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A Simple and Dumb Policy

Greg Mankiw:

Robert Reich says that, as a requirement for free trade deals, we should tell developing countries to "set a minimum wage that's half their median wage."

It's amazing how effortlessly people come up with policies that really hurt the poorest of the poor!

Imagine a nation with a median wage of $730 per year. According to Reich, we should tell this country to set a law which makes it illegal for anyone to be hired at less than $365 per year. (I'm assuming that everyone works a 40-hour work week for simplicity.)

What happens to those who were making less than a $1 a day. They're out of a job! Is this, in any way, compassionate!?


Josh Scholar

The fact is that studies on the sort of low minimum wages that the US and US states have set show very little effect on employment, and you are ignoring the good done for poor workers who don't lose their jobs under this regiment.

The fact is that in many cases the cost of labor is not a significant burden on a business.

Josh Scholar

I think that, in fact, there in general, no measurable effect on employment has been shown at all in the long run.

Saul Wall

Studies by the Marxist reading club no doubt. If all the studies say that minimum wage laws are fine why is it that economists who actually study economies and their histories and their behaviors (and many of whom are employed by far left universities so should have every reason to champion government regulation and other socialist schemes) always come out against them? Minimum wage laws in Arizona seem to have made teenagers less employable.

Josh Scholar

They may well have made teenagers less employable (by attracing more adult competition), but that's not the same thing as lowering the number of employees.

And adults are more likely to NEED work rather than just want it. More work for them means less welfare payments, which isn't true for teenagers. And that's hardly an outcome that conservatives should be against.

Josh Scholar

typo: "attracting" not "attracing", sorry.

Josh Scholar

To be clear, I had heard that there was an effect on teenage employment. When I said "no measurable effect" I meant no measurable effect on the number of people employed

Josh Scholar

It's an idiotic faith that American conservatives have, that the extremes of every policy (especially of having no regulation at all) are always the optimum.


Cite a study, or piss off.


" measurable effect on employment has been shown at all in the long run."

You can starve to death in the short run. But hey, what's a few eggs, right?

And the reason we have such a terrific economy in America is because other countries have micro-managed our labor policies, right? In bits and pieces, with no regard for the big picture and with no accountability if they totally screw it up?

Josh Scholar

Well, oddly enough, my source was a talk given by Robert Reich. But since I didn't come home with a pocket full of footnotes, you'd be as good as googling for the studies as I would.

Josh Scholar

Or maybe it wasn't Reich. In any case it was a talk given on NPR. It cited studies, (including all of the claims I gave), but I don't have any cites myself.

Josh Scholar

Google Scholar may be a good search engine for papers:

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