minimum-wage analyses

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James Kwak's look at Econ 101 and the minimum wage [an excerpt from his book Economism: Bad Economics and the Rise of Inequality] points out that "The minimum wage has been a hobgoblin of economism since its origins," from Henry Hazlitt to Milton Friedman to Ronald Reagan:

Think tanks including Cato, Heritage, and the Manhattan Institute have reliably attacked the minimum wage for decades, all the while emphasizing the key lesson from Economics 101: Higher wages cause employers to cut jobs.

Kwak cites two recent meta-studies suggesting that "increasing the minimum wage does not have a significant impact on employment." One study is "The New Minimum Wage Research;" the other, "Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis," agrees that minimum-wage increases can drive up labor costs overall, but with this caveat:

But many companies can recoup cost increases in the form of higher prices; because most of their customers are not poor, the net effect is to transfer money from higher-income to lower-income families.

"Raising the minimum wage," this study observes, "would also reduce inequality by narrowing the pay gap between low-income and higher-income workers:"

This conviction that the minimum wage hurts the poor is an example of economism in action. Economists have many different opinions on the subject, based on different theories and research studies, but when it comes to public debate, one particular result of one particular model is presented as an unassailable economic theorem.

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This page contains a single entry by cognitivedissident published on January 14, 2017 10:35 AM.

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