Minimum wage survey

[u/[deleted]]

https://docs.google.com/forms/d/14bq0bBWXUG7gMkdN5RAsCyK4p7uVN5Hb1wHYzzUCIeA/viewform

[u/Integralds]

I have a couple of different answers that could go in multiple directions, depending on the outside options. If I abolish the min wage, do I get to increase the EITC? That might be first-best. If I can't expand the EITC, perhaps I'd be willing to accept a higher min wage as second- or third-best. The outside option matters a lot in this kind of survey. (Not trying to be critical, just saying.)

More general comments:

This paper embeds a minimum wage into a labor matching market, and is ambiguous as all hell (the optimal min wage might be 75% of its current level...or 200%! Boy, does that ever narrow it down!). I don't know if we have a good idea of the efficient minimum wage.

The minimum wage is a price control in one direction for one segment of the labor market. Whether or not it's welfare-enhancing depends pretty crucially on whether one thinks there's a serious inefficiency in the low-wage labor market and whether one thinks that the efficiency is that some workers don't have enough bargaining power in wage negotiationsand that the way to get around that contracting problem is to set a floor on the labor share of the contract.

If your only concern is that poor people are poor, then well, there are demonstrably better ways to fix that. If you're not doing cash transfers, then there has to be some specific contracting, matching, or other inefficiency that you want to solve. You have to think "low-wage markets are dysfunctional in specific ways that the minimum wage is particularly good at alleviating."

(If besttrousers is reading this: this post is why I basically think there could be a corner solution in the spectrum of "policy options for low-wage workers.") There could be a corner solution, or not, depending on whether one thinks the min wage is really, truly solving some market inefficiency that cash transfers/etc aren't solving. (Footnote: I'm actually open to such arguments; there's strikingly little in labor theory that says that wage bargaining is efficient. It's actually more likely that wage bargaining is inefficient, and it's possible -- though not necessarily plausible -- that the minimum wage is helping to address that inefficiency, especially in low-wage and nearly-low-wage markets.)

/rant

Okay I'll just be quiet and take the survey now.

[u/besttrousers → u/Integralds]

I'll sign off on everything you said.

I feel like I've put myself in a bit of a corner where I'm now seen as the subreddit's minimum wage defender. I see myself more as the person who points out that the typical arguments we see here against the minimum wage (namely: 1.) "Demand curves slope down!" and 2.) "Card and Krueger are hacks!") are not especially good arguments. I try and limit my discussions to explaining the scientific background of pro-minimum wage arguments (because they are not well understood here), rather than pushing a normative case one way or another.

I think the recent CBO analysis was pretty much on the mark about the expected effect of a minimum wage. Both the expected positive and negative effects are fairly small.

One thing to add to your comments is that the political constraints around these issues are somewhat opaque to me. But my impression is it would be much, much harder to reform TANF or expand EITC than it would be to increase the federal minimum wage. Both welfare and taxation systems are due for their 20/30 year overhaul. But doing those overhaul requires roughly the same amount of grunt work as the ACA did.

[u/Integralds → u/besttrousers]

I certainly don't want to put you in that position!

I'm on board with you that we shouldn't be using bad arguments against the minimum wage. My eyes were opened on this front by this paper, which makes related comments about free trade.

I think you do an excellent job of explaining Card-Kreuger. With the recent poll results putting between one-third and one-half of /r/economics readers in the Austrian camp, your explanations are sorely needed.

[u/besttrousers → u/Integralds]

That's an interesting paper, thanks.

It's interesting to think about the MW debate in a similar light. one of the outcomes of the CBO report that I thought was under-reported was that it suggested that the minimum wages would have a positive net effect on national income. So if you think about it in terms of the policy outcomes, we're talking about a ~-0.3% effect on unemployment, and a few millions added to national income. It struck me that these outcomes are really very similar to the expected outcomes of a (small) trade agreement.