Conservative reasons for increasing the minimum wage.

[DanieltheDragon]

First I would just like to get a few things out of the way. I am not a huge fan of the minimum wage. It is what it is and the current structure of our economy makes it a necessary component. The current amount of workforce dependent on minimum wage is actually pretty small. The impact of increasing the minimum wage will not end poverty and would likely increase some inflation.

1. I do not subscribe to the idea that increasing the minimum wage will prevent job growth. Although some do the jury is still out on this one however we have recent data from 13 states that recently increased their minimum wage.

http://www.npr.org/sections/thetwo-way/ ... eport-says

2. Minimum wage on inflation

http://www.investopedia.com/ask/answers ... lation.asp

3. Increasing the minimum wage will also increase wages for those working close to the minimum wage.

http://www.hamiltonproject.org/papers/t ... n_workers/





With that out of the way I will move onto reasons why I think the minimum wage should be raised from a conservative backdrop.

A.) It will have a natural effect on reducing entitlement programs.
-----By increasing the minimum wage workers on the lower end of the wage spectrum will have less dependence on entitlement programs and safety nets. Lowering the burden on the tax payer.


B.) The government should not be in the business of subsidizing the workforce
-----Not all companies but some use entitlement programs to subsidize the salary of their workforce. Places like Wal-Mart are examples of this collecting millions in tax breaks and manipulating workforce hours to avoid providing health insurance. These employees end up depending on SNAP, Welfare, Medicaid/Medicare. By increasing the minimum wage this shifts the burden back on to the employer to pay for their employees wages.

C.) Maintaining the free market not destroying it.

The minimum wage is a baseline of employment. All business across all states must at least meet the federal minimum wage. An increase in the minimum wage will not suddenly change the paradigm on how we employ or pay people in this country. It will however maintain it. The minimum wage should rise and fall with inflation. Having fixed arbitrary regulations that are devoid from market impacts has more destructive force than taking the baseline and adjusting it accordingly to these market fluctuations. If inflation rises the baseline needs to rise with that inflation lest we render that baseline moot in the first place.

[Paprika]

[Replying to post 14 by Paprika]

And part of your solution is to maintain management/distortion by increasing minimum wage? That's rather counterproductive.

It is the recognition that you are not going to remove the minimum wage. So it is not so much trying to increase distortion but minimize it. A wage that is dependent on inflation matches market fluctuations comparative to an unwavering wage that does not.

Since inflation tends to increase, this generally means maintaining the price floor in real terms instead of allowing it to depreciate. And increasing the price floor only increases distortion (which by the way is independent of the 'fact' that 'we can't get rid of minimum wage'). If you want to keep it but minimise distortion, one way is to let it fall in real terms.

[DanieltheDragon]

[Replying to post 21 by Paprika]

Since inflation tends to increase, this generally means maintaining the price floor in real terms instead of allowing it to depreciate. And increasing the price floor only increases distortion (which by the way is independent of the 'fact' that 'we can't get rid of minimum wage'). If you want to keep it but minimise distortion, one way is to let it fall in real terms.

This assumes that it won't increase at a future date(which I demonstrated as wrong). Which it invariably will and to match inflation to boot. Except instead of having a gradual curve of a few cents per year you could see 120%-130% spikes in wages. It is a lot easier for an employer to adjust wages by 10 cents to 15 cents per year than it is to adjust it by$2-4 at an unforseen date. That sudden spike can put some businesses over the hump financially speaking.

Also an inflation based wage is much easier to plan for rather than a flat wage that will increase drastically on you at an unforseen future date. Distortion occurs all the same one form of distortion is more damaging than the other. Also if we consider that the wage floor will increase over time in spikes that businesses will be operating under a depressed wage floor at a certain point which is it's own form of distortion.

[Paprika]

This assumes that it won't increase at a future date(which I demonstrated as wrong). Which it invariably will and to match inflation to boot. Except instead of having a gradual curve of a few cents per year you could see 120%-130% spikes in wages. It is a lot easier for an employer to adjust wages by 10 cents to 15 cents per year than it is to adjust it by$2-4 at an unforseen date. That sudden spike can put some businesses over the hump financially speaking.

So you're trading increased distortion for more price stability of wages. I get that; my point is that this is hardly 'conservative' nor does it promote a 'free market'.

[DanieltheDragon]

[Replying to post 23 by Paprika]

The distortion occurs all the same though. Whether the wage goes from$7.20 to $9 over a period of ten years or if it goes from 7.20 to 9 suddenly. Also I would just like to point out stability is a conservative value.

Some conservatives seek to preserve things as they are, emphasizing stability and continuity

https://en.m.wikipedia.org/wiki/Conservatism


There is also progressive conservatism which both Taft and Eisenhower promoted.

[Paprika]

[Replying to post 23 by Paprika]
There is also progressive conservatism

A rather obvious oxymoron.

The distortion occurs all the same though. Whether the wage goes from$7.20 to $9 over a period of ten years or if it goes from 7.20 to 9 suddenly. Also I would just like to point out stability is a conservative value.

Some conservatives seek to preserve things as they are, emphasizing stability and continuity

Since 'things as they are' is almost always moving leftwards, all such 'conservatives' are preserving is progressivism. I've quoted GK Chesterton on this before:

"The whole modern world has divided itself into Conservatives and Progressives. The business of Progressives is to go on making mistakes. The business of Conservatives is to prevent mistakes from being corrected. Even when the revolutionist might himself repent of his revolution, the traditionalist is already defending it as part of his tradition. Thus we have two great types--the advanced person who rushes us into ruin, and the retrospective person who admires the ruins. He admires them especially by moonlight, not to say moonshine."

[DanieltheDragon]

[Replying to Paprika]

Conservatism means a lot of things to a lot of different people and is often culturally and chronologically dependent. Seeing that we likely come from different times and places it could be you are trying to foist your ideas of what conservatism should and should not be.

Conservatism is vast and varied. It is why we are not all autonomous robots that think the same. If the quote is how you feel then that is an opinion you are entitled to, I don't agree with it though. Personally I would like to correct some mistakes ones that I feel are way more important than the minimum wage. If you try to fight every battle no matter how small you will lose all the bigger more important battles.

[WinePusher]

Your points don't address an inflation based minimum wage.

The post I put up refuted common arguments used by minimum wage proponents. There shouldn't be a minimum wage at all, let alone a minimum wage that is annually adjusted for inflation.

And btw, have you ever considered the fact that the minimum wage is itself a cause of inflation, namely cost push inflation? There's demand pull inflation, a situation where higher aggregate demand pulls the general price level upward, and then there's cost push inflation, a situation where higher input prices on the part of businesses pushes the general price level up. When wages (the input price for labor) exceed the marginal product of labor, inflation rises. And this is precisely what the minimum wage does.

The original Card & Krueger paper made waves by purporting to show an increase in employment due to the minimum wage, and attributed this to the possible effects of monopsony. After revising the paper, they found no significant effect on employment, but monopsony stayed in the conversation.

I agree with the highlighted bold raising it has no significant effect on employment. It will not generate a noticeable increase or decrease on employment.

I know you do. Did you read that rest of the post? The highly controversial result of the Card-Krueger study is that the minimum wage doesn't impact employment. The reason why this result is highly controversial is that previous research on the minimum wage and labor markets (done by George Stigler, a Nobel laurete) showed that the minimum wage can actually increase employment in the presence of a monopsony.

The intuition behind Stigler's research is that if there's a market dominated only by one firm (a monopsony) then that monopsonistic firm will hire workers below the amount that would be hired under normal, generally competitive conditions and will pay these workers a wage below the wage rate that would be paid under competitive conditions. In other words, if you have a monopsony you're going to have under employment and lower wages. As such, Stigler purported that a minimum wage would simply offset these negative outcomes that are associated with monopsonys.

Card and Krueger heavily integrated the notion of monopsony into their paper in order to explain their conclusion (that the minimum wage didn't affect employment) and they go on to explicitly claim that the market for low skilled labor is monopsonistic. And as the post I linked explains, if this was true, if the minimum wage increased employment because the market for low skilled labor is monopsonistic, THEN there should also be a reduction in prices. The exact opposite happened, prices rose and this actually contradicts their usage of monopsony.

In short, the Card-Krueger study is always cited by pro minimum wage advocates but among actual economists, particularly labor economists, the findings of the study are shady at best, and the empirical methods they used are even worse.

I think this is where I am in biggest conflict but it is out of practicality. Is it politically practical to remove the minimum wage? Are we stuck with a minimum wage?

Of course it isn't politically practical to remove the minimum wage, but so what? Most of the general public may support it, but the same is true when it comes to creationism and evolution. A significant portion of the public believes in creationism and denies evolution, so what?

If the answer is yes then we have an economy with a floor on wages no matter how much we may be against it. There is simply not the political wherewithal to remove it. So I think the question then becomes not should there be a minimum wage, but what do we do about the minimum wage we have.

Avoid raising it, keep it as low as possible in order to avoid higher unemployment among low skilled workers.

It is not a true free market. It is more along the lines of Managed Capitalism. Certainly we have a significant amount of individual freedom within that confines it still doesn't change the fact that we are not in a true free market capitalist economy.

Yes, our economy most definitely isn't a free market. One of the reasons why is that we have the government fixing wages. So if you want a market that is more free than you should oppose the minimum wage.

You also present so called 'conservative' reasons to support the minimum wage that don't make much sense. How exactly does the minimum wage reduce entitlements when it creates unemployment among low skilled workers,

If you can show me the data where this has taken place I will have to revise my position.

You already mentioned Seattle's $15 minimum wage, which has devastated low skilled workers in that city. The minimum wage study commission concluded that hikes in the minimum wage are associated with declines in the unemployment rate. The huge majority of economists who actually study this in detail agree that the minimum wage reduces employment, etc, etc, etc.

You can informally confirm this for yourself by gathering data on youth unemployment and regressing it on minimum wage data in EXCEL. And once you see the negative coefficient, you'll know that a higher minimum wage is associated with low employment rates.

Or, you can just go with your common sense, which should tell you that when you increase the price of something people will buy less of it. So increasing the price of labor will mean that business will buy less labor.

[WinePusher]

Why? What's wrong with the way our economy is structured?

How about the fact that minimum wage is not enough to live on? I've done the math for my state. I found the cheapest rent I could find, the cheapest, thrifty food plan, etc. and one minimum wage income cannot support a person. two minimum wage incomes cannot support a family. not even close.

Is it valid to have people working 60 hours a week at three jobs, barely able to feed their families, and praying they don't have any unexpected expenses that would totally destroy them financially?

No, it isn't valid to have a person who has a family working at 3 minimum wage jobs and still barely unable to feed a family. But the solution you seem to be in favor of (raising the minimum wage to $15 or $20 an hour) is equally, if not more so, invalid.

The problem that you're raising indeed legitimate and there's been an enormous amount of time and energy devoted to understanding it and developing remedies for it. This issue is more in the domain of sociology, but due to their poor empirical methods sociologists have failed to provide any deep insights about this.

Ideally, low wage jobs should be occupied by workers just entering the labor market while moderate-high wage jobs should be occupied by workers with a decent amount of working experience. When we add age in as a variable, we note that under this framework low wage jobs are occupied by young people while moderate-high wage jobs are occupied by those who are older. Now, when we throw child bearing into the mix it would be ideal only for older people with high wage jobs to have children and start a family. Young people with low wage jobs should refrain from having children.

So if everybody somehow managed to follow this prescription (get a job when your young, work your way up the ladder, start a family only once you have a high income, etc) then the scenario where you have a middle age guy working 3 low wage jobs and trying to support a family would be nonexistent. Unfortunately, there are many controllable and uncontrollable factors that cause people to deviate from this framework.

For anybody genuinely interested in the research behind this see the work of Gary Becker, James Heckman and Raj Chetty. Becker and Heckman are Nobel laureates who have profoundly changed the way social scientists view human development and human capital, and Raj Chetty is a rising star in the economics profession who has produced seminal research on the effects of neighborhoods and locations on the economic development of children.

[Paprika]

[Replying to Paprika]

If you try to fight every battle no matter how small you will lose all the bigger more important battles.

As noted earlier, the battle is won precisely by doing nothing to the minimum wage, so that the distorting effect it has is reduced by inflation and therefore the market becomes more free over time.