make something more expensive, people buy less of it. Even non-economists presume this in supporting “sin taxes” and tariffs on foreign-made products. This presumption is thrown out the window when they start talking about labor. Why? Because a lot of people just really liked minimum wage before they really thought about it. I was one too. I changed my mind.

    • The minimum wage wasn’t set up to be a “living wage”, genius. But maybe it should be increased to $20 or $30 for that purpose. Would that make things better? Give us your economic take on the topic.

  13. An interesting article I suppose, but I find the way this topic is handled to be a bit disingenuous, or at least myopic. The choice of focus generates a view that is besides the point in many ways.

    So there’s a weak correlation between increased minimum wage and unemployment. To me that’s a non-point altogether. You can’t suggest for example that it’s better to hire ten people but leave them all struggling in poverty, than it is to hire eight people and pay them properly.

    The minimum wage is in many ways a social indicator of values too. What we say as a society with our minimum wage depends on where its set. Is it okay to pay people so little that even if they work 40 hours a week they don’t come in above the poverty line? I don’t think so, and I think it reflects how we value people in general if we do. The social messaging and psychological spinoff effects of that statment are huge.

    Minimum wage is also the bar by which people negotiate future pay increases or set levels of pay. So even someone who makes more than minimum wage is affected by what the minimum wage is.

    And frankly, that last bullet point is shockingly used. Basically it says that the result of low minimum wage is that all the poor people shack up together… and that’s okay. Interesting how it’s okay to set standards for others we ourselves wouldn’t accept.

    The underlying message here is that where and how we set the minimum wage is irrelevant. I find that extremely disturbing.

    The minimum wage is a message we all send about the value of human work. There’s intrinsic ethical and moral questions involved in that, whether we like it or not.

    • “You can’t suggest for example that it’s better to hire ten people but leave them all struggling in poverty, than it is to hire eight people and pay them properly.” What if increasing the wage means employers reduce their hours so they take home the same amount? What’s required is some form of minimum income, probably requiring some contribution from government in a less bureaucratic way than WITB, but crafting it in a way which doesn’t incentivise employers to game it won’t be easy either.

      • We can’t do much about the part time / full time thing in my opinion. Business needs the flexibility inherent in the ability to use such combinations, and besides which, nobody could ever get part time work if they needed it if we did otherwise.

        Given that one way or another the business would have to pay a living wage calculated by the hour, they could only cut hours and have it benefit them if they don’t actually need the work done. We can’t exactly force companies to hire people for no reason can we?

        The most we can expect in my opinion is that someone working a full week (37.5 hours) should be able to make enough to survive. So if that means two part-time jobs, then I don’t see what we can reasonably do about that.

        If what you’re talking about is an income tax system that generates a living wage based on a refundable deductible set at the poverty line, that’s a whole other ball of wax isn’t it? People have been discussing that for decades, and it involves a massive shift of perspective I don’t see happening anytime soon. I’d have to see the case laid out to be 100% on board with that given the pitfalls I see.

    • “You can’t suggest for example that it’s better to hire ten people but leave them all struggling in poverty, than it is to hire eight people and pay them properly.”

      Pay them properly? Minimum wage can hardly be said to push the wages of those 8 people from being paid “improperly” to “properly” (whatever that means). You’re not pulling eight people out of poverty, you’re pulling them into a slightly less harsh poverty in exchange for 2 of them becoming unemployed. “properly” makes it sound like minimum wage is boosting people into the middle class. Minimum wage in its most effective form does nothing close to that.

      “Is it okay to pay people so little that even if they work 40 hours a week they don’t come in above the poverty line?”

      Where does these threshold come from? It is just wrong to employ people for $7.50 an hour, but at $9.00 an hour wrong becomes right? The poverty line is in people’s heads. It’s made up. It’s not a metaphysical reality.

      The stuff about intrinsic ethics and morality is kind of silly. You can’t separate the results of minimum wage from the ethics of it. If it leads to negative results for the people its trying to help, does ethics still dictate that we must have it? How high should the minimum wage be before it becomes unethical? And don’t answer it based on how high the minimum wage would have to be before it starts becoming counter-productive, because the ethics and pragmatics are detached.. Its hard to see why we wouldn’t raise minimum wage to $20 an hour or $40 an hour in order to be REALLY ethical, even though the results would CLEARLY be bad for those with low incomes.

      “Minimum wage is also the bar by which people negotiate future pay increases or set levels of pay. So even someone who makes more than minimum wage is affected by what the minimum wage is.”

      Minimum wage possibly effects the wages immediately above it, but not wages in general. The bar explanation means that a bunch of people change their behavior because politicians made up a new number. That just doesn’t make any sense.

      There is a wage above which it would be unprofitable to hire a worker, and another wage under which it would be unprofitable for the worker to take the job. Negotiations take place between these two thresholds.

      Worker won’t work threshold I——–Negotiations——–I Employer won’t employ threshold

      As for the employer threshold; If you could not employ me for more than $6.01 and minimum wage increases from $5.50 to $6.00 an hour, has the wage at which it is no longer profitable to employ me changed? Why would it?

      As for the worker threshold; there some people lean on a irrational psychology story (the bar story). I’ve read up on psychological biases, and this doesn’t meet the criteria of any of them. Workers do not make different choices because politicians made up a new number. Minimum wage can force wages higher than the worker won’t work threshold, it does not effect the psychology of where the worker sets it. Workers adjusting their wages relative to minimum wage is irrational behavior. Nothing real in the worker’s life has changed.

      Even if employees did adjust their threshold relative to minimum wage, that makes the new wage even more prone to exceeding the employer threshold, which would make the employee irrationally unemployed (the worker chooses unemployment even though the worker can and should be employed).

      There is a non-psychological explanation for why minimum wage effects the wages immediately above it. That is; some jobs are now more viable for higher than minimum wage low income workers. I have more negotiating power with my $6.25 an hour employer if a bunch of new employers are now paying the new minimum wage of $6.00. I have a bunch of new options.

      However, not that this is only viable if my employer is competing with minimum wage employers. It does not boost the wage of anybody who would not plausibly leave their job for a minimum wage job. Yes minimum wage can increase the wages of those making immediately above minimum wage. No it is not because a new bar has been set. No it does not effect the vast majority of workers. No it doesn’t effect even the vast majority of low income workers. One would not plausibly leave their $12 an hour job because a bunch of new employers are paying the new minimum wage of $9… but maybe if one were making $10.

      CognitiveStrain.blogspot.com

      • Nice rant. I certainly agree with some of your points.

        You probably should’ve just posted your own comment rather than “respond” to mine though, since you’re not really doing so in any meaningful way.

        “Properly” for example is a matter of perspective that is useless to single out if you’re not responding the definition I’m employing. I don’t disagree with the substance of your point, it’s just not responding to the substance of mine.

        Things are not usually as simple as we would like to make them out to be. That’s why I speak about the underlying principles rather than suppose that details are some form of absolute.

        We all together must decide what is reasonable, what is fair, what is right etc, and we can only do so on the basis of asking those questions in the first place. We can’t avoid that discussion with static facts that don’t take into account our values as people, which is my main problem with the view provided in the article, understandable as it is from the perspective employed.

        Cheers.

        • Do you believe that it is okay to cause net damage income workers because a bunch of other people looked into their intuitions and decided that it was fair?

          These underlying principles are undefined objectively, and subjectively defined principles that “we all agree to” translate to “its right because I believe its right”. Besides that, they’ve been shown to be inconsistent.

          Consider two questions, first;

          “Should the child exemption be larger for the rich than for the poor?”

          And we reach down into our intuitions and survey says, No! We all agree that this would be unfair and intrinsically unethical.

          Second;

          “Should the childless poor pay as large a surcharge as the childless rich?”

          Survey says, NO! We all agree that this would be unfair and intrinsically unethical.

          You can’t have it both ways. You cannot logically reject both proposals. In the first question our principles want the poor to receive the same or greater benefits as the rich for having children, but then our principles have to want the poor to pay at least the same penalty as the rich for being childless.

          These kinds of principles are volatile, inconsistent, and indefinable. Principles if they’re going to make any sense, need definitions that don’t depend on how we feel about them.

          Consider: Me and many others would like to live in a world where everyone makes at least $40,000 a year. We propose raising minimum wage to $40,000 a year because that’s what we think proper pay is (not your silly $9 an hour, which is clearly not enough to live on). Me and others are not concerned with the results of such a policy, even though they would certainly be disastrous, it is the right thing to do.

          Please change your mind.

          • I consider some of your lines of logic to be reductio ad absurdum. One can take nearly any point and push it to an extreme in which it no longer makes sense. Such is your example concerning $40K minimum wage.
            Beyond that you seem to have a desire for black and white answers in a world consisting of mostly grey zones. I cannot do anything to help you with that; it is what it is.

            What you fail to recognize is that any measure or statistic one choses is fraught with the same complications, ie. people have to agree that it is the right measure to use in one case or another and those reasons have different logics leading to different conclusions, none of which are entirely right or wrong.

            So there is no absolute or fundamental law of right and wrong to draw on to come to conclusion, only the interpretations of people. That is why fundamental principles are more useful. They at least start from a point most can agree on, thus allowing us to trace points of divergence and agree upon compromises.

            And so I must return to my original point: Minimum wage exists for good reasons, and those reasons are mostly not economic-system related, but principally based. And no matter where it is set, it says something about society’s few of the value of human work.

            For me the bottom line is survivability. If a person works 40 to 60 hours a week, they should reasonably expect to be able to survive on that wage, rather than live on the street. I don’t expect it to be comfortable, but it should at least not result in an over-due burden on people.

            Yes that’s relative. How could it not be relative?

            Have you a better solution, or would you have no minimum wage at all?

          • There should be no minimum wage; as Friedman noted, you cannot legislate a person’s worth to a company. History shows that low wage workers are hurt with rises to the MW; it certainly harms students and those without marketable skills/experience, who take MW jobs to build resumes and – hopefully – move on to better jobs.

            But by saying that an employer cannot pay a man $9.99 an hour to do productive work because some random governmental decree says anything less than a $10 MW is legal deprives that man of earnings and the opportunity to gain experience. So an employer who might be able to employ somebody at a lower wage for doing work that isn’t worth $10 to them doesn’t hire, the work isn’t done and the job-seeker remains unemployed. Where’s the benefit in that?

            Labor is a commodity, and subject to the real-life forces of supply/demand. If it is overpriced, demand drops and you must have surpluses, or unemployment; this is fact. And to the social busybodies who argue that this will entice employers to pay slave wages, the opposite is true: people won’t take jobs for miserly wages, nor will companies that wish to retain good employees keep them without market compensation. You also hear the same types huff that “any company that can’t pay minimum wage shouldn’t be in business, anyway”. Easy for them to say, however. Maybe a startup company can afford to pay an employee $X for their contribution, and another employee less for a job that isn’t as important. But if the company cannot survive because it can’t afford to pay the MW, both employees are out of work, and hence deprived of even that opportunity, which is presumably the best they have at the time. Again, who benefits, apart from social engineers who sneer at the idea of paying less than the MW?

            The MW actually works against higher-output and competent retail employees, who continue to get paid the minimum because that’s where retailers peg their wages. A truly free market with no MW would force employers to reward the better employees or risk losing them to competitors; the market would dictate a “fair” wage for the work done, and not some uninformed and unaccountable government wonk having no clue of the jobs or values thereof.

            mhb23e

          • haha, enjoy revolution if you try to get rid of the minimum wage God you are so historically illiterate.

          • Wow. Guess you really told me. Where did you learn to debate?

          • @mhb23re:disqus

            You don’t live on minimum wage, you’re merely an ivory tower pointficater divorced from reality. There are many people out there who wouldn’t hesitate to put a bullet in your skull for oppressing them with your nonsense just remember that.

          • The word is “pontificator”, ignoramus. You could look it up in a dictionary, if you owned one.

            And sorry to disappoint, anus, but I’m middle-class like most on this thread, trying to stretch income as far as possible for my family, while keeping it from you and your parasitic socialist horde.

            Your last sentence is a keeper, however. Is that a threat? Are you one who wouldn’t hesitate to “put a bullet in my skull” for exercising my right to free speech? I almost hope you say yes, as my next reply will be to Macleans and the authorities, who will provide the lithium and padded cell you so clearly require.

            You need professional help. Get it before it’s too late.

          • On a active government side: Have the government fund X% of the wage that employers and employees negotiate. That opposed to the minimum wage is actually progressive.

            On the free market side: lower/eliminate barriers to entry on occupations that there really isn’t any reason to restrict. The safety and quality gains by licensing things like dental hygienists, truck drivers, nurses, pharmacists are little to none. Employers are quite capable of hiring these people. These restrictions simultaneously make upward mobility more difficult for low income individuals, and increase the prices of the services these occupations provide.

            Yes, I can agree that minimum wage signals something good about society; their value of human work. But the signal is not the same as what is being signalled. I love what is being signalled, but throwing bricks at bank windows can also signal the value of human work.

            Minimum wage signals good intentions, but it also signals that they don’t care enough to think a little more critically about whether policies actually help the poor. Society doesn’t pay these wages, employers do. Profit seeking behavior on the employers part can mean a lot of very good things for workers and consumers, but it also means that when the price of “human work” goes up, they’re going to buy less of it; something not so good.

            Survivability is important. People making minimum wage survive better than unemployed people. People who are working below minimum wage are not living on the street. Minimum wage effects 2-4% of the population and it effects them in a matter of cents, not dollars. Almost nobody would be thrown into the street by eliminating the minimum wage. It would result in small decreases in low income wages in exchange for more employment opportunities by the people who are far more likely to actually be on the street; the unemployed.

            Would you support a law that made it illegal for anyone to sell their work for less than $X? Putting enforcement aside (assume everyone abides perfectly to this new law) what is the difference between that and telling employers that they can’t hire a worker for less than $X?

          • I see no conflict between wanting the poor to receive the same or greater benefits as the rich for having children while simultaneously wanting the poor to pay a lesser penalty for being childless.

            I think the problem you’re having in this example is that you think whether they have children is the factor that we are concerned with. It isn’t. What’s important is that they’re poor and have less opportunity because of it.

            As to the rest, if you’re not concerned with the results of such a policy, you’re an idiot. However, there is not simply a “disaster” result at 40k and a “good” result at some other value, there is also every point on the graph between the two. What’s more, those points aren’t necessarily in a straight line.

            The trick is to figure out where on the graph gets us the most good and the least disaster.

          • I didn’t see a conflict at first either, until I read the example more carefully. If you think the child exemption shouldn’t be larger for the rich than for the poor then you must believe that the poor ought to pay as high a surcharge for being childless as the rich. A higher surcharge is not a higher absolute penalty than the rich but a higher extra charge for having less children.

            I agree with you that the desirability of minimum wage ought to be analysed in light of the trade-offs with each marginal increase. $40K is pretty clearly disastrous unless we think a 30% unemployment rate is okay.in exchange for pay increases to those who make a bit less than $40K.. A $0, $7.50 or $9.00 minimum wage might have desirable trade-offs.

            My $40K minimum wage was a response specific argument. It is hard to see why one would get a non-disastrous number without being concerned with the effects of minimum wage. Very few people reach into their moral intuitions and feel like $9.00 an hour is “proper” pay. That’s scraps. That’s nothing to start a family on. Something more like a disastrous amount seems more proper, fair, and intrinsically ethical.

        • The potential employee and the employer will decide what is fair. How on God’s green earth can a third party declare what is fair? Minimum wage, as the low legal wage, is the entry level wage or the wage of a low skilled, no skilled, or poor worker. an employer spends more time and money in training and usually incurs losses due to them. Only after training and the employee exhibits the ability to work efficiently does the employer incentivize by giving raises. Most minimum wage jobs are part-time or for teaching a person how to become a good employee.
          What is fair? A job at low wages … To start, as few ever remain there? Almost all people with jobs are at the lowest end of wages temporarily. Or, no job and no prospect of working as the no skill, low skill, lowly educated are priced out of the market?

      • >>> you’re pulling them into a slightly less harsh poverty
        Even that isn’t necessarily true. Researchers who debunked the Card-Krueger study in the fast-food industry found that the recipients of the higher minimum wage were generally worse off than they were previously; e.g., they had shorter hours, more work, and fewer benefits (some had to buy their uniforms, meals were no longer provided free of charge, etc.).
        The main beneficiaries of the minimum wage are those politicians and pundits who get to feel better by advocating it. It’s called “moral narcissism.”

        • Yes. Employers do make tradeoffs between higher monetary compensation and other forms of compensation (work environment, flexibility in scheduling, being treated with dignity, and you list others) These tradeoffs are not in the worker’s best interest. I didn’t mention that, but I think I agree with you.

          Is this monetary wage increases entirely offset by reductions in non-monetary compensation for every single worker? Probably not. But as you say, “generally worse off” is probably accurate since it seems easy to do, and providing employees with their most desired mix of compensation in the first place is a free way of getting better employees and reducing turnover.

    • >>>”You can’t suggest for example that it’s better to hire ten people but leave them all struggling in poverty, than it is to hire eight people and pay them properly.”
      What a mean-spirited, miserly suggestion. If it’s better to hire eight people and pay them “properly”, then it’s even better to hire four people and pay them well. I’m all for raising the minimum wage to $50 an hour.
      Only those who are just plain cheap could possibly object to such a humane policy.

  14. By Chris Hedges from Truthdig, who knows a thing or two about poverty, just wrote a column on this Feb. 3rd, 2013: Debt peonage is and always has been a form of political control. This debt peonage must be broken if we are going to build a mass
    movement to paralyze systems of corporate power. And the most effective
    weapon we have to liberate ourselves as well as the 30 million Americans
    who make up the working poor is a sustained movement to raise the
    minimum wage nationally to at least $11 an hour. Most of these 30
    million low-wage workers are women and people of color. They and their
    families struggle at a subsistence level and play one lender off another
    to survive. By raising their wages we raise not only the quality of
    their lives but we increase their capacity for personal and political
    power. We break one of the most important shackles used by the corporate
    state to prevent organized resistance.

    http://www.truthdig.com/report/item/breaking_the_chains_of_debt_peonage_20130203/

    -30-

    • p.s. Kill corporate welfare now. Raise the taxes on the 1% NOW. Make the 1% actually pay their fair share of taxes NOW!!!!!!!

      • In the US, the top 1% of earners pay 39% of all income taxes, the top 25% pay 86% and the top 50% earners pay 97% of all taxes. The numbers are depressingly similar here. How much more a “fair share” should you steal?

        I do agree with ending corporate welfare, however. Corporations should be allowed to maximize their earning potential and not expect government bailouts in return.

  15. Incidentally, Card & Krueger revisited their work in the late 90s, responding to the most prominent challenge – that of Neumark and Wascher, that an NJ minimum wage increase “lead to a relative decline in fast-food employment in New Jersey” vs Pennsylvania. It’s worth taking a look only because I’ve seen it bandied about a couple of comment threads that Neumark & Wascher totally discredited their work. For your wonkish reading pleasure: http://davidcard.berkeley.edu/papers/reanal-ff-nj.pdf

  16. Okay, it’s been two days now and I’m still waiting … waiting for someone to
    drag the old favourite .. “if people are poor,just give them money”.
    It never gets tired …

    • I don’t understand. That’s what the WITB and the GST/HST rebates do. What’s wrong with giving money to poor people?

      • Nothing. I’m entirely in favour of it … and in a blatant and
        open way. Or we could play a jiggery-pokery shell game
        with the tax code to avoid the ensuing mouth foaming.

  17. Right-wingers keep repeating the same tired mantra – if you raise cost, business will leave or pass the extra cost to consumers, if you impose regulations, business will leave or raise prices ….so, governments and consumers are held hostage by business and there is nothing can change this power imbalance. Do you believe this?

    • Damn straight. Data have a well-known right-wing bias.

      • Yeah those bailouts of the worlds insolvent banks the right is known for are amazing. Privatize profits, socialize losses. Socialism for the wealthy, screw everyone else. That sure is amazing data. Proof that the entire system of the imaginary money game exists by fiat.

        Grayson grills the Inspector general of the federal reserve

        http://www.youtube.com/watch?v=cJqM2tFOxLQ

        http://www.dailybail.com

        Same as it always has been with the right and their hypocrisy “do as we say, not as we do”.

        • Why were the US banks insolvent? Oh yeah: they were forced to give mortgages to welfare recipients, the unemployed, illegals, and other high-risk applicants. Who forced them to do this? Try googling “Community Reinvestment Act”, “Carter”, “Clinton”, “Reno” and “US DOJ”.

          Without government interference, risky loans would be a non-issue, and the housing crises/house of cards would not have blown up as it did.

          • Only a moron like you could believe such lies.

          • Google what I wrote, Einstein, instead of posting trash. Of course, facts are like kryptonite to a leftist loser, so I don’t expect you to educate yourself.

            But I will try – against better judgement – to encourage you to think. Maybe. If the feds hadn’t forced the banks to give mortgages to high-risk recipients who stood practically no chance of paying back the money, would the banks… loan it? Would YOU give out money with no hope of seeing it repaid, with no government safety net (Fanny/Freddy) to protect your assets?

            We can wait the required hours for you to figure out a reply, if you like.

          • lol you’re too stupid to even to even think critically about what you read on the internet.

          • From your posts, it’s apparent that the concept of “critical thinking” is as relevant to you as is nuclear physics or celestial mechanics.

  18. A question for the people who are angrily dismissing the available evidence: did you denounce the Harper government for screwing up the census? If so, why? It can’t possibly be because you’re an advocate of evidence-based policy analysis.

    • You write a blog on a magazine with a left-wing readership (primarily) who criticize Harper for whatever reason they can find, legitimate or not. They don’t care a whit about the census, all they want is something, anything, they can use as a stick for whacking Harper. Anything and everything they think or write in the comments has one purpose. Do you seriously think they actually had any other interest in mind when they praised your criticism of the census changes?

      They don’t care what the evidence says about the minimum wage, to them it doesn’t matter. For them, wages are not about work, or about value, they are about the class struggle between the rich and everybody else.

      If you know what these readers are all about, then it’s quite clear that their positions on the minimum wage and on the long-form census are entirely consistent, and neither has anything to do with economics.

    • So the corollary to your thesis would be… that a lower wage boosts employment?

      Maybe it’s just me, but that sounds like an argument in favour of slavery as a means of full employment.

      • It’s just you.

        • Do you deny, though, that your thesis in effect says lowering wages increases employment?

          • It is a basic fact that if the price of a good is lower more will be consumed. If labor is cheaper, more labor will be used. If it is more expensive, then other means will be found to accomplish the same thing.

            Workers are hired to do things that bring a return to their employer. If the workers are too expensive, it won’t be done by workers, very simple.

            Not very many in Canada are getting rich by paying minimum wage. Minimum wage jobs are very low skilled, often with large turnover, and often entry level. The low paying jobs that are creating wealth are done in other countries. The vast majority of low paying jobs in Canada pay more than the minimum wage.

            The people who are hurt by high minimum wage rates are those who need to get into the work force and learn the basics of doing a job. And those who don’t have skills but are priced too high for the return, hence get few hours and have to juggle two or three jobs.

          • I’ll grant you all that; it is all basic common sense. The problem is that minimum wages, if not indexed to inflation, fall behind – and then you get large catch-up increases that cause spikes in unemployment.

            What SG fails to do is address why we end up with these large jumps and how to prevent them (set an appropriate minimum wage and index it). He also fails to indicate how long these unemployment bumps last (clearly, not forever or half the nation would be unemployed).

            The article comes across to me as Gordon being an apologist for the anti-minimum-wage forces; his solution – do nothing; be cruel to be kind – smacks of the worst of capitalism. Hence my earlier snarks.

          • Did you read the last sentence?

            And what is wrong with looking at the evidence and revising your beliefs about the effectiveness of a policy measure? That’s what evidence-based policy-making is all about.

          • There’s nothing wrong with looking at the evidence and revising your beliefs accordingly. But you have to look at it – all of it – with open eyes and I’m not completely convinced you did.

            My original comments were in reply to your snark at the commenters on here; I thought a reply in kind was in order.

            As to your last sentence – I guess I should have addressed your quick aside re WITB. I admit that I’m not familiar with the program; I did follow the link, though, and played around on the site a bit. The one major problem I see with this program – at least as it is currently constituted – is that one has to wait until the next year to file your claim and get a rebate. Anyone working for low enough wages to qualify – and esp. at minimum wage – needs that money NOW. If you can find a way to credit that back to the employee in real time so that it shows up on the current paycheque, then you may be on to something.

            So what’s wrong with indexing the minimum wage to inflation? Those big bumps that cause the unemployment result from setting a wage and letting it remain static for years. Indexing it means it remains constant and reasonably predictable, and we don’t have cycles of the poorest falling farther behind while waiting for the governmen to wake up.

          • Very good post, Derek. Wages, like anything else in business, are subject to the laws of economics, regardless of social re-engineering or anti-capitalist desires.

      • An argument in favor of wage slavery…

        • Hardly. Because people won’t work for slave wages. Would you? Especially in Canada, where you can make more on welfare. So please stop using that worthless canard.

  19. misinformation

  20. The purpose of incraesing min. Wage is framed as a social policy goal. Not sure that is such a good idea but let’s go with that. Then the question is “why is the onus on a group of employers who are already contributing to the goal as opposed to the brosder population?

    If it is a social policy goal then the solution is through the general tax base such as the tax relief programs the author has identified

  21. When a jar of peanut butter or family sized box of cereals costs about what you make an hour on minimum wage MINUS taxes, there is a problem in society. To state that increasing a wage does not help an individual or a family is dis-information and clearly has not been experienced by the writer in question. A sane society does not encourage a class of hard-working poor… period.

    • Stephen’s not looking at this from the viewpoint of individuals. He’s addressing it from the viewpoint of the population as a whole. Basically, he’s saying there are more efficient ways we could address poverty than a minimum wage increase — something which doesn’t touch the primary cause of poverty — simply not enough work available for people.

      Unfortunately, his solution, the WITB, doesn’t touch this at all.. because teenagers, the area he says is most underserved, are specifically exempted from the WITB.

      • Also, anyone working for minimum wage needs that money NOW – not twelve months from now.

      • >>>– simply not enough work available for people.

        You mean, not enough work available for people AT A LEGALLY PERMITTED WAGE THAT WOULD MAKE THEM EMPLOYABLE. Because in the absence of any controls at all on wages, employment always tends toward “full.” So there’s always enough work available in any division-of-labor society; the question becomes, “is there work available at a given wage?”

        Until 1997, Hong Kong had no minimum wage laws (and no mandatory negotiations with unions). Result? Full employment. 1989 was typical: 1.07% unemployment, which simply reflects workers voluntarily leaving their current jobs in order to pursue other opportunities. In 2007, however, unemployment was over 7.0% and in 2013 many analysts expect it to be over 4.0% This is burgeoning “structural” unemployment that persists year after year. The reason they have this now in Hong Kong is because of the various welfare-state policies, including the minimum wage, implemented after the handover to the PRC in 1997.

      • Because they are NOT POOR.

        • Hey, you’re the one who was using a report saying how teens were most hurt by an increase in minimum wage as a means of justifying why raising it doesn’t make sense. You then proposed that to adress this, we increase the WITB.. which specifically exempts teenagers.

          If this isn’t what you meant, then perhaps you should learn how to write.

          Alternatively, if it is, perhaps you should learn how to think.

          In either event, that’s no reason to get huffy just because you got shown up on the legal hours wrt: productivity thing.

          • Actually, the people who are most hurt are low-income minwage earners. I’m pretty sure it actually says so in the OP.

            And why are you so keen to defend a policy that available evidence says is at best pointless? Is this an article of faith?

          • Nice strawman, but where, exactly, am I defending minimum wage?

            I’ve attacked various positions posted here, tried to explain to some of the short-sighted folks here how the system needs a legislative counter-weight to unfettered corporate interest, and presented a position of my own that explicitly gave you your argument about minimum wage increases not being effective, but that’s not the same thing as defending minimum wage.

            Kind of like how if you argued the sky isn’t purple, it’s green, and I responded pointing out that the sky isn’t green either, that’s not defending the point of view that it’s purple.

            Incidentally, still waiting for your response to demolishing your position that productivity increases spurred shorter hours, not the reverse.

    • >>> To state that increasing a wage does not help an individual or a family is dis-information

      And what about the workers who become unemployable because the law forbids them from negotiating with an employer for a wage that is below the mandated minimum but more in line with their lack of experience and low skills? They’re out of work and will stay out of work. They’re probably not impressed that you believe the minimum wage laws did right by you; in fact, they might even resent it as an instance of the usual liberal hypocrisy: you cry that a “sane society does not encourage a class of hard-working poor,” yet every law you favor does nothing EXCEPT produce more poor . . . in this case, by taking away their right to be hard-working.

      • Another good post. Friedman noted this, often (viewable on youtube), and Sowell says as much in his epic “Basic Economics”, and also notes it in “Economic Facts and Fallacies”. Just because the left doesn’t like the idea of events following economic rules doesn’t make the rules false; rather it should spur us to better understanding of rudimentary economics and market principles.

    • >>>When a jar of peanut butter or family sized box of cereals costs about what you make an hour on minimum wage MINUS taxes, there is a problem in society

      In other words, your vision of a “sane” society is one in which people with low skills — instead of feeling the need to gain greater skills and wider work experience in order to be self-reliant and improve their own situation — are made comfortable in jobs like flipping burgers and slinging hash so they can marry, raise families, buy cars, get their teeth capped, afford the latest consumer electronics, take nice vacations, etc., right?

      The purpose of low-paying entry-level jobs like flipping burgers and slinging hash, at least for most young people, is to learn how to get up in the morning without having partied oneself to exhaustion the night before, put on dress clothes or a uniform, and say “Yes, Sir!” or “Yes, Ma’am” to the boss, and then MOVE ON FROM THERE TO ANOTHER, HIGHER PAYING JOB REQUIRING HIGHER SKILLS. The idea is not to stay there for decades and be comfortable.

      Lefties are so amusing! They cry that a “sane”, “just” society would not produce an underclass of the chronically poor or habitually unemployed, yet their economic policies accomplish precisely that.

      • A well-played, Friend. Minimum wage jobs aren’t meant to support a family of four, else the wage would be triple what it is, and far fewer people would have those jobs.

  22. I find all this debate pointless. Minimum wage should be abolished for one very good reason: It is simply a violation of my human right to freely negotiate the rate at which I sell my labor. It is not the business of a government to institute a feelgood law that prices an individual’s labor out of the market, or that prices labor at a rate above what a particular employer wishes to offer.

    • Fair comment. And your rights are violated further as we have no “right to work” laws in this country, so you are mandated to join a union and have them determine what your labor rate is with your employer.

      • Wait, wait, wait.. do you even realize the hypocrisy of what you’re saying?

        On one hand, people can go with no income whatsoever as they wait for however long it takes to find a job that pays them what they think they should earn. Somehow, the idea they might get hungry never plays into that.

        But yet on the other side, they *can’t* wait for a job with a firm that doesn’t have a union? Why not? Did they suddenly get hungry when the union showed up?

        • Hardly.

          People should have the right to negotiate their wages with an employer without the government taxing them out of existence, or mandating a wage that might be lower than they could negotiate on their own, without being forced to join a union that is closed shop and permits non-members from working at said employer. Simple enough?

          And if people lose their jobs, we have an UI system to tide them over until they get back on their feet, and there is a welfare system to assist further if needed, although it has become more of a disincentive to working than an incentive.

    • Gee when I last looked at the calender it was the twenty-first century not the nineteenth. This was just the argument made against child factory labour. Ayn rules. At least in the minds of adolecent schoolboys.

  23. This is the foolish nonsense that results when economics makes pretentions to being a Science. The noise is so strong, the number of possible conflating factors so large and the signal so weak that these results re meaningless at best. A classic case of physics envy. Gee what would be the significant difference between the two countries that gave the opposite result? I don’t know nor does anyone else.

  24. Study by Card and Krueger in US

    In 1992, the minimum wage in New Jersey increased from $4.25 to $5.05
    per hour (an 18.8% increase) while the adjacent state of Pennsylvania
    remained at $4.25. David Card and Alan Krueger
    gathered information on fast food restaurants in New Jersey and eastern
    Pennsylvania in an attempt to see what effect this increase had on
    employment within New Jersey. Basic economic theory would have implied
    that relative employment should have decreased in New Jersey. Card and
    Krueger surveyed employers before the April 1992 New Jersey increase,
    and again in November–December 1992, asking managers for data on the
    full-time equivalent staff level of their restaurants both times.[66]
    Based on data from the employers’ responses, the authors concluded that
    the increase in the minimum wage increased employment in the New Jersey
    restaurants.[67]

    One possible explanation for why the current minimum wage laws may
    not affect unemployment in the United States is that the minimum wage is
    set close to the equilibrium point for low and unskilled workers. Thus
    in the absence of the minimum wage law unskilled workers would be paid
    approximately the same amount. However, an increase above this
    equilibrium point could likely bring about increased unemployment for
    the low and unskilled workers.[21]

    Card and Krueger expanded on this initial article in their 1995 book Myth and Measurement: The New Economics of the Minimum Wage.[68]
    They argued that the negative employment effects of minimum wage laws
    are minimal if not non-existent. For example, they look at the 1992
    increase in New Jersey’s minimum wage, the 1988 rise in California’s
    minimum wage, and the 1990–91 increases in the federal minimum wage. In
    addition to their own findings, they reanalyzed earlier studies with
    updated data, generally finding that the older results of a negative
    employment effect did not hold up in the larger datasets.

  25. FUNNY- all these experts seemed to have missed the best evidence available….that of the Australian Fair Wage Panel raising the minimum wage last June to $15./hr

  26. I totally agree with DianeG. People can study and prove anything they want. At the end of the day, what power do they really have? Plus, all these studies are created by people and who knows what biases they believe. To me, it just makes intuitive sense to put more money in people’s hands and allow them to self-determine how it is spent. Call it an increase in the minimum wage, call it a living wage, call it whatever you want. Canada is infamous the world over for being so wealthy and yet so many of us remain so poor. This is an example of how that becomes the reality. The government can so easily find money for billion dollar fighter jets and billion dollar corporate tax breaks, but we cannot find any means to put a little money in the pockets of those who need it most to spend it locally, on the necessities of life, creating jobs and wealth in communities. Come on. Only the people have the power to demand a living wage for everyone and an increase in minimum wage for workers. This power is in the streets, not some study.

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