Thursday, September 26, 2013

Two links to minimum wage discussions ...

John Cochrane discusses

The article has a nice analysis.  It even uses an example I use of who will benefit from a minimum wage increase. (With machines replacing human workers.)  An excerpt from the beginning ...
The lady who took my order must have been about 19, as were all the other employees I could see, and pretty clearly new on the job.  Getting the order right took some effort.  I made the mistake of paying cash. The bill was something like $7.62. I first offered a $10, and she rang it up. Then I found 12 cents in my pocket, and offered it. This was a big mistake, as the cash register had already computed my change, and adjusting to my offer of 12 cents was beyond her abilities. 

Greg Mankiw discusses

He discusses a new academic paper that shows that minimum wages can be efficient - under implausible assumptions.  He concludes:
Rather than providing a justification for minimum wages, the paper seems to do just the opposite. It shows that you need implausibly strong assumptions, such as efficient rationing, to make the case.  I cannot see any compelling reason to believe that in the presence of excess supply of workers, the market will somehow manage to efficiently ration the scarce jobs.

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