Regarding the link that Peter posted, see the follow essay by Reisman in which he discusses how employment can increase even in the face of an increase in the minimum-wage law: http://georgereismansblog.blogspot.com/search?q=minimum+wage+laws His answer is that the increased employment is lower than it would have been had the minimum-wage law not been raised. This is the point that I was making in Post #1 about the difference between employment that is seen and employment that is unseen. Reisman also points out that economists who claim that minimum-wage laws do not necessarily cause unemployment are denying the law of demand, which states: "[O]ther things being equal, the higher is the price of any good or service, the smaller is the quantity of it demanded, i.e., the quantity that buyers purchase, and that, by the same token, the lower is the price of any good or service, the larger is the quantity of it demanded, i.e., the quantity that buyers purchase. Since wages are merely the price of labor services, the Law of Demand implies that all government and labor-union interference that forcibly raises wage rates above the height at which they would otherwise have been reduces the quantity of labor employers seek to employ in comparison with what it would otherwise have been. It thus implies that the government’s or labor unions’ interference causes unemployment.
"One major reason for the existence of the Law of Demand is that while people would like to buy more goods and services, their ability to spend is always limited by the funds at their disposal. Lower prices enable the same funds to buy more, while higher prices prevent any given amount of funds from buying as much. In order to overthrow the Law of Demand, [one] would need . . . to show how the division of a given-sized numerator (i.e., the funds people have available to spend) by a larger-sized denominator (i.e., the prices and wages they must pay) does not result in a reduced quotient (i.e., ability to buy goods and labor services). It should be obvious that this is simply impossible and that insofar as the Law of Demand rests on the laws of arithmetic, no statistical data can ever overthrow it. Rather, the statistical data must be interpreted in a way that is logically consistent with the laws of arithmetic and their derivative, the Law of Demand." (Reisman, "The State Against Economic Law: the Case of Minimum Wage Legislation.") Another way to look at this is to imagine the following: Suppose that a geometry teacher were to argue that the Pythagorean theorum is not necessarily valid, because she discovered after physically measured a right triangle that the height squared plus the base squared did not exactly equal the hypotenuse squared. What would you say in response to his claim, which is based on empirical observation -- on going out and actually measuring a particular right triangle? Would you say that perhaps the Pythagorean theorum isn't necessarily true, after all? Or would you say that the measurement which the teacher performed had to involve a small error, because the Pythagorean theorem is a well-established law of geometry? Clearly, you'd say the latter. The link that Peter posted also includes the following comment from President Obama: "When ... you raise the minimum wage, you give a bigger chance to folks who are climbing the ladder, working hard.... And the whole economy does better, including businesses." This is the opposite of the truth. Minimum-wage laws prevent young unskilled workers like black teenagers from ever getting a foot on the economic ladder to begin with, thereby preventing them from gaining job experience and eventually qualifying for a better paying job, a point that Fred made in Post #2. The link also included this comment from Sylvia Allegretto, an economist at the University of California, Berkeley: "[R]esearch comparing counties in states that raised their minimums with neighboring counties in states that did not has found no negative impact on employment." As Rand would say, this is a perfect example of concrete-bound thinking. Allegretto continued, "Restaurants and other low-wage employers may have other ways of offsetting the cost of higher wages, aside from cutting back on hiring, she said. Higher pay can reduce staff turnover and save on hiring and training costs." If employers thought that it would be more profitable to pay higher wages, because it would cut down on turnover and save on hiring and training costs, they would already be doing it. What right does Ms Allegretto have to second-guess their decisions, especially as she has no intimate knowledge of their operations, nor do the legislators who are aggressively passing these increases in the minimum wage law. The arrogance of these pseudo-economists and legislators who think they have the right to dictate the business decisions of firms whose operations they have no knowledge of and are not responsible for is simply stunning!
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