http://logicandreasonweb.blogspot.com/2007/06/federal-minimum-wage-bad-idea-becoming.html

Keep up the great work!

“Service” includes the various forms of labor.

The price of the various forms of labor is sometimes called “wages”.

Wages levels (and conditions of work) are a matter of supply and demand. Price and wage controls cause economic distortions (harm) – because they are an attack on the price system.

It really is this simple. And an person who does not understand the above has no business calling himself (or herself) an “economist”.

Sadly the economics department at Princeton seems to include people who by any reasonable stretch should not be described as economists.

It is not that they are “non Austrian school economists” – they are not economists at all. They do not even understand the basics of the price system.

And what is the productivity of the worker who has skills everyone else has? My guess is that it will be quite low, because productivity is the actual value of labor, not skills. On the other hand, someone who is very unskilled but is very reliable, works quickly, or otherwise maximizes productivity will tend to see higher wages. The only people who will be “punished” with the lowest wages are those who are unskilled, unmotivated, will not learn, and are otherwise unable or unwilling to contribute higher productivity.

Acquiring new skills increases your productivity. “New skills” can mean formal education, training on the job or regular, old-fashioned life experience. It means that you yourself are learning how to create more wealth. Why should it be otherwise?

The other question that I am seeing is what happens when the there is a labor surplus. What if there are just not enough low-skill jobs to go around to all those low-skill people out there? Well, as you say, workers start to bid down their wages. This may continue until employers who do use those workers start to see significant profits from “exploiting” them. This is when competing firms spring up, eager to employ this excellent source of revenue. Eventually, the labor surplus disappears. The lowering of wages slows, stops, then starts to reverse. Once more, people get paid according to their marginal productivity, modified by time preference.

It’s so simple and logical that it’s difficult to see how it could be otherwise. It isn’t difficult to see how large firms could profit from a minimum wage that prevents the least productive people in society (often teenagers) from gaining skills and experience while working for small businesses that directly compete with the big firm.

After why do companies outsource their job to poorer nation such as India? The main reason is that workers work for less and aren’t hampered by pesky trade unions.

I can’t believe that Price Makers and Price Takers are Socialist claptrap terms but represent supply and demand forces. It’s like someone selling a bottle of water in the desert versus selling a bottle of water in a rainstorm.

They would always compete. Even if the supply of workers outstrip demand, employers still HAVE to compete in order to obtain the most productive – more bang for the buck.

Minimum wage laws do limit the supply of workers, however it also makes market entry for the less skilled more difficult than if there were no such laws – basically, a market distortion.

However, more competition for labor would also increase wages.

Think of it this way: Labor is a scarce resource. There are only so many people who are qualified and willing to perform a particular job at a particular time. Firms must compete for a piece of that labor supply by offering higher payment or otherwise giving greater enticement to work for them over another employer. “More competition for jobs” would be an accurate description of what you are talking about, an increase in the labor supply. We are talking about an increase in labor demand.

http://www.epionline.org/studies/epi_njfastfood_04-1996.pdf

this is an example what meant when I said that ‘some say’ – people who have tried to replicate C-K stuff have found problems. One can find additional ‘slanderous gossip’ in the American Economic Review, published by Neumark and Wascher. C-K data DOES so signs of measurement error. The errors found in C-K indicate at best slipshod research, at worst statistical fraud.

It is a simple historical fact that unemployment rates used to go down to the low single digits, before miw wage laws (1.4% is the lowest national unemployment rate I have seen). Some categories of labor still get in the low single digits (Asians aged 30-44). Besides, I have personally run too many regressions (and read too many other studies) on wage rates and employment to take C-K stuff seriously. Labor markets can clear in the low single digits level, we just need to ditch the current price floor.

As for mainstream economists being unwilling to do math, that is rediculous. The ones who complain most loudly about mathenomics and econometrics are the heterodox lefty types who focus on things like reswitching. I could get into more stuff, but I don’t think that Robert is about to let anyone confuse him with the facts.

D

Suppose DW MacKenzie knew what the referent to “Card and Krueger’s meta-analysis” was. Then he would know his (4), about the bulk of empirical studies, is difficult to sustain.

Suppose DW MacKenzie knew what “capital-reversing” (which is not the same thing as “technique reswitching”) was. Then he would know that it is doubtful that the remainder of his comment offers any valid counter to my point.

By the way, I don’t know that the typical mainstream economist differs from the typical Austrian on this point. Both refuse to do math.

The war of ideas is primarily and essentially on the moral plane. The vogue view is that it is moral to coerce (for a good cause of course); the truly moral view of allowing free-will is rarely stated. Mr. MacKenzie who encounters students who care about efficiency, not morality, might ask them why they care about efficiency if not for a moral end. Would any of them support an immoral policy if it were efficient?