The Effects Of Minimum Wages

"This paper provides evidence on a wide set of margins along which labor markets can

adjust in response to increases in the minimum wage, including wages, hours, employment, and ultimately labor income, representing the central margins of adjustment that impact the economic well-being of workers potentially affected by minimum wage increases. The evidence indicates that workers initially earning near the minimum wage are adversely affected by minimum wage increases, while, not surprisingly, higher-wage workers are little affected. Although wages of low-wage workers increase, their hours and employment decline, and the combined effect of these changes is a decline in earned income.

We also delve into the political economy of minimum wages, attempting to understand the vigorous support of labor unions for minimum wage increases. Using the same empirical framework, we find that relatively low-wage union members gain at the expense of the lowest-wage nonunion workers when minimum wages increase."

The Effects of Miminum Wages Throughout the Wage Distribution

by David Neumark, Mark Schweitzer, and William Wascher.

 

In PDF.

 

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Obama has a superficial, if not infantile view on business and economics. His speech to the Union on mimimum wages made that all too painfully clear.

 

We see this time and again with progressive measures. The people it's said to help actually get hurt by them. It's a broken record that keep skipping. It keeps repeating itself over and over.

 

"The reason is simple: although minimum wage laws can set wages, they cannot guarantee jobs. In practice they often price low-skilled workers out of the labor market. Employers typically are not willing to pay a worker more than the value of the additional product that he produces. This means that an unskilled youth who produces $4.00 worth of goods in an hour will have a very difficult time finding a job if he must, by law, be paid $5.15 an hour. As Princeton economist David F. Bradford wrote, “The minimum wage law can be described as saying to the potential worker: ‘Unless you can find a job paying at least the minimum wage, you may not accept employment."

 

"Several decades of studies using aggregate time-series data from a variety of countries have found that minimum wage laws reduce employment. At current U.S. wage levels, estimates of job losses suggest that a 10 percent in crease in the minimum wage would decrease employment of low-skilled workers by 1 or 2 percent."

 

Yet we cling to minimum wages and superficially set wages (like in subsidized daycare) as if it's an empirical fact.

 

Link expands on the above comments.

 

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What about rent controls?

 

Inefficient.