tag:blogger.com,1999:blog-582368152716771238.post1989446717389573432..comments2024-03-28T14:41:03.793-05:00Comments on The Grumpy Economist: Meer On Minimum WageJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-582368152716771238.post-82180727835468326792019-04-14T11:48:15.357-05:002019-04-14T11:48:15.357-05:00Great post. Shared it in my current labor econ cla...Great post. Shared it in my current labor econ class. Ha. <br /><br />Best,<br />MMykel G. Larsonhttps://www.blogger.com/profile/17128735421035292909noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-75017723232552053282019-04-10T21:16:39.025-05:002019-04-10T21:16:39.025-05:00Minimum wage in Australia (2018) is about 13 USD p...Minimum wage in Australia (2018) is about 13 USD per hour (17.70 AUD). Current unemployment rate is about 4%. Oh, and they have universal health care there. It is called Medicare :) John's post is trying to convince you that they are fools down under. Or perhaps the laws of economics are different there. rafalhttps://www.blogger.com/profile/03627684458558457142noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-35584441110298536182019-04-10T09:09:37.990-05:002019-04-10T09:09:37.990-05:00"An employer may pay for uniforms, provide a ..."An employer may pay for uniforms, provide a free meal at each shift, give employee appreciation events, allow a family discount, or give birthday presents, and as mentioned in the article, free parking or flexible hours. These are all benefits, just not for healthcare."<br /><br />And if you were to take the sum total of either the value employees derive from these "benefits" or what employers are paying, they wouldn't come close to even a marginal increase in the minimum wage. That and "flexible hours" for jobs paying at or close to the minimum wage is probably not what you think it means...<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-3236144862235268362019-04-10T06:54:46.547-05:002019-04-10T06:54:46.547-05:00two things that are missing from the analysis:
On...two things that are missing from the analysis:<br /><br />One: general equilibrium effects. All the papers cited in the piece are partial equilibrium effects. There is certainly job creation at the margin from higher income to those who are not displaced. General equilibrium effects are more likely the reason for the empirical results that NATIONAL minimum wage hikes have little effect on employment.<br /><br />Two: confirmation bias. There are plenty of papers that provide evidence on the benefits of minimum wage hikes. And some that highlight the costs. The former were ignored in the op-ed. Here is my take: effects of MW changes on social welfare are extremely context-dependent (local vs national, too high vs too low, etc etc). It is easy to find evidence against it or for it if we want to just confirm our priors. But I find most political discussions of MW lacking: those who are in favor tout just the results they want and those against (present case?) focus on just the results that bring costs. <br /><br />Some references, new and old, without citing just the best known results:<br />Freeman, R. B. (1996). The minimum wage as a redistributive tool. The Economic Journal, 106 (436): 639-649.<br />Draca, M., Machin, S. and Van Reenen, J. (2011). Minimum wages and firm profitability. American Economic Journal: Applied Economics, 3(1): 129-51.<br />Gasparini, L., and Lustig, N. (2011). The rise and fall of income inequality in Latin America. In Ocampo, J. A. and Ros, J. (Eds.), The Oxford Handbook of Latin American Economics, 691-714.<br />Ni, J., Wang, G., and Yao, X. (2011). Impact of minimum wages on employment. Chinese Economy, 44(1): 18-38.<br />Khamis, M. (2013). Does the minimum wage have a higher impact on the informal than on the formal labour market? Evidence from quasi-experiments. Applied Economics, 45(4): 477-495.<br />Schmitt, J. (2013). Why does the minimum wage have no discernible effect on employment? CEPR Reports and Issue Briefs, 2013-04.<br />Poncet, S., Mayneris, F., and Zhang, T. (2014). The cleansing effect of minimum wage: Minimum wage rules, firm dynamics and aggregate productivity in China. CEPII Working Paper, 2014-16.<br />Fang, T., and Lin, C. (2013). Minimum wages and employment in China. IZA Discussion Paper, No 7813.<br />Anonymoushttps://www.blogger.com/profile/10307153779004273793noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-28515461385270251452019-04-10T02:57:21.857-05:002019-04-10T02:57:21.857-05:00As an intend follower of the FED (it's my job)...As an intend follower of the FED (it's my job), I don't agree with your interpretation. The FED does not consider unemployment 'too low' at all (IT NEVER DOES! the fed is not evil (in that regard, anyway)!). They are surprised that despite the very low unemployment, wage inflation is not picking up/going through the roof. <br /><br />In their models, such a low unemployment should raise inflation so much that it would require higher interest rates to keep wages balanced.Anonymoushttps://www.blogger.com/profile/11725878023525027986noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-65168509348991084462019-04-09T14:25:31.431-05:002019-04-09T14:25:31.431-05:00You are thinking very narrow about what the term b...You are thinking very narrow about what the term benefits entails.<br /><br />An employer may pay for uniforms, provide a free meal at each shift, give employee appreciation events, allow a family discount, or give birthday presents, and as mentioned in the article, free parking or flexible hours. These are all benefits, just not for healthcare.<br /><br />Plenty of jobs try to compete on all these different dimensions. Partially because the tax advantages, but also because some people see these as valuable and the employee no as much, so it is more beneficial than a cash payment. <br /><br />When prices are fixed, firms will compete in other dimensions. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-54251033431031631992019-04-09T13:33:53.743-05:002019-04-09T13:33:53.743-05:00An alternative read of what the Meer et al. paper ...An alternative read of what the Meer et al. paper is saying:<br /><br />http://econospeak.blogspot.com/2019/04/does-cochrane-really-understand-latest.htmlAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-31043555001054943622019-04-09T12:54:52.283-05:002019-04-09T12:54:52.283-05:00Butterfly effect; sensitive dependence on initial ...Butterfly effect; sensitive dependence on initial conditions in which a small change in one state of a deterministic nonlinear system can result in large differences in a later state. I suspect minimum wage laws not only affect dropouts, who need not apply today, but affect their progeny in the future. The negative effects of minimum wage laws observed today, will be greatly exaggerated in the future. David Seltzernoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-51251749770345344802019-04-09T12:44:58.225-05:002019-04-09T12:44:58.225-05:00Are there minimum wage jobs that also have healthc...Are there minimum wage jobs that also have healthcare, let along any other benefits?96Treeshttps://www.blogger.com/profile/08716538387188852143noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-35109922802009448262019-04-09T08:49:22.440-05:002019-04-09T08:49:22.440-05:00Dear Professor Cochrane and Folks,
My thanks to P...Dear Professor Cochrane and Folks,<br /><br />My thanks to Professor Cochrane for publishing this post. It has all the standard arguments against increasing the minimum wage in one spot and so is useful on those grounds alone.<br /><br />Having become somewhat acclimated to stirring up nests of hornets a little while ago, when I got stung for doing so, I just want to make a few comments from the other side of the fence. Please do not label me a supporter of the $15 minimum wage, which is likely to pass in Maryland, for doing so. It seems more complicated to me than that, and I am not in favor of this large an increase.<br /><br />Three points seem relevant. One is ceteris paribus - if we are going to discuss the minimum wage, we have to hold everything else constant to get the standard responses. In reality, everything else isn't constant. So the negative effects of the rise would be vulnerable to how much everything else is changing. Whether this completely explains the Card-Krueger results is a good question, but clearly aggregate expansion elsewhere was important.<br /><br />Two, we may like artisanal or particular establishments more than we like fast-food chains, and thus support the usual Neumark-style arguments. To support these establishments, which might charge more but might produce healthier results, we may be willing to live with the minimum wage. So there may be a small externality.<br /><br />Three, the real effect of the minimum wage would seem highly dependent on the elasticities involved. If the recipients of the increase in the minimum wage have a very high income elasticity of demand, and spend like crazy, while those who make losses basically save everything, and investment opportunities for the banks are limited, then the total effect of the minimum wage would depend on the price elasticity of demand for the labor effected. If you are starting from a very low price elasticity, the income effect might outweigh the price effect. You can't go to this well forever, but as an occasional measure of relief, it would seem you might get positive results from the change.<br /><br />Julian SilkJulian Silknoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-28338677783770841932019-04-09T07:18:40.203-05:002019-04-09T07:18:40.203-05:00I think you have the wrong link for their first pa...I think you have the wrong link for their first paper as it goes to their 2nd paper that you mentioned. Try this:<br /><br />https://cheps.sdsu.edu/docs/seminar/Clemens_MW%20&%20Fringe%20Benefits%20--%20CHEPS.pdfAnonymoushttps://www.blogger.com/profile/06551775998021197253noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-86625848271983525102019-04-08T22:40:27.113-05:002019-04-08T22:40:27.113-05:00Add on:
This is from the Fed:
"Many estimat...Add on:<br /><br />This is from the Fed:<br /><br />"Many estimates suggest that the long-run normal level of the unemployment rate--the level that the unemployment rate would be expected to converge to in the next 5 to 6 years in the absence of shocks to the economy--is in a range between 4 percent and 5 percent." <br /><br />The Fed has been squawking loudly that the present unemployment rate is "too low" and there are "worker shortages." The Fed recently posited the "natural" unemployment rate is 4.65%.<br /><br />How would such a "natural" unemployment-rate target work in conjunction with no minimum wage laws? <br />Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-46769957832759939272019-04-08T19:48:21.417-05:002019-04-08T19:48:21.417-05:00It is interesting to ponder the Federal Reserve...It is interesting to ponder the Federal Reserve's 4.65% minimum unemployment rate target in conjunction with no minimum wage. As someone skilled in math and logic, I am sure John Cochrane knows the ramifications of those two policies matched together.<br /><br />Nevertheless, it probably is a good idea to get rid of the minimum wage, as soon as we get rid of property zoning, and the routine criminalization of push-cart, motorcycle-sidecar, and truck-vending.<br /><br />It also seems to me that if the national policy became no minimum wage, the Federal Reserve would have to have a minimum unemployment rate target of 0%.<br /><br />As a practical matter, I think a marriage of no minimum wage laws and open borders for labor will put AOC in the White House in 2028.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com