City of Chicago Mandates a Living Wage for workers.

[jman220]

Story Here

I completely disagree with the implementation of this to only Big Box Stores like Walmart of course. But it will be interesting to see if the implementation of this in a big city like Chicago will actually cause all these stores to leave, as all the minimum wage doomsayers were predicting on this board a few months ago, or whether, as I predicted, most stores will simply stay and raise prices a little. (It doesn't seem like having a living wage had the dire predicted consequences in Santa Fe, Albuquerque, San Francisco, and Washington).

[adios]

Not a law in Albuquerque yet (I live there). Given the track record of the city government I'd expect it to happen eventually if not soon. Haven't heard anything negative or positive regarding Santa Fe.

[Parnick]

I think there is little justification for a minimum wage, even if you believe in a serious redistribution of income. A minimum wage basically amounts to a distortionary price floor that fails to gain any government revenue for the loss in consumer/producer surplus it creates.

The only reason it remains such a calling card of liberals and progressives is that it seems so simple: Just raise people wages, and everyone will make more money.

Of course, if this were the case, I would advocate a $200 minimum wage, or more. Unfortunately, people respond to incentives. That inconvenient truth tends to derail many liberal economic policies from planning to implementation.

[iron81]

The only problem I have with the Chicago ordinance is it is not broad enough: I can see the equity argument the big retailers are making. But since this is turning into a general minimum wage debate, lets have at it:

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A minimum wage basically amounts to a distortionary price floor that fails to gain any government revenue for the loss in consumer/producer surplus it creates.

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Thank god that that's not the reason we have a minimum wage then. The reason for a minimum wage is to make sure that people who work aren't explolited by their employer and that people who work full time don't live in poverty (at least, it was until the Republicans let it stagnate).

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The only reason it remains such a calling card of liberals and progressives is that it seems so simple: Just raise people wages, and everyone will make more money.

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1. Its not just liberals who support it: 80% of Americans support raising the minium wage.
2. We're not talking about raising everyone's wages, we are talking about raising the wages of the bottom 10%.

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Of course, if this were the case, I would advocate a $200 minimum wage, or more. Unfortunately, people respond to incentives. That inconvenient truth tends to derail many liberal economic policies from planning to implementation.

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Also in the link above, a Princeton University study was cited indicating that raising the minimum wage has no impact on joblessness and might even be a slight job creator. I didn't get it either at first, but it makes sense if you think about it: if you are poor and you get a raise, you are going to go out and spend that money right away, probably at places where other people also don't make much like grocery stores.

You say that people respond to incentives, I agree. That's another reason we need to raise the minimum wage, to give people a greater incentive to go out and work. You don't want people on welfare BOOGA BOOGA, do you?

Also, I would point out that if everyone's wages were increased to $200/hour tomorrow, that wouldn't mean that everyone would be unemployed, it would just mean rampant inflation.

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Haven't heard anything negative or positive regarding Santa Fe.

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Study in PDF on that law

[vulturesrow]

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Also in the link above, a Princeton University study was cited indicating that raising the minimum wage has no impact on joblessness and might even be a slight job creator. I didn't get it either at first, but it makes sense if you think about it: if you are poor and you get a raise, you are going to go out and spend that money right away, probably at places where other people also don't make much like grocery stores.


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The Card and Krueger study has received a lot of criticism, especially because it relied on survey data. There is no way to explain how charging more for something results in increased utilization of that something. If you want to believe that, you might as well throw the whole of economic theory out the window.

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Also, I would point out that if everyone's wages were increased to $200/hour tomorrow, that wouldn't mean that everyone would be unemployed, it would just mean rampant inflation.


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And here you go completely off the deep end. Find me one reputable economist who would supoort a statement like that. The larger the increase of a minimum the greater distortionary effects you are going to see.

Since you like studies, here is one for you:

Sense and Nonsense on the Minimum Wage

EDIT: I should add that the Card and Krueger study is looking at a relatively small wage increase. The plan that Chicago passed effectively doubles the Illinois minimum wage. This is a big increase, and pretty likely to have a real impact on hiring decisions.

[Parnick]

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Thank god that that's not the reason we have a minimum wage then. The reason for a minimum wage is to make sure that people who work aren't explolited by their employer and that people who work full time don't live in poverty (at least, it was until the Republicans let it stagnate).

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I understand that this is not the point. Clearly, the point is to get more money to the people at the bottom of the economic ladder. I think we all accept that this is the typical motivation for the minimum wage. Of course, that's not always the case... but I digress.

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1. Its not just liberals who support it: 80% of Americans support raising the minium wage.

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That's mildly interesting but almost entirely irrelevant, considering that we are discussing the merits of the minimum wage, not its popularity.

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2. We're not talking about raising everyone's wages, we are talking about raising the wages of the bottom 10%.

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Again, I understand that. Afford me even the slightest principle of charity.

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Also in the link above, a Princeton University study was cited indicating that raising the minimum wage has no impact on joblessness and might even be a slight job creator. I didn't get it either at first, but it makes sense if you think about it: if you are poor and you get a raise, you are going to go out and spend that money right away, probably at places where other people also don't make much like grocery stores.

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I believe the Card and Krueger paper is interesting, but not terribly indicative of general trends concerning minimum wage. Unfortunately, it’s difficult to perform truly controlled experiments concerning minimum wage, and therefore results from a single experiment can mislead people who wish to find evidence to support their case. The case of workers in a small segment of the population (fast food) in two states does not provide a comprehensive look at the effects of minimum wage increases. The bulk of economic literature on the subject contends that a raise in the minimum wage causes a slight decrease in employment. Off the top of my head, I think a 10% increase in wage causes a 1% fall in employment. If someone has a source for that, please post it. I’ll look for it as well. Anyway, my basic point is that Card and Krueger provide a puzzling aberration, but by no means discredit the basic economic theory that raising the price of a good (labor) decreases the demand (employers).

Again, if Card and Krueger are right about the effects of minimum wage increases in general, raising wages even further would provide even more jobs. Clearly this is not the case, as you addressed in your comment about the 200/hr wage. (You imply that there would only be inflation, which is incorrect, but vulture addressed that above)

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You say that people respond to incentives, I agree. That's another reason we need to raise the minimum wage, to give people a greater incentive to go out and work. You don't want people on welfare BOOGA BOOGA, do you?

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I think that, ceteris paribus, it is better for people to have income subsidies to supplement their wages below a certain point than for people to be unemployed by minimum wage laws and receive total income subsidies. Why? Because minimum wage laws, as a I stated above, are a price floor that provides the government with no revenue to redistribute. It would be preferable from an apolitical standpoint to allow the sub-minimum wage jobs to exist while taxing the companies that provide them. This causes a smaller amount of deadweight loss for the same level of government intervention.

The more general case of whether a welfare state should exist is not my concern in this argument. I don’t think I gave any indication of whether I wanted people on welfare or not. Don’t assign policy prescriptions to me when I haven’t given any indication that I advocate them.

On a side note, I think comments such as “Booga Booga” are boring and unfunny, and they certainly don’t help win you any points with people who don’t already agree with your ideas.

[Copernicus]

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(at least, it was until the Republicans let it stagnate).


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Yeah the minimum wage skyrocketed during the Clinton administration. The "stagnation" of minimum wage during the 80s and early 90s was a corollary to the fight to get inflation under control and the disasterous economic policies of Nixon, Ford and Carter.

But minimum wage has plenty of "Air time" in its own thread a month or so ago.

[iron81]

I really got owned here. I couldn't understand half of what Vulturesrow and Parnick were talking about. Parnick was even busting out the Latin. I guess I should have taken a macroeconomics class in school after all [img]/images/graemlins/frown.gif[/img] Although I still believe that an increase in the Minimum Wage is long overdue.

[Parnick]

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I really got owned here. I couldn't understand half of what Vulturesrow and Parnick were talking about. Parnick was even busting out the Latin. I guess I should have taken a macroeconomics class in school after all [img]/images/graemlins/frown.gif[/img] Although I still believe that an increase in the Minimum Wage is long overdue.

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haha, yeah, ceteris paribus just means "all else being equal." And minimum wage laws apply to micro rather than macroeconomics. But, if you are interested in econ, you should buy Grag Mankiw's intro textbook. It's very easy for a non-econ guy to understand. Your last sentence made me sad, but all I can do is argue as well as I can for what I believe. It's up to others to decide whether it makes sense.

[vulturesrow]

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I really got owned here. I couldn't understand half of what Vulturesrow and Parnick were talking about. Parnick was even busting out the Latin. I guess I should have taken a macroeconomics class in school after all [img]/images/graemlins/frown.gif[/img] Although I still believe that an increase in the Minimum Wage is long overdue.

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haha, yeah, ceteris paribus just means "all else being equal." And minimum wage laws apply to micro rather than macroeconomics. But, if you are interested in econ, you should buy Grag Mankiw's intro textbook. It's very easy for a non-econ guy to understand. Your last sentence made me sad, but all I can do is argue as well as I can for what I believe. It's up to others to decide whether it makes sense.

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I second the recommendation on the Mankiw textbook. Also check out Greg Mankiws blog, it is excellent.