Minimum wage myths: unemployment

Written By: - Date published: 9:15 am, February 2nd, 2010 - 127 comments
Categories: class war, minimum wage, unemployment - Tags:

One of the old saws that the Right brings out whenever the topic of increasing the minimum wage comes up is ‘oh no, it will increase unemployment’. They said it this year. The Business Roundtable said it every year as the Fifth Labour Government put up the minimum wage and unemployment kept falling. Hell, they probably screamed it when, in 1975, the Third Labour Government nearly doubled the minimum wage to $12.46 in today’s dollars, and were mystified when unemployment didn’t skyrocket.

In fact, the neoliberal consensus among economists that minimum wages are bad news has been unravelling for decades. In 1978, 90% of economist agreed the minimum wage increases unemployment. By 1990, 62.4% fully agreed and 17.5% disagreed. In 2000, only 45.6% (I’m guessing the older ones) still wholeheartedly thought the minimum wage increases unemployment and 26.5% thought otherwise. The numbers are probably still dropping and there is growing evidence of no relationship between unemployment and minimum wages. It is simply not a truth universally acknowledged by economists that the minimum wage increases unemployment.

It is only in the bonehead world of the rightwing pundit or editor that it is taken as gospel that raising the minimum wage increases unemployment. But, wouldn’t you know it, those annoying facts don’t agree. Check out the minimum wage and unemployment rates from 1970 to 2009:

[Positive correlations go from 0 to 1. The higher, the stronger the relationship. 0.05 is so laughably low that there’s probably more relationship between the colour of my shirt on a given day and the weather in Ulan Bator than between the minimum wage and unemployment in New Zealand]

Face it, the Right isn’t worried that about low-paid Kiwis losing their jobs. Low income Kiwis don’t even exist in their imaginations (go on, righties, guess the median income without peeking, and remember 50% of people are poorer than that). No, the Right is interested in bigger profits and bigger salaries for the bosses.

At the end of the day, there’s only so much pie to go around at any one time. Cutting bigger slices for the working poor means slightly smaller slices for the well-off, and that’s what the Right is against.

127 comments on “Minimum wage myths: unemployment ”

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  1. TightyRighty 1
    2 February 2010 at 9:34 am

    Marty, did you read your “growing evidence”. thats a pretty good own goal. basically saying that the methods used by card-krueger were not very scientific in their approach. I really like the final comment

    “Despite the above mentioned shortcomings, the Card-Krueger findings have been seized upon, both in the United States and abroad, as providing support for increasing the minimum wage. Initially, there was a rush to judgment and a rush to celebrate and acclaim the results. With the emergence of major questions concerning the accuracy of the basic data in their major natural experiment, there has been some retreat from that position. We think this retreat is wise. Certainly, until some of the major questions are resolved, it might be well to accept the statement made by Krueger at a Milken Institute conference, where he stated, “I want to emphasize that my comments should not be interpreted as support for the position that increasing the minimum wage is sound public policy” (Krueger 1993:11). “

    • TightyRighty 1.1
      2 February 2010 at 9:42 am

      Oh, and this is from 1995. so if there hasn’t been any more evidence, which was discredited anyway, like the IPCC, since then, it’s not growing. it’s stagnating. how about this,

      http://expectedreturns.blogspot.com/2009/07/increase-in-minimum-wage-means-more.html

      • Bright Red 1.1.1
        2 February 2010 at 10:00 am

        No. The old guard don’t accept the findings of the study – ie that it doesn’t increase the minimum wage.

        And it’s just one study among many. I think we’re still waiting for any empirical studies that show the minimum wage increasing unemployment.

        How do you respond to the soaring numbers of economists who don’t think the minimum wage increases unemployment?

        • TightyRighty 1.1.1.1
          2 February 2010 at 10:05 am

          Um, the study was proved to be statisctically false. you’ll rip on the herald for it, but when it’s one of your own, it’s one of many, lots of consensus. yeah wikipedia is always accurate. IPCC AR4, himalayan glaciers, i see a trend emerging. i’ll go make some pretty graphs to back it up. where are these other studies then bright red?

          • snoozer 1.1.1.1.1
            2 February 2010 at 10:06 am

            tighty. if you want to talk about the IPCC f*ck off to the appropriate thread and stop threadjacking this one.

            • TightyRighty 1.1.1.1.1.1
              2 February 2010 at 10:08 am

              not threadjacking. using it as a comparison point for dodgy studies. if you can’t comprehend what i’m saying, fuck off back to school.

              • snoozer …
                2 February 2010 at 10:14 am

                So, what is dodgy about the study? that some old neoliberals disagree? Boo, hoo.

                And how do you dismiss the growing number of economists who don’t agree that the minimum wage increases unemployment? With “yeah wikipedia is always accurate”? Weak, check the studies, links are provided.

                Oh and sonny, how do you explain that complete lack of correlation between the minimum wage and the unemployment rate in nz?

              • TightyRighty …
                2 February 2010 at 10:20 am

                some old neo-liberals disagree? pull your head out of the sand snoozer. the study got pulled apart because it was based on dodgy stats, put together by dodgy methods. It doesn’t stand up to scrutiny. sorry to tear down the things you hold dear. it’s not disagreement, it’s peer reviewed and found wanting. we on the right no the left can’t handle this, so it’s no suprise your being a fucking tool about it. trying to run interference for marty with his 15yr old discredited study. “wikipedia, wikipedia”

              • snoozer …
                2 February 2010 at 10:55 am

                so we’ll conclude that you have no answer to the fact that there is no concensus among economsits that increasing the minimum wage increases unemployment.

                And we’ll conclude that you have no answer as to why there is no correlation between unemployment in New Zealand and the minimum wage.

              • TightyRighty …
                2 February 2010 at 11:29 am

                and we’ll conclude with the fact you haven’t acutally provided any evidence apart from a wiki link to consensus on economists.

                surveyer – is there a link between the minimum wage and unemployment?

                economist – can i hold all things equal?

                surveyer – sure

                economist – then there can be no link.

                the “growing evidence” was growing mould from being left in the closet to long. there is no rhyme or reason to raise the minimum wage by 19%. it’s an idealogical thing, and cheap political point scoring. some jobs just aren’t worth it. as some other commentators have called, if it can be $15 with no impact, why not $50? any answer to that question snoozer, or are you just going to keep your head in the sand?

              • snoozer …
                2 February 2010 at 12:29 pm

                the answer to your question is that you’re arguing reductio ad absurdum and it makes a fool of you. We’re talking about increases to the minimum wage within the ranges that NZ has experienced, indeed thrived under, in the past. Not some silly idea of making it double the average wage.

                Remember, it is you guy’s who are arguing that there is a positive link between minimum wages and unemployment.

                You’ve got no evidence of it.

                Economists increasingly don’t think its true. (and I don’t know what you’re playing at making up survey questions)

                and the evidence from New Zealand is completely to the contrary.

          • lprent 1.1.1.1.2
            2 February 2010 at 10:35 am

            TR: AR4 has no significant issues. There are a couple of dodgy links in a massive compilation of the available studies in the descriptive parts of the release.

            If you think that invalidates the science – then I’d suggest you’ve proved yourself to be a moronic dork with very little idea about the depth of the AR4 reports.

            If so then you’re probably a moronic dork about the subject of the post as well.

            • TightyRighty 1.1.1.1.2.1
              2 February 2010 at 10:43 am

              it’s lazy referencing. kind of like marty’s “growing evidence”. it’s a benchmark thing Lprent and it’s an emerging trend. if you are only as good as your weakest link?

              • BLiP …
                2 February 2010 at 2:56 pm

                I do tend to put my own slant on whatever is being said, which means i read, comprehend and then argue without reference.

                irony 1 noun (pl. -ies) [ mass noun ] the expression of one’s meaning by using language that normally signifies the opposite, typically for humorous or emphatic effect

              • TightyRighty …
                2 February 2010 at 6:58 pm

                irony? i don’t think you get it BLiP. you seem to make out that i reference, and then lazily. i don’t. i know my argument before i walk in. it’s not my fault all your beliefs are based on shaky ground and you feel the need to act like a superior twat to get your kicks. i bet you got bullied as a kid and the teachers didn’t care as you brought it on yourself.

              • BLiP …
                3 February 2010 at 8:45 am

                You may well know your argument before you walk in but, as the presentation of facts and application of logic strip it down to just another lump of ignorance, your inner nastiness swells up and it becomes ad hominem. Whattaguy!

        • Paul Walker 1.1.1.2
          2 February 2010 at 9:34 pm

          As I have noted below no economist thinks the minimum wage increases the *overall* unemployment rate. What economists do say is that minimum wages reduce employment of low-skilled workers; adverse effects even more apparent when research focuses on those directly affected by minimum wages.

    • toad 1.2
      2 February 2010 at 11:17 am

      I think there is a growing consensus that moderate minimum wage increases have no statistically significant impact on employment.

      Your challenge, TightRighty, if you choose to argue that moderate increases in the minimum wage reduces employment levels is to find a study that shows, to a level of statistical significance, that it does. Card and Krueger now accept that their earlier assertion that such minimum wage increases increase employment rates is not backed by statistically significant evidence. But the same applies to the contrary assertion of Neumark and Wascher:

      The exchange between Neumark and Wascher (2000) and Card and Krueger (2000) provide some resolution of the differences because they essentially re-examined the earlier natural experiment of the fast-food industry in New Jersey and Pennsylvania originally done in Card and Krueger (1994). Neumark and Wascher (2000) were critical of the fact that the original study was based on survey data of firms. They provided new evidence based on administrative payroll data of the firms and found that the survey data exhibited much more employment variability than did the payroll data (causing them to question the accuracy of the survey data). More importantly, they find that the payroll data imply that a 10% increase in the minimum wage would reduce employment by 1 – 2.5% which is almost exactly equal to the earlier consensus estimates of 1 – 3%, although their results are often statistically insignificant. They conclude (p. 1391) that:

      “minimum wage increases reduced fast-food employment [and] we can be more decisive in concluding that New Jersey’s minimum-wage increase did not raise fast-food employment in that state’.

      Card and Krueger (2000) respond to that critique by reanalysing the Neumark and Wascher payroll data (arguing that it is not based on a representative sample of employers) and by using two alternative sources of administrative payroll data provided by the Bureau of Labor Statistics. They conclude:

      “Consistent with our original sample, the BLS fast-food data set indicates slightly faster employment growth in New Jersey than in the Pennsylvania border counties over the time period that we initially examined, although in most specifications the differential is small and statistically insignificant (p. 1397) the increase in the New Jersey minimum wage in April 1992 had little or no systematic effect on total fast food employment in the state (p. 1398) The increase in New Jersey’s minimum wage probably had no effect on total employment in New Jersey’s fast-food industry, and possibly had a small positive effect’ (p. 1419).

      One interpretation of this exchange is that both sides converged closer to zero effect. That is, although Neumark and Wascher (2000) found estimates that were in the earlier consensus range, they were often not statistically different from zero. As well, the new Card and Krueger (2000) estimates moved away from their earlier ones of often finding statistically significant positive employment effects, closer to ones that find no employment effect, and this seems their “preferred interpretation’.

      • TightyRighty 1.2.1
        2 February 2010 at 11:33 am

        so the downward results are there, just a statistcally insignificant negative effect or a “possible positive effect”? maybe due to other factors, pop growth etc. so extrapolating from that, the minimum wage could remain where it is, and then unemployment would go down. hardly fucking rocket science is it? based on NJ fast food industry data and all.

  2. tsmithfield 2
    2 February 2010 at 9:45 am

    Notice also that the minimum wage on your graph is inflation adjusted.

    So, how would a rise to $15 dollars per hour equated on an inflation adjusted basis given the extremely low rate of inflation during the financial crisis?

    Lets assume for arguments sake that the evidence you quote is water-tight, even though, as TR points out, this is unlikely to be the case. Your graph shows that the minimum wage may not have had a huge effect on unemployment during relatively normal economic times. However, to assume that a substantial increase of 20% (as Labour wanted) when inflation is at two percent during the worst economic times since the great depression won’t increase unemployment is lunacy. You simply aren’t comparing apples with apples.

    If what you are saying is correct then increasing the minimum wage to $50 per hour won’t affect unemployment either.

    • TightyRighty 2.1
      2 February 2010 at 9:52 am

      it’s just one of the old saws of the left. “there is no impact from minimum wage super-rises, we’ll back this up with shonky evidence, taken straight from the IPCC playbook”

    • snoozer 2.2
      2 February 2010 at 10:03 am

      Of course the numbers should be inflation-adjusted, ts.

      Nominal dollar values are just numbers on pieces of paper, real inflation-adjusted values show actual ability to purchase good and services.

      So, guys, how come unemployment didn’t head for the stratosphere when Labour doubled the minimum wage in 1975, during a period of drastic economic crisis?

  3. luva 3
    2 February 2010 at 10:01 am

    Why are Labour not advocating for an $18 minimum wage if there is no connection with unemployment.

    Please explain their reason for only $15

  4. Pete 4
    2 February 2010 at 10:05 am

    “At the end of the day, there’s only so much pie to go around at any one time. Cutting bigger slices for the working poor means slightly smaller slices for the well-off, and that’s what the Right is against.”

    …but it’s all about GROWING the pie, and that’s apparently what this government has been elected to do…

    …and where are businesses going to get the money for to pay their employees??…

    …and what about employees on the cusp of the minimum wage? Their wages will be forced up too, who will pay for that…

    etc etc

    (sorry, I thought I’d get those out of the way)

  5. mickysavage 5
    2 February 2010 at 10:18 am

    Why is it that trying to give workers the dignity of a reasonable minimum wage attracts such opposition from the right? It seems to me that at the slightest mention of “minimum wage” the comments pour in.

    • BLiP 5.1
      2 February 2010 at 1:11 pm

      Because, to their minds, human beings are goods, just like a pile of sand at a cement factory.

      • lukas 5.1.1
        2 February 2010 at 1:17 pm

        No, I think you are confused…. it was a certain green MP who compared trees to humans, close though.

        • BLiP 5.1.1.1
          2 February 2010 at 2:16 pm

          Ahh, reminds me . . . I’ve been meaning to ask one of the trolls, and you’re just as clever as the others: how come, so far as the right is concerned, a tree is worth more chopped up than standing up?

          • lukas 5.1.1.1.1
            2 February 2010 at 2:28 pm

            Firstly, I do not speak for “the right” I am quite capable of thinking for myself.

            A tree can be useful and productive when cut down obviously. We have a need for timber.

            I am not saying all trees should be cut down, I am quite happy for our native forests to be protected within reasonable grounds, they attract tourists and obviously help clean up our air quality.

            So BLiP, I’ve played your game and answered your question, will you finally answer the question that I have asked you many times, do you think comparing the lose of a child’s life is comparable to chopping down trees?

            • BLiP 5.1.1.1.1.1
              2 February 2010 at 2:36 pm

              As a rhetorical device it certainly resonates with you . . got a little bit of the cognitive dissonance creeping in there, Lukas?

              • lukas …
                2 February 2010 at 2:40 pm

                Not at all.

                Yes or no BLiP, is a childs life more valuable than trees?

              • BLiP …
                2 February 2010 at 6:49 pm

                Let me answer with a question:Yes or No – do you understand the word “metaphor” and, if so, what would the answer to your question be if you were to ask Tāne Mahuta?

                Do you live in Aotearoa?

              • lukas …
                2 February 2010 at 7:29 pm

                Yes or No do you understand the word “metaphor’

                Yes.

                what would the answer to your question be if you were to ask Tāne Mahuta?

                Ask him yourself. I don’t make a habit of talking to made up things/people.

                Do you live in Aotearoa?

                I live in New Zealand.

                Yes or No BLiP, is it appropriate to compare chopping down trees to the lose of a childs life? Here is a hint for you… the correct answer is No.

              • Pascal's bookie …
                2 February 2010 at 8:10 pm

                …is a child’s life more valuable than trees?

                Certainly. There are very few things, I imagine, that survive the face off when you put it like this. If there is a decision to make between your child getting killed and some other thing happening, most will prefer the other thing to happen, almost always.

                …is it appropriate to compare chopping down trees to the loss of a childs life?

                This depends entirely on what comparison you are making. No one would argue that chopping down a tree for necessary ends is exactly the same thing as burning babies on an altar for lolz. I strongly suspect however, that there are certain legitimate comparisons that could be made. ie, that there are certain aspects involved in losing a child’s life that could be compared to other things. It is very common, for example, for people to compare the loss of a beloved pet to the loss of a child.

                So let’s see the quote Lukas. You are using two very different versions here, and I’d like to see what it is you want people to defend.

                I’m guessing it’s closer to the second quote of yours above than the first, but let’s see it.

              • lukas …
                2 February 2010 at 8:27 pm

                here you go PB

                “That’s like saying you’ve got six children, so it doesn’t really matter if you lose one does it.”

                http://static.radionz.net.nz/assets/audio_item/0006/2047776/ckpt-20090827-1707-Conservation_land_assessed_for_mining-m048.asx

              • Pascal's bookie …
                2 February 2010 at 8:48 pm

                “That’s like saying you’ve got six children, so it doesn’t really matter if you lose one does it.’

                Cool, ta.

                So it is closer to the second version, and it’s about mining conservation land rather than chopping ‘trees’.

                Now, is it an unreasonable comparison?

                If you take a simplistic, literal, and frankly rather stupid reading of it, then sure. It isn’t exactly like losing a child in every respect. In the same way that taxation isn’t exactly like theft.

                But what is it about our children that makes the loss of one of them so tragic? Is it that children are rare? Is it that they are expensive? Is it that we could make lots of money from them? I think not. I think it’s something else.

                What is it about children that is so valuable? What type of value is it that they hold?

                Whatever the answer is that you have, I guess it will be something along the line that the value is intrinsic to the child. It is senseless to talk of placing a price on children, or to assess their value in any sort of way that doesn’t address their intrinsic value as individual, irreplaceable and unique humans. Their value is determined by their intrinsic qualities, which are a part of them.

                Right?

              • lukas …
                2 February 2010 at 9:02 pm

                PB, perhaps it is because I am literally hours away from becoming a Dad for the first time, or perhaps for completely different reasons… one can not tell logical thought from ideological thoughts to sleep deprived thoughts during times like this 😀

                But, I find it abhorrent to put a value on the life of a child and compare it to mining the estate and chopping down trees in the process. I would literally kill for my child, as I am sure any parent who reads this would, and would personally find a way of chopping every last tree down in my neighborhood if it saved my child’s life.

              • Pascal's bookie …
                2 February 2010 at 9:12 pm

                Ahh. Congrats. I’ve just got mine to bed.

                I think you miss her point. She is not saying that you shouldn’t chop down lots of trees to save your child, if such a scenario was the thing.

                The value is the thing she is comparing. She is saying that we should neither kill children, nor mine the conservation estate. She is not putting a price on the life of a child, but rather putting those lands similarly beyond price.

                This may be of use in explaining, perhaps not now, but at a less busy/restful time maybe: (circa 6 months 😉 )

                http://en.wikipedia.org/wiki/Intrinsic_value_(ethics)

                see also:

                Conservation Act 1987 No 65 (as at 01 November 2008), Public Act

                Conservation means the preservation and protection of natural and historic resources for the purpose of maintaining their intrinsic values, providing for their appreciation and recreational enjoyment by the public, and safeguarding the options of future generations

                This means, in short, that by law, the lands must be protected for their intrinsic value. They must be treated as ends themselves, rather than as means to ends. Just as we do with children.

                Anyways, you may not agree with that, but it is not unreasonable, nor degrading to children.

                Good luck, and I hope it all goes well.

  6. tsmithfield 6
    2 February 2010 at 10:26 am

    “IrishBill
    2 February 2010 at 10:19 am
    I think you’re right, luva, it should be $18.”

    So if you can just pluck figures out of the air like that, why not $50 per hour? After all, the minimum wage doesn’t affect unemployment, does it?

    • snoozer 6.1
      2 February 2010 at 11:04 am

      ts. the evidence is that increasing the minimum wage clearly doesn’t affect unemployment in the ranges we’ve experienced in NZ in the last 40 years (ie 30-70% of the average wage).

      Setting it at double the average wage is clearly a different matter.

      Now stop being silly and engage with your mind.

      In fact, tell us why, deep down, you are opposed to increasing the minimum wage even if only back to levels it safely sat at in past decades. Is it that you just don’t think poor people deserve a living wage for a day’s work? Or is it because you want all the wealth for yourself?

    • IrishBill 6.2
      2 February 2010 at 11:08 am

      Yeah why not? And while we’re at it why not take the upper tax level down to 0% cut all social services and let the poor fight for food in the street like dogs? And the three strikes law, why not apply it to all offenses and then bring back the death penalty?

      Reductio ad absurdum is an argument that makes you look stupid, tsmith, try a little harder please.

    • Bill 6.3
      2 February 2010 at 11:08 am

      What about calculate the entire net profit of business in NZ and pay it out in wage rates to the workers? Of course, each instance of a business being compelled to stop stealing money from workers to five to owners or/and shareholders would be treated on a case by case basis…ie the wage level would vary across the economy based on current wage + nett profit/ no. of workers for any particular business venture.

      (The bosses can get a fair share too if they put in the graft.)

      On this scenario, where is the impact on unemployment? As far as I can work out, there would be full employment insofar as nobody would be treating the workforce as a liability…as an outlay of cash to be trimmed and cut where possible to allow for the generation of more profit.

      And if anyone is up for explaining where the negative impact in employment arises in the above scenario, would they be kind enough to also point out for me that really difficult to recognise and isolate element in today’s scenario, whereby rising wages come at the direct expense of profit levels?

      Thankyou.

      • kelsey 6.3.1
        3 February 2010 at 7:32 am

        The effect on employment would be huge. By ensuring that there is no return on capital invested in the form of profits, you remove the incentive to start new businesses and invest money in business to, for example, increase productivity or keep up with technological advances. As such, what businesses that do exist will slowly die off and no new ones will be formed. Economic collapse.
        [yeah like that economic collapse that happened to aussie when it put its minimum wage at $14.50]

  7. uroskin 7
    2 February 2010 at 11:12 am

    “Or is it because you want all the wealth for yourself?”

    But, but, but if I don’t get all that wealth for myself, why did I have to lose so much time reading Ayn Rand novels?

  8. tsmithfield 8
    2 February 2010 at 11:38 am

    Snoozer : “ts. the evidence is that increasing the minimum wage clearly doesn’t affect unemployment in the ranges we’ve experienced in NZ in the last 40 years (ie 30-70% of the average wage).”

    Tell that to the workers on the minimum wage who are losing their jobs to China where the minimum wage doesn’t exist. There is no argument that we have been losing industry to low wage economies. This logically will have a major effect on those on the minimum wage. Tell me why it shouldn’t.

    Snoozer “In fact, tell us why, deep down, you are opposed to increasing the minimum wage even if only back to levels it safely sat at in past decades. Is it that you just don’t think poor people deserve a living wage for a day’s work? Or is it because you want all the wealth for yourself?”

    Because I believe people should be paid on the basis of what they’re worth, not what they need.

    • Pascal's bookie 8.1
      2 February 2010 at 11:42 am

      Labour theory of value then is it?

      • tsmithfield 8.1.1
        2 February 2010 at 11:49 am

        The polar opposite I would have thought. How can an arbitrary minimum wage be even be close to paying people on the basis of what they are worth? Afterall, you get it no matter what you’re worth.

        • IrishBill 8.1.1.1
          2 February 2010 at 11:58 am

          And what (or who) determine a worker’s “worth”?

          • tsmithfield 8.1.1.1.1
            2 February 2010 at 12:10 pm

            If I pay the wages its what they’re worth to me.

            • snoozer 8.1.1.1.1.1
              2 February 2010 at 12:19 pm

              left ot your own devices, you would pay them as little as you can get away with. That’s the nature of the market.

              Is that a just and moral way to value the time and effort of a human being? No. decent pay for a decent day’s work. This is about the right of a working person to enjoy the fruits of their labour and a decent standard of living.

            • Bill 8.1.1.1.1.2
              2 February 2010 at 12:56 pm

              And what if they decide that your arrogance is worth a bullet? That okay with you? I mean, fair’s fair afterall. If you have the right to judge worth and mete out reward on your evaluation, so do they. Right?

    • Robert Winter 8.2
      2 February 2010 at 11:56 am

      @tsmithfield

      China introduced minimum wage regulation in 2004. Of course, there are issues about patrolling the legislation, just as there are here.

      Your argument appears to accept the ‘race to the bottom’ approach (if they pay less, we should too). Now, of course, that was the impact of the ECA. It becomes a self-fulfilling process, in turn leading to ever-increasing inequality, fraying of social and labour market inclusion, and, eventually, political unrest. This is why the Chinese brought in their 2004 and 2008 legislation.

      • Pascal's bookie 8.2.1
        2 February 2010 at 12:12 pm

        And most of our minimum wage jobs are in cleaning, retail, hospo and other service industries. Kind of hard to do those jobs from coastal China I’d think.

  9. randal 9
    2 February 2010 at 12:12 pm

    why is it okay for the right to claim that lowering taxes will increase investment but giving poor people more money will ruin the whole system and send it into a terminal spiral with no chance of recovery.
    this is a straight us versus them argument with the ruling party divvying up the pie in their favour and trying to smother any resistance.

  10. tsmithfield 10
    2 February 2010 at 12:25 pm

    Of course the minimum wage causes unemployment, in conjunction with the dole. How do we know this? There are unemployed people of course!!

    If there was no minimum wage and no dole, there would be no unemployment other than for people who couldn’t work due to illness/injury etc, or people who were unemployable at any price. This logic is fairly irrefutable.

    • snoozer 10.1
      2 February 2010 at 12:34 pm

      oh jesus. You’ve really just given up haven’t you ts.

      In fact, there is wide-spread unemployment in countries with no minimum wage or unemployment support. But what you’re saying is that if you reduce people to absolute poverty, they’ll do anything to scrap enough food together to live – it won’t be formal ‘work’, it will be crime, a desperate scramble to survive, and many won’t.

      Yeah, not a society I want to live in. It’s the society my ancestors fled from Victorian London.

    • Robert Winter 10.2
      2 February 2010 at 12:38 pm

      Clearly this person (tsmithfield) seen brigandage as a career option, for his argument assumes that work will stretch to include everyone at some price or other (presumably ever-lower, as we bid each other down in an undistorted market). History shows us that, at some stage, people will leave the labour market, retreating to subsistence activity or brigandage (that is, preying on those in the labour market). Now, there’s a slogan for National at the next election – “work or crime: the thinking person’s options”.

    • Clarke 10.3
      2 February 2010 at 12:38 pm

      …. and the people starving to death on the streets would simply be a non-relevant economic indicator, I presume.

    • toad 10.4
      2 February 2010 at 1:20 pm

      Bollocks tsmithfield.

      Macedonia has no minimum wage. Explain why it has unemployment of 33%.

  11. tsmithfield 11
    2 February 2010 at 12:40 pm

    Snoozer “Yeah, not a society I want to live in. It’s the society my ancestors fled from Victorian London.”

    I wasn’t giving a value judgement on whether I thought this was a good thing. Just refuting the irrational logic that the minimum wage can’t effect employment.

    Snoozer “In fact, there is wide-spread unemployment in countries with no minimum wage or unemployment support”

    In those countries the amount of people exceeds the jobs available. I don’t think that applies here somehow. If there is work that can be done it is just a matter of determining the price. If the price is too high the work won’t get done.

    My wife is a real-estate agent. She often does work she doesn’t get paid for at all. Her worth is determined by how effective she is at selling. She doesn’t get any minimum wage.

    • felix 11.1
      2 February 2010 at 1:05 pm

      Just refuting the irrational logic that the minimum wage can’t effect employment.

      I’ve yet to see anyone make such an argument.

      The position being advocated by your opponents is that there has been no discernible impact on employment in NZ as a result of setting minimum wage levels at anything up to 83% of the average wage.

      If you have evidence to the contrary I’m sure there are plenty here who would love to see it.

      • tsmithfield 11.1.1
        2 February 2010 at 1:12 pm

        I think the error is that using backward looking research to project to the future requires that all things remain equal going forward.

        However, there are a lot of things that are not remaining equal. For instance, the worst recession in living memory, the increasing tendency for jobs to be exported overseas to name a few.

        Therefore, if things are not remaining equal, as they clearly are not, then there is no basis to project forward past research to the future.

        • felix 11.1.1.1
          2 February 2010 at 1:15 pm

          Therefore, if things are not remaining equal, as they clearly are not, then there is no basis to project forward past research to the future.

          Why didn’t you add the words “for anything, ever” to the end of that and really let the crazy out?

          • IrishBill 11.1.1.1.1
            2 February 2010 at 1:19 pm

            Indeed. I’m really starting to appreciate exactly what makes the right tick here.

            • Dean 11.1.1.1.1.1
              3 February 2010 at 9:17 pm

              Is it the same kind of insight you had when you told someone they were an “uncle tom”?

        • snoozer 11.1.1.2
          2 February 2010 at 1:30 pm

          “I think the error is that using backward looking research to project to the future requires that all things remain equal going forward”

          I believe I can fly, sure every time I’ve tried to fly in the past I’ve fallen to the ground, but that was the past, man, let’s not be “backward looking”, I’m gonna jump, whoo!

          yeah, when was the past ever an indicator of the future? Let’s ignore all the evidence from the past and come up with wild theories that just so happen to validate our ideologies.

          Pity, I actually had ts down as one of the smarter righties.

  12. tsmithfield 12
    2 February 2010 at 1:09 pm

    There are lots of people who work who are not entitled to a minimum wage. e.g:

    Small business owners who pay themselves what their businesses can afford to pay.
    Sales people who get paid commission only.
    Voluntary workers.
    Parents who choose to stay at home to work by providing care for their children.

    Since there are lots of people who work who are not entitled to a minimum wage (as listed above) you seem to think there should be a special category of worker who is entitled to a minimum wage. Why so?

  13. randal 13
    2 February 2010 at 1:22 pm

    the ‘other’ categories described by tsmithfiled are there by choice.
    people who work for an employer are entitled to at the very least a subsistence wage or we are not a first world country.
    furthermore if an employer is only paying the minimum wage then they are either exploiting their workers or they are not very good bsuinesspeople or they are in business for the psychological pleasure of watching poor people struggle.
    dig?

  14. tsmithfield 14
    2 February 2010 at 1:27 pm

    felix “Why didn’t you add the words “for anything, ever’ to the end of that and really let the crazy out?”

    lol. Obviously there are some situations that are more unequal than others. Where there are minor fluctuations it is relatively safe to make assumptions going forward, and obviously necessary and wise to do so. However, when there is a major trend change, as has been happening, then clearly it is dangerous to project forward.

    Surely that is not too much of a difficult concept?!

    • Bright Red 14.1
      2 February 2010 at 1:33 pm

      do tell, ts. what has changed?

      Why if, as you are now conceding, raising the minimum wage has never before been linked to a rising unemployment rate (even in times of recession) are you so confident things have changed?

      What are these fluctuations of which you speak? What evidence do you have that they would cause something that hasn’t happened before to happen now?

  15. tsmithfield 15
    2 February 2010 at 1:33 pm

    It may surprise you to know that I don’t actually subscribe to having people live on a pittance and starving on the street.

    However, I believe there has been a lot of people locked out of the work-place due to things such as the minimum wage, the dole etc. There is enough work to go around, as there seems to be judging by the amount of people we import to work in orchards etc while we still have people unemployed who could be doing it. Therefore, it would be better for businesses to tender to WINZ or whatever for workers for various roles available. Those that tender the best wage would get the workers. Any shortfall from a living wage would be made up by the taxpayer.

    That would get a lot of people back into the workforce rather than having them stagnating as they are at the moment.

    • Pascal's bookie 15.1
      2 February 2010 at 1:40 pm

      “Those that tender the best wage would get the workers. Any shortfall from a living wage would be made up by the taxpayer”

      I’m no expert at game theory, but I reckon the taxpayer will get fucking shafted in this game.

      • tsmithfield 15.1.1
        2 February 2010 at 1:44 pm

        Not if the workers are tendered for. This then would rely on the market to come up with the best price that can be paid for the workers. Therefore, the cost to the taxpayer will be minimized. In many cases it will probably be less than having to pay the dole.

        • Bright Red 15.1.1.1
          2 February 2010 at 2:03 pm

          that’s the dumbest thing I’ve ever heard. You’re thinking of human beings like their labour is bails of wool and the government is giving farmers’ a guaranteed minimum price.

          Labour simply isn’t that flexible or homogeneous.

          And it’s pretty obvious there isn’t enough work to go around when you’ve got 3,500 people lining up for 150 jobs.

  16. tsmithfield 16
    2 February 2010 at 2:07 pm

    You obviously haven’t thought that through very well. Want to try again?

  17. tsmithfield 17
    2 February 2010 at 2:44 pm

    BLiP “Brilliant!! Lets turn WINZ offices into slave markets . . .”

    Not what I said.

    I don’t think it is the employer’s responsibility to effectively be part of the social welfare system by paying more than what the job is worth to them via an artificially set minimum wage.

    The employers can offer the work at what they can afford. Employers who offer the best rates get the employees. It then becomes a function of the state to ensure the income is fair. Its really not a lot different to what happens with WFF now if you think about it.

    • felix 17.1
      2 February 2010 at 4:19 pm

      So you want the rest of us to pay even more of your wage bill than we already do via WfF.

      What a bludger. The sooner you and your kind fuck off to China the better.

  18. gomango 18
    2 February 2010 at 9:16 pm

    So looking at the graph, it would appear the highest ever real minimum wage is under the current Nat government.

    Credit where credit is due and all that.

    Oh and Mary G, it may or may not change your correlation conclusion but it is essentially meaningless to plot a coincident indicator (wages) with a lagging indicator (unemployment). You are looking for a cause/effect relationship which naturally implies a time lag. Anecdotally I’d guesstimate 9 to 12 months is the right sort of lag, though differnt industries would likely have different lags. Ljung-Box test is the right one.

    Without taking into account the non-coincident nature of the data your graphs are just interesting but ultimately meaningless anecdotes.

    • The Voice of Reason 18.1
      2 February 2010 at 9:59 pm

      “So looking at the graph, it would appear the highest ever real minimum wage is under the current Nat government. Credit where credit is due and all that.”

      There seem to be two peaks, one in the early seventies (Kirk Labour Government) and the second levelling off in 2008 (Clark Labour Government), and the rises all appear to be with Labour, the falls with National. The next drop starting, um, about now I guess.

  19. Paul Walker 19
    2 February 2010 at 9:29 pm

    “One of the old saws that the Right brings out whenever the topic of increasing the minimum wage comes up is ‘oh no, it will increase unemployment’.”

    Don’t lie Marty, no economist says this. As I have pointed out many times, what economists say is that both theory and evidence tells us is that the minimum wage has little effect on the *overall* unemployment rate. But as Neumark and Wascher write (“Minimum Wages’ by David Neumark and William L. Wascher, Cambridge: MIT Press, 2008: from Table 9.1 page 287 when dealing with the effects on employment, under the ‘Summary of evidence’.)

    “Minimum wages reduce employment of low-skilled workers; adverse effects even more apparent when research focuses on those directly affected by minimum wages.’

    That is, an increase in the minimum wage will reduce employment for those directly affected by minimum wages such as workers with low-skills or those returning to the labour force. In Chapter 9 “Summary and Conclusions’ Neumark and Wascher write

    “Three conclusions, in particular, stand out. First, as indicated in chapter 3, the literature that has emerged since the early 1990s on the employment effects of minimum wages points quite clearly despite a few prominent outliers to a reduction in employment opportunities for the low-skilled and directly affected workers’. (p. 286)

    • Pascal's bookie 19.1
      2 February 2010 at 9:33 pm

      He said ‘the right’ says it. And they do. John Key did for one. Perhaps you should be trolling him.

      • Bill 19.1.1
        2 February 2010 at 9:42 pm

        Interesting that ‘the right’ is apparently synonymous with economists for the likes of PW, who in turn claim to operate from a scientific and rational basis.

    • IrishBill 19.2
      2 February 2010 at 9:39 pm

      There are close to a half a million workers on the minimum wage or within a couple of dollars of it. That’s a large enough chunk of the working population that any significant effect on it in terms of unemployment would also significantly affect the overall unemployment rate.

      Which didn’t happen.

      Which means you’re wrong.

      • Paul Walker 19.2.1
        2 February 2010 at 9:46 pm

        Bill, read the evidence. “Minimum Wages’ by David Neumark and William L. Wascher, Cambridge: MIT Press, 2008 being a good place to start. As a percentage of the labour market those on or around the minimum wage are a small part. So the increases in the minimum wage that you see have little or no effect on the *overall* unemployment rate. What is claimed is the the changes in the minimum wage will effect the employment opportunities of those in the group at or around the level of the minimum wage. This shows up in the empircal studies.
        [Paul tell us why the number of economists who think the minimum wage increases unemployment is falling (I believed you claimed 90% agreed on your blog, only 32 years out of day, mate). Also, tell us why there is no correlation between the real minimum wage and unemployment. Marty G]

        • Pascal's bookie 19.2.1.1
          2 February 2010 at 9:51 pm

          Which means that it isn’t the knock down argument against min wages that people pretend it is. The small effects (on opportunities) that are found could surely be mitigated by other policies, which is what we pay economists for isn’t it?

        • Bill 19.2.1.2
          2 February 2010 at 10:18 pm

          Read my response to your fellow idiot gomango below who also seems to be incapable of reading what it was I actually said but responds to what he thinks I might have said if it were he who was writing my response.

        • The Voice of Reason 19.2.1.3
          2 February 2010 at 10:25 pm

          “What is claimed is the the changes in the minimum wage will effect the employment opportunities of those in the group at or around the level of the minimum wage”

          So, I assume you are concerned. Paul, at the plight of the low paid. You must be absolutely livid at another threat to their employment; the 90 day Fire at Will Law. Or is it all academic with you?

        • Paul Walker 19.2.1.4
          2 February 2010 at 11:34 pm

          Read the post you have commented on. It is explained there. Increases in the minimum wage that you see have little or no effect on the *overall* unemployment rate. That is the *overall* unemployment rate. Because those effected by the increase will be a small proportion of the whole labour market. Got it?

          The increase in unemployment caused by the minimum wage will show up among those at or around the minimum wage, that is, those directly effected by the minimum wage. Got that too?

          Simple.

          • Pascal's bookie 19.2.1.4.1
            3 February 2010 at 6:31 am

            “The increase in unemployment caused by the minimum wage will show up among those at or around the minimum wage”

            You keep changing your tune. It’s usually “a decrease in employment oppurtunities”, but here it’s an increase in unemployment. You should get more sleep, your sophistry is showing.

            • Paul Walker 19.2.1.4.1.1
              3 February 2010 at 12:54 pm

              Actually you will get both.

              • IrishBill …
                3 February 2010 at 1:06 pm

                And as I pointed out there are a half a million workers on or around minimum wage. That’s a large enough group (about 20% -25% of all workers) that, according to your argument, we could expect changes in employment in that group to show as changes to employment in general if the minimum wage was increased.

                The problem you have is that we didn’t.

              • Paul Walker …
                3 February 2010 at 8:51 pm

                “And as I pointed out there are a half a million workers on or around minimum wage. That’s a large enough group (about 20% -25% of all workers) that, according to your argument, we could expect changes in employment in that group to show as changes to employment in general if the minimum wage was increased.

                The problem you have is that we didn’t.”

                Where does the 20-25% figure come from? But no, you would need very large elasticities in the effected groups and a large increase in the minimum wage to have a large effect overall. Given all the other things that effect labour markets, finding the effects of minimum wage changes in the overall unemployment stats would be very difficult.

              • Pascal's bookie …
                3 February 2010 at 9:47 pm

                So as everyone has been saying, employment effects are a pretty shit argument against minimum wages.

      • Marty G 19.2.2
        2 February 2010 at 9:52 pm

        Nah mate. The problem isn’t with Paul and his increasingly unpopular theory. It’s with us and the statistics.

        See there’s this magic unemployment of only low paid and low skilled workers that takes place. For magical reasons it doesn’t show up in the stats. But if you look real hard (ideally while looking through a copy of Milton Freidman) it’s there to be seen.

  20. gomango 20
    2 February 2010 at 9:46 pm

    Bill – your comment reminds me of the response one gets from a fundamentalist christian when their belief system is questioned.

    Andrew Walker points out some research, and a very quick overview of the conclusions. Your response is essentially “That conflicts with my personal beliefs therefore you are wrong.I don’t care about any of that data or research nonsense.”

    • Marty G 20.1
      2 February 2010 at 9:54 pm

      All Paul has is one book from the school of economics that he worships. It is not proof. In fact, it is a theory that is increasingly rejected by economists.

      • Paul Walker 20.1.1
        2 February 2010 at 11:38 pm

        the book just happens to be the most recent large scale survey of the literaure and thus is worth reading to get an overall of that literature.

    • Bill 20.2
      2 February 2010 at 10:15 pm

      What the fuck is this twattery?

      I made no response to Paul on the min wage/unemployment assertion. I pointed out that he claimed convergence between ‘the right’ and economists and rationality. Which is fucking nuts; ie irrational. End.

  21. Marty G 21
    2 February 2010 at 9:59 pm

    Actually, Paul. As you are conceding that increasing the minimum wage doesn’t increase unemployment – in fact, you’re going so far as to claim that no economist believes that – can you tell us why you are against increasing it to $15 an hour?

    Pro-tip: you can’t say ‘because it will increase unemployment.’

    • Paul Walker 21.1
      2 February 2010 at 11:41 pm

      I can say what i have been saying all along. The increases in the minimum wage that you see have little or no effect on the *overall* unemployment rate. That is the *overall* unemployment rate. Because those effected by the increase will be a small proportion of the whole labour market. Got it?

      The increase in unemployment caused by the minimum wage will show up among those at or around the minimum wage, that is, those directly effected by the minimum wage. Got that too?

      Simple.

      • Macro 21.1.1
        3 February 2010 at 9:49 pm

        I read that about 10 times and still can’t work out what your talking about, and I don’t think you know either.

  22. Robert Winter 22
    2 February 2010 at 10:25 pm

    Studies of the UK minimum wage that suggest little or no impact on employment (by economists too). There are others.

    Machin and Manning (ILRR 47/2 1994) “the minimum wage has either no effect or a positive effect on employment’.

    Stewart (JEEA 2/1 2004) “No significant adverse employment effects are found for any of the four demographic groups considered (adult and youth, men and women) or in any of the three data sets used’

    Metcalf (JIR 50/3 2008) Why has the British National Minimum Wage had Little or No Impact on Employment?

    • Pascal's bookie 22.1
      2 February 2010 at 10:35 pm

      That wiki page in the post (“unravelling for decades”) also points at some Statistical Meta-analyses:

      Several researchers have conducted statistical meta-analyses of the employment effects of the minimum wage. Card and Krueger analyzed 14 earlier time-series studies and concluded that there was clear evidence of publication bias because the later studies, which had more data and lower standard errors, did not show the expected increase in t-statistic (almost all the studies had a t of about two, just above the level of statistical significance at the .05 level). Though a serious methodological indictment, opponents of the minimum wage virtually ignored this issue; as Thomas C. Leonard noted, “The silence is fairly deafening.” More recently, T.D. Stanley has criticized Card and Krueger’s methodology, suggesting that their results could signify either publication bias or the absence of an effect. Using a different methodology, however, he concludes that there is statistically significant evidence of publication bias and that correction of this bias shows no relationship between the minimum wage and unemployment. In 2008, Hristos Doucouliagos and T.D. Stanley conduct a similar meta-analysis of 64 U.S. studies on disemployment effects and concluded that Card and Krueger’s initial claim of publication bias is still correct. Moreover, they concluded, “Once this publication selection is corrected, little or no evidence of a negative association between minimum wages and employment remains.”]

      source refs at the link. (“unravelling for decades”)

    • Paul Walker 22.2
      3 February 2010 at 8:41 pm

      Robert Winter

      No sure how interesting these results are. It will depend, in part, on the level of aggregation of their data. The more aggregated the data the less likely you are to find any effect of changes in the minimum wage.

      • Robert Winter 22.2.1
        4 February 2010 at 12:15 am

        Well, you may not be sure, but they are from solid, established performers and part of an emerging consensus in the UK, apart from the die-hard market fundamentalists, to the effect that the impact was negligible or nil. Cambridge’s Willie Brown, over here last year, reported extensively on that consensus. And, of course, in a reductio ad absurdum approach, one can disaggregate and disaggregate until one finds a single (negligible) case of anything.

  23. gomango 23
    2 February 2010 at 10:51 pm

    sorry – i actually meant irish bill – didnt see your post. coincidence.

  24. SPC 24
    3 February 2010 at 1:02 am

    In a word globalisation changed the way the market impacted on jobs.

    Once a domestic market, and we are a very good model being so open a market, is part of the global economy it loses price sensitive jobs in manufacturing.

    It will retain low wage jobs in the domestic services sector and these are jobs where the minimum wages can be increased and costs passed on to the rest of the workforce.

    Some Americans think they can mop of the unemployment of those losing manufacturing jobs and “immigrants” by having a low wage service sector – downward mobility for the once unionist worker and “domesticated” roles for “immigrants” (no health cover etc). It’s part of their increasingly disparate society ethos and their ever increasing disparity of wealth. There is no evidence as yet that the number of jobs providing services increases if wage levels are lower – except as domestic servants (often involving “immigrants” and only if they can get into the country where such work is available).

    PS There is the practice of cheap farm labour used in some areas of the USA (below minimum wage illegals?).

    • Macro 24.1
      3 February 2010 at 10:20 pm

      “In a word globalisation changed the way the market impacted on jobs.
      Exactly!
      And the “democratisation” of the “communist” block.

      • BLiP 24.1.1
        3 February 2010 at 10:40 pm

        Try hopping onto a Chinese server, calling up Google and doing a search on the word “democracy”.

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