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PeakTrader:

Jon, that’s the same sub-standard statement I’d expect from people with too little knowledge of economics. It’s just more laissez faire ignorance.

Of course, the article is just a political statement, void of economics. American Samoa isn’t the U.S..

Economists understand without real data and rigorous models, to reveal and explain reality, all you really have are models that make sense only in a vacuum.

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Marque2, you don’t know what you’re talking about.

Rigorous models control other variables to isolate the effect of the minimum wage on employment.

Have you ever noticed many non-mainstream economists against the minimum wage can’t even construct sound empirical models?

Instead, they rely on simple models that work well in a vacuum.

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Morganovich, that study you cite was created by two people who are biased against the minimum wage, and couldn’t challenge an unbiased paper.

Here’s what Nobel Prize (for economic growth) economist Robert Solow said: “The evidence of job loss is weak. And the fact that the evidence is weak suggests that the impact on jobs is small.”

Here’s a source of studies:

http://www.raisetheminimumwage.com/pages/job-loss

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Morganovich, no matter how many times your statements are proven false, you make the same exact statements. Obviously, you’re looking for new fools.

“It is not uncommon to hear the Card and Krueger results dismissed by opponents of the minimum wage as having been disproved by the Neumark and Wascher study. However, an objective review of all the material from both sets of authors leads to the conclusion that the New Jersey minimum wage increase had no measurable impact on employment in fast-food restaurants. As discussed on the following pages, a number of factors support the Card and Krueger findings and call into question the results of the Neumark and Wascher study: 1) the questionable data collection methods used by Neumark and Wascher; 2) a reexamination of the Card and Krueger study using unbiased government records; and 3) the carefully worded conclusions in the final version of the Neumark and Wascher paper.

Based solely on their own research—using highly questionable data—Neumark and Wascher concluded that the minimum wage had a negative impact on employment. They did, however, acknowledge that many of their results are not statistically significant. Even more telling, after reviewing the results of the second Card and Krueger study that used government data and combining that with their own findings, Neumark and Wascher hedge by saying that they can only decisively conclude that “New Jersey’s minimum wage increase did not raise fast-food employment in that state” (Neumark and Wascher 2000, p. 1,391). “

“The best data for looking at the impact of the minimum wage on restaurant employment are ES-202 data, which are routinely collected by state governments for the unemployment compensation program. These data are likely more accurate than the phone survey originally performed by Card and Krueger and would not be subject to the same biases as the EmPI/Neumark and Wascher data. For confidentiality reasons, ES-202 data is generally not available to the public except in the form of broad aggregate data. Card and Krueger, however, received access to establishment-level data, which allowed them to reevaluate their original study using an accurate and unbiased source.

The results of this study were published in the American Economic Review alongside the results of Neumark and Wascher (Card and Krueger 2000). The updated conclusion of Card and Krueger was identical to their first study: that the “increase in New Jersey’s minimum wage probably had no effect on total employment in New Jersey’s fast-food industry and possibly had a small positive effect” (Card and Krueger 2000, p. 1,419).”

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How did the country survive in 1968 when the real minimum wage was above $10 an hour and the unemployment rate was 3.5%, with a rising teen labor force participation rate, that didn’t begin the collapse, until the real minimum wage fell below $8 an hour in 1980.

While real per capita income doubled, the real minimum wage declined over 25%.

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The labor economics literature suggests the (positive) income and multiplier effects may be much stronger than the (negative) employment effect, perhaps up to $15 an hour.

The implication is raising the minimum wage will lead to faster economic growth and efficiency in production.

For example, I stated before:

A rise in the minimum wage can increase real economic growth.

The higher wage attracts better workers, with higher reservation wages, to increase productivity.

Minimum wage workers have high marginal propensities to consume. So, a higher minimum wage increases consumption.

Only a portion of the higher minimum wage may be passed along in higher prices, because portions will be absorbed by “excess” wages of other workers (or overpaid workers) and “excess” profits (capital as a share of GDP is at an all-time high, while real wages declined).

Weak or poorly managed firms will lose business or fail. However, stronger or better managed firms will gain their business, and also gain from the increased demand.

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Hitssquad, I’ve explained in detail how raising the minimum wage would move the economy towards optimization and correct structural problems built-up over decades.

However, some people cling to their laissez faire philosophy, to maintain the collapsed teen labor force participation rate, since 1980, while teens and low-wage workers collect more benefits from government and parents, rather than pay taxes, keep weak business owners profitable, keep production costs higher than they should be (e.g. the costly turnover rate), maintain, or even increase, the saving glut and weak consumption, etc.. The more desperate someone needs a job, the better.

To the laissez faire crowd, there are no problems. Their simple models, that hold everything else constant, work well, regardless of over a century of data.

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Nothing brings more joy to the laissez faire crowd than a worker riding his 10-speed bicycle to work, smiling with no teeth, shopping at dollar stores and eating dollar hamburgers

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Yes, the “unskilled and unemployable” cannot learn in five minutes how to flip a hamburger.

So, they take out $100,000 in student loans, grants, and scholarships to learn Austrian economics or fictional writing.

Then, they find rather than wasting their time working and paying taxes, they can collect more in benefits from government and parents for not working.

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Rigorous empirical studies have proven increases in the minimum wage have a small effect on employment.

I think, there are two opposing forces on employment. One is raising the minimum wage increases productivity and lowers production costs. So, instead of 100 workers, for example, to produce a level of output, 95 workers, for example, may be needed to produce the same level of output.

The higher wage creates incentives for workers to keep their jobs (e.g. working harder for the higher wage) and attract more productive (idle) workers (e.g. with more education). There are also lower production costs, e.g. a lower turnover rate.

The other force is when 100 workers get a $1 raise, one worker may lose his job and go on unemployment. So, 99 workers benefit and one worker doesn’t. 99 workers have $1 an hour more to spend or save. If they spend it, they generate a cycle of consumption-employment.

There may be increasing returns initially, then diminishing returns, and then negative returns, e.g. when the minimum wage rises above $15 an hour.

The freed-up labor, along with a rising labor force participation rate, can expand the economy at a faster rate.

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Weak tuna canneries should fail. Even if the minimum wage was lowered to $1 an hour, no one would work there, except maybe a few hobos.

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More PeakTrader comments:

http://www.aei-ideas.org/2013/08/whod-a-thunk-it-18-different-minimum-wages-in-american-samoa-by-industry-and-a-30-jobless-rate/comment-page-1/#comment-311610

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