I’m right and Paul Krugman is looking in the wrong place …

… for the problem.

Krugman makes the argument that opposition to raising the minimum wage to $15.00 an hour is not valid because doing so will not cause jobs to disappear.

It’s true that once upon a time there was a near-consensus among economists that minimum wages substantially reduced employment. But that was long ago. These days only a minority of economists think raising the minimum to $15 would have large employment costs, and a strong plurality believe that a significant rise — although maybe not all the way to $15 — would be a good idea.

Why did economists change their minds? No, the profession wasn’t infiltrated by antifa; it was moved by evidence, specifically the results of “natural experiments” that take place when an individual state raises its minimum wage while neighboring states don’t. The lesson from this evidence is that unless minimum wages are raised to levels higher than anything currently being proposed, hiking the minimum won’t have major negative effects on employment — but it will have significant benefits in terms of higher earnings and a reduction in poverty.

Who’s Radical Now? The Case of Minimum Wages
https://www.nytimes.com/2021/01/18/opinion/minimum-wage-us.html?referringSource=articleShare

Who am I to disagree with a Nobel prize winner who writes for the New York Times? On the above point, not me.

But the point Mr.Krugman makes is a smokescreen. I say that because I have every confidence he knows the other real issues regarding the minimum wage.

The majority of minimum wage earners are not married, or heads of households. They are young and unmarried.

A national minimum wage of $15 has a far different economic impact on communities in Mississippi and other lower income areas than it does in New York.

What is the impact on all workers (and employers) who currently earn $15.00 and several dollars an hour more? Is it unreasonable to assume many workers will demand higher wages?

What is the effect of all this on prices and the cost of doing business?

When the minimum wage is doubled will the income criteria for various subsidies and assistance programs be adjusted accordingly?

When all is said and done how will a person stuck in a minimum wage job be better off?

While the job loss issue is widely discussed, the above issues are rarely, if ever, spoken about.

8 comments

  1. “But the point Mr.Krugman makes is a smokescreen.”

    So you try to refute Krugman’s point by arguing against points he doesn’t make. This is rather obscure.

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  2. Much like law’s requiring prevailing wage bids to protect unions, a national minimum wage is designed to do the same for high cost blue states that can’t compete against low cost red states.

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      1. Just the exodus of companies moving from blue states to red. Boeing moved some manufacturing to the south. Sever car builders have moved to the south. Tesla, Oracle, etc.

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      2. I happen to live in a blue state, Hawaii, and I just never heard of our local businesses being exported to a red place. Also, I have heard NY complaints that their federal tax monies far exceed the federal subsidies of poorer states, like KY. Those are the sources of my skepticism.

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  3. Retail jobs are changing, as more people shop from home. The need for store employees to check you out is changing with smart apps, you can now scan and go, and skip the checkout lines, if you do chose to do your own shopping. I like to order my groceries on line and have them delivered or if free delivery is not an option, I just drive to the store when the order is ready and an employee brings it out to my car. You see it now at Walmart several employees moving around the store with the blue bins, filling several orders. With COVID or some other risk to shoppers and employees, I could see in person shopping going away, or be very limited. Just think of all the new jobs that will be created in providing special services.
    You need new glasses and the technician comes to your home to examine your eyes, with a hand held piece of diagnostic equipment, and then sends your glasses selection to the factory. No retail store required. Who knows we may even see Doctors making house calls once again. I know they are doing a lot of video appointments right now. As far as minimum wage increase driving production out of the United States, I do not think it will matter. There are only 15 million people working in manufacturing. Most employees work in the services / retail space and wage increases are only one of many factors that affect prices. My son works for Georgia Pacific making paper products in Muskogee, OK, he makes $22 per hour, he started at $13 per hour 10 years ago, and will be making much more by the time minimum wage reaches $15 per hour in OK.

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  4. I do not believe that raising the minimum wage on January 1st did or would have caused layoffs on January 2nd for those states that did raise rates this year. I believe that the studies of another era in the workplace were correct but I believe that in 50 years they will find that the conclusions were wrong for our modern era.

    All of your concerns that you stated are still true. In Seattle and NYC, where they have raised the minimum wage prior to 2020, hours and benefits were cut because they couldn’t raise prices and stay in business. It will be interesting to see a long-term study to see how many businesses failed after one year. I think that the covid pandemic will hide some of the truth. It will be easy to blame the shutdown for business failures.

    I also don’t believe that these studies have taken into account new technology that allows self-service kiosk, self-checkout, or even automation filling soda cups. People may not get fired but they sure are not going to be replaced after the new equipment gets installed. In retail and the food service industries, they have high turnover rates so how would you tack who lost the jobs until years later when comparing government BLS reports. There are always new stores opening so is there a net gain, loss, or a status quo thing per store going on?

    The last time America’s wages were too high, the manufacturing jobs that could be done elsewhere went to cheaper workforces overseas. This too will not happen overnight as it takes time to set up factories. I am no economist but it doesn’t take a Noble prize to see if you double the minimum wage of some southern states that the cost of labor will drive production out of the United States if they remain in business at all. One size solution does not fit all in this very large country.

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