Thursday, February 5, 2015

David Henderson on minimum wage

Link here

He's responding to a question from a Susquehanna University student (after his visit to talk at our university)...

I recommend reading the entire thing.  Here's an excerpt:

One of the students I met and talked to afterward sent me the following query this morning:

I have yet to find an argument that makes economic sense that would be in favor of raising the minimum wage and I was wondering if you could play devil's advocate and make a point about why it would be beneficial if there is any.
Here's my answer:
Let me give some context to the minimum wage discussion before answering your specific question about the devil's advocate part. It's very hard to deny the law of demand: so, when the minimum wage rises, there will be fewer low-productivity people employed at that higher wage. Most of the discussion has been about how many fewer. Is the demand for low-skilled workers elastic or inelastic? One thing that seems to be agreed on is that the reduction in employment for the kinds of minimum wage increases we've seen in this country in the last 2 or 3 decades is not large.

1 comment:

  1. Would it not be better for a company to eliminate higher skilled jobs that pay two or three times the minimum wage. A perfect example of this is ordering on line The advancement of technology has enabled companies to eliminate millions of customer service reps that used to have to take orders over the phone. Now one can order stuff online without ever talking to a customer service rep and these jobs are skilled jobs require computer skills yet maids at hotels have not been eliminated these are less skilled jobs. Higher skilled jobs may be easier to do away with than lower skilled jobs Would a company not have a bigger incentive eliminating jobs that pay two sometimes three times minimum wage than jobs that just pay minimum wage. I do not agree that minimum wage jobs are more susceptible to elimination than higher skilled jobs I have just provided an excellent example to make my case thank you.