Will Wilkinson - Latest Comments in Today in Backwardsville

Re: Today in Backwardsville

Интеллектуальная Собственность — Tue, 12 Aug 2008 13:03:26 -0000

Apparently inflation doesn't exist in Libertarianville. Man, that must be nice. But for those of us in the real world, "keeping up with inflation" isn't an "arbitrary" reason.

The whole bit about "raising the minimum wage actually hurts poor peolpe" is a neat little Econ 101 trick, but it doesn't always withstand scrutiny past Econ 101, and it grows old very quickly. So before you congratulate yourself on the brilliance of your contrarian position, look at some slightly more advanced models, and do a bit of research. Maybe read "Why Wages Don't Fall During a Recession," by Yale economist Truman Bewley. Then leave the libertarian fantasy world behind.

Re: Today in Backwardsville

bkalafut — Tue, 29 Jul 2008 18:27:26 -0000

Links were live when I posted; AZ Republic archived stories, putting them behind a pay wall, in the interim. There's a difference between "totally unsupported" and "containing one dead link". That you don't make the distinction speaks volumes about your bona fides.

Re: Today in Backwardsville

ossicle — Tue, 29 Jul 2008 12:10:36 -0000

Opposition to such a modest minimum wage is silly, and the sanctimony over the poor slobs being denied opportunities for a paycheck is both irritating and ill-founded.

If a person is so unqualified that he can't be hired for a minimum wage job (let's call this person a "schmo"), there are plenty of off-the-books jobs available to him: Sweeping and helping out in a small store; assisting a small-time contractor or handyman; doing off jobs for people. Those sorts of jobs generally, though not always, pay less than minimum wage (let's call it $5/hr for sake of reference), thus the needs of schmoes are taken care of.

Meanwhile, if you get rid of the minimum wage, it will just allow the sorts of larger scale employers now bound by the minimum wage to convert huge numbers of jobs to $5/hr jobs, doing two things: further impoverishing the workers who'd been earning the minimum wage, and flooding what had previously been the schmo job market with higher-skilled workers (because not everyone who'd been working at McDonalds for minimum wage will want to work there for $5/hr; some of them, if that's all their making, will decide they feel like doing previously-schmo jobs.

Oss

Re: Today in Backwardsville

Steve Roth — Mon, 28 Jul 2008 23:12:36 -0000

Muirgo, the blog post you link to is totally unsupported. The "teenage unemployment" article it links to doesn't seem to exist (link broken, search turned up nothing to match), and even if it did the causal connection between the two things (MW hike/teenage unemployment) is purely speculative.

Will, you know perfectly well that all the decent research on this suggests that the kind of minimum wage laws we have produce virtually no effect on unemployment. The produce virtually no effect on long-term growth. But they make a profound difference in the lives of millions of people.

Murgo is almost certainly right that if you "Raise the minimum wage to $10, $11, $12 per hour," you'll see some negative employment consequences. Nobody's doing that. Let's talk about reality here, to the extent we're able to perceive reality given the econometric tools that exist.

Re: Today in Backwardsville

muirgeo — Sun, 27 Jul 2008 13:25:52 -0000

My initial objection was the claim that minimum wage was an arbitrary thing.

After looking into it and thinking about Wills claims that there are better ways then minimum wage I have to say that indeed I'm inclining to think that Will made a good point.

As far as I'm concerned massive wage and wealth inequality are bad things for a host of reasons one of which is economic inefficiency. The second thing that matters to me is recognizing the fact that policy DOES effect the degree of inequality. So it bothers me when some one claims that if a policy effects wealth distribution then it is bad. This is absurd in my opinion because EVERY policy effects wealth distribution it's just a matter of how much, in which direction and how fair and efficient it is. The simple minded idea that all wealth is always a result of being more efficient or productive is non-sense.

We are the wealthiest country ever . In America there is no reason a hard working person shouldn't be able to feed, house and send his kids to college for an honest weeks work. We can do better and the answer certainly does not have to be socialism but it certainly is not unbridled capitalism.

The answer is good policy and I thank you all for making me think there is a better way then simply increasing minimum wage. I pledge to learn more on the issue.

Re: Today in Backwardsville

Steve M. — Sun, 27 Jul 2008 12:57:40 -0000

Long time reader, first time commenter.

Contemporary American liberals display a particularly distasteful brand of vitriol whenever someone asks whether the minimum wage actually performs as advertised. It's a dull, dull empirical question. Do low-wage workers fare better of worse under the minimum wage than under a large-EITC program? Or wage subsidies? Or straightforward transfer payments? In this case, mind you, the question comes from Will Wilkinson, who has publicly endorsed a guaranteed minimum income. Apparently, support for a minimum income -- untethered to a requirement that *employers* pay the minimum income through hourly wages -- represents a kind of anarcho-capitalism.

One might even point to this kind of response as strong evidence that support for the minimum wage really is, in part, altruistic signaling. I can't think of having read a liberal political pundit or blogger (that is, someone outside the academy) provide an explanation of why we don't -- and should expect to -- see the rise in unemployment that one should expect. We get lots of comments to the effect that "This is more complicated than Econ 101," and that there *is* such an explanation, but the actual explanation is always conspicuously absent.

Armchair speculation on the merits: Surely there are *some* labor markets in the United States in which transaction costs give employers a kind of psuedo-monopsony power. Likewise, I can see how systematic discrimination in the labor market would depress wages in a way that the minimum wage could repair. I imagine that these effects are frequently quite large, and that's probably why the minimum wage's negative effects are not as large or as uniform as one would predict in a well-functioning market. But that story, alone, doesn't justify dismissing the unemployment objection. At the very least, one would have to argue that factors depressing wages are large enough and pervasive enough, and alternatives sufficiently unpalatable, that the benefits of an increase in the federal minimum wage outweigh increased unemployment in particular industries, regions, or segments of the labor market. But, of course, I haven't said anything that hasn't already been said above. As always, one should turn to the evidence.

Re: Today in Backwardsville

jumbolachi — Sun, 27 Jul 2008 12:11:15 -0000

Just realized that my parenthetical remark at the end of the last reply only illustrates half the story.

Actually, those Danish policies I mentioned would also lead to an upward shift in labor demand curves as well. I must have been just focusing on the increased bargaining power and opportunity cost of working for a specific employer, without adding in the effect that each worker's marginal product would also be boosted for that employer, shifting up that employer's demand.

Re: Today in Backwardsville

GilM — Sat, 26 Jul 2008 19:26:09 -0000

mk,

I don't think the bad faith argumentation charge is fair, here.

Will goes on to write: "It works as altruistic signaling because the people receiving the signal don't understand economics either."

Notice the "either". He's not claiming that the signalers are knowingly promoting policies to hurt the poor. He's saying that they don't understand economics enough to know, but they do know that advocating minimum wage increases works to transmit certain messages.

Re: Today in Backwardsville

GilM — Sat, 26 Jul 2008 19:18:40 -0000

This is a great point. It's interesting that many who claim to care so much about justice seem unconcerned with the fairness of imposing certain costs on convenient victims.

This also applies to "taking" the value of property for environmentalist concerns.

Why not spread the costs broadly, if the cause has a broad benefit?

Re: Today in Backwardsville

Alan Gunn — Sat, 26 Jul 2008 17:05:07 -0000

Even if the minimum wage didn't have the bad effects that it actually has, what justification could there possibly be for imposing the cost of a forced transfer to (some) low-wage workers on those who employ low-wage workers?The earned income tax credit increases the wages of the working poor and pays for it out or tax revenues generally. One would think that leftists would prefer that source of financing, which takes from people more or less according to their ability to pay, to taking the money from the very people who provide what jobs the unskilled can get. Are laundry owners really a more-attractive target than doctors and lawyers?

Re: Today in Backwardsville

mk — Sat, 26 Jul 2008 17:04:14 -0000

Support for minimum wages is pure altruistic signaling.

I agree with the substantive point here (wage subsidies rather than minimum wage), but it is bad faith argumentation to accuse others of bad faith argumentation. "Support for minimum wages is dumb" would be a less assumption-laden way of putting it. "Pure signaling" is presumably taking a position purely for its signalling value, which seems like an uncharitable characterization of the motivations of minwage-supporters.

Nevertheless, your content-to-garbage ratio is impressive given the depths of the flame war at this point.

Re: Today in Backwardsville

Guest — Sat, 26 Jul 2008 16:28:03 -0000

"That the minimum wage is some kind of free lunch is an item of faith for people who don't care enough about poverty to actually think about what helps poor people. "

"If this is libertarian faith, then libertarian faith is just the same thing as giving a shit and knowing what you're talking about. So, yes, the law of demand is God. Defy it and it will smite you."

Bartlett's-worthy! I love it when Will gets political about something (and I mean by "political" in a very specific/"philosophic" sense, having something to do w/...thumos...).

Re: Today in Backwardsville

Robert Light — Sat, 26 Jul 2008 16:09:22 -0000

Nice.

Re: Today in Backwardsville

jumbolachi — Sat, 26 Jul 2008 13:02:42 -0000

John V,

I know that Denmark is a mixed economy. But, you are right, "socialist" is a strong term and "welfare state" is certainly better. But you must admit that with socialized health care, childcare, education, job training, etc., Denmark is more socialist than the U.S.

I know that *nothing* is truly free, not even "free" social services. But "free" is what we tend to call things that have no monetary marginal cost, and (as you well know) that is what I meant.

I don't care if you think that I am a liberal. Just know that I don't like to label myself or anybody else. To label yourself is to limit yourself. When you label others and their arguments you're being lazy, as you're saving yourself the work of understanding the difference between what that person is saying and the usual argument of some group you have in mind. All that I ask is that you do not generalize what I say with that of other people.

Thanks for asking for a clarification of what I meant by,

"As such, these policies all lower the distortions of imposing a minimum wage by lowering the number of people who would be on and outside of the margin created by the distortion."

I admit that was a bit sloppy. Here's another attempt to say the same thing:

Since these policies all increase either the marginal product and/or the bargaining power of labor, they also decrease the market distortion of instituting a minimum wage.

The idea is that these policies all increase the wages that labor would be able to successfully negotiate for in an unregulated market. With less people below any given wage level, once a minimum wage is imposed there are less people who lose their jobs (i.e. there is less distortion). (One might illustrate this as an upward shift in the labor supply curve.)

Re: Today in Backwardsville

John V — Sat, 26 Jul 2008 02:15:55 -0000

OK, Jesse

So you DO understand the difference (maybe?). It just didn't seem that way in your previous answer.

BTW, Denmark is a very capitalist country with a vibrant private sector. Let's not call it "socialist". A welfare state? Yes. But not socialist. There is a difference in most respects. And, if you search out info, you'll see Denmark has some kinks in the armor and have had to address some of the overgenerosity of their benefits.

Anyway,

Denmark's "free" institutions that you mention are not "free" at all. They pay heavily in income taxes...50% and higher. It's not "FREE".

As for what Will thinks about it, I don't know. You'll have to wait for him to answer.

This is a little speculative:

"As such, these policies all lower the distortions of imposing a minimum wage by lowering the number of people who would be on and outside of the margin created by the distortion."

Not so sure you're drawing accurate conclusions.

And I have read you're site. You strike me as a liberal...I used to be one. ;) Sorry, nothing to take offense to. If you aren't just say so. As for me, I'm libertarian for the most part. No secret. But I'm totally nonpartisan.

Re: Today in Backwardsville

jumbolachi — Sat, 26 Jul 2008 01:23:53 -0000

John V claims that I am surprised at Will's evocation of Denmark in the minimum wage debate because I do not understand Will's arguments. This is untrue.

From what I have read by Will, he is in favor of instituting direct wage subsidies for low-skilled workers and getting rid of the minimum wage. Let me say that I understand this proposal and think it is actually very compelling.

What I was hoping to get at by probing Will's comment was his thoughts on adopting other Danish policies that can be thought of as substitutes for the minimum wage. Specifically, I was curious what his take was on the Danish policies of having free education (including college), free health care, free job training, and relatively generous unemployment benefits. All of these policies either lead to less unskilled workers in the economy or improve the bargaining position of labor. As such, these policies all lower the distortions of imposing a minimum wage by lowering the number of people who would be on and outside of the margin created by the distortion.

Also, John V, please know that I do not appreciate you implying that I am a liberal, social democrat, or whatever. You will never witness me implying that anybody falls under any sort of category and I expect the same treatment in return. Categorizing people and generalizing their thoughts with those of others detracts from discussion and understanding. If you ever check out my blog, you may notice that I praise and attack the ideas of all parties, regardless of their party or political-economic leanings.

Re: Today in Backwardsville

John V — Fri, 25 Jul 2008 22:36:48 -0000

You are surprised because you don't understand the argument you are trying to oppose.

If you reread what Will has said and look more closely at many liberalization arguments in general, you will see something you probably never noticed before:

Direct subsidies of some kind to targeted demographics are not the same as interfering in the labor through price controls and other distorting policies that can backfire. Some free market thinkers oppose both...others leave room for some specific subsidies while still opposing minimum wage laws.

Debates about minimum wage are not about "wanting to help vs. NOT wanting to help the poor" as many liberals like to think. That's what Will meant by "signaling"...and empty misguided signaling at that.

Something I've noticed through the years is that most Modern American Liberals (social democrats) do not distinguish between different kinds of intervention. It's all the same to them because they don't think about market forces (or think they matter). Therefore, the difference between a negative income tax and a variety of income supplements...as proposed by Friedman and Hayek (for example)...and minimum wage laws are often not different to garden-variety liberals in terms of how they conceptualize what exactly these very different measures MEAN to labor markets.

Think about it.

BTW, Denmark has very flexible labor markets....something whose details you should look into.

Re: Today in Backwardsville

jumbolachi — Fri, 25 Jul 2008 20:04:43 -0000

I am a bit surprised that you evoked the socialist state of Denmark in defense of having no minimum wage. Are you suggesting that it would be somehow better to institute Danish-style welfare policies and jettison the minimum wage, or are you in favor of a more ceteris paribis scrapping of minimum wage?

Just so you know, I am on the fence when it comes to minimum wage because the empirical literature is unconvincing (on both sides) and because it really doesn't seem to have much of an effect on macrovariables (particularly in the long-run). However, when I try to imagine the counterfactual of our society without the minimum wage, Denmark style equality is not what I see. But I am definitely open to considering the replacement of the minimum wage with other policies (like those in Denmark).

Re: Today in Backwardsville

bkalafut — Fri, 25 Jul 2008 17:42:50 -0000

I'm not Will but I imagine that you're referring to ideologues at places like the Mises Institute. Why should Will Wilkinson be somehow responsible for his downmarket "confreres" any more than anyone else is responsible for stupids with whom they coincidentally agree?

Re: Today in Backwardsville

WilsonF — Fri, 25 Jul 2008 17:40:21 -0000

This response doesn't make any attempt to give an explanation as to why the minimum wage is a welfare-increasing proposition for low-income workers on the whole, much less a more welfare-increasing proposition than the proposals that Will talks about above.

Really what you do in this post is that you call Will out for what you believe is a misuse of the term ceteris paribus, and then you say he doesn't know what he's talking about because he argues that some important 'skills' come from on the job experience. If you're going to call someone a 'libertarian play-economist' you should have more to work with than that.

You obviously have some theory based in bounded rationality about how firms that hire low income workers are not profit maximizing and so the minimum wage can act as an effective transfer to low income workers. I would like to hear about it, I really don't know of good theories for the minimum wage beyond the C&K monopsony theory.

However, I tend to think that Will is right here and that you need to have some reason to throw out the law of demand if you don't think that the minimum wage increases unemployment for low-income workers.

Re: Today in Backwardsville

Greg N. — Fri, 25 Jul 2008 17:40:12 -0000

Here's Will's introductory use of "ceteris paribus" in the CAL post:

"Economic laws, like the principles of all the “special sciences,” are ceteris paribus generalizations: generalizations that are true other things being equal. Econ 101 lays out the basic laws and explains what follows from them ceteris paribus."

Where in there do you get that Will thinks CP means "given normal conditions"?

Re: Today in Backwardsville

bkalafut — Fri, 25 Jul 2008 17:39:40 -0000

We saw it in Arizona. The macro data hide the effects on the individual worker. The marginally employable (e.g. teenagers, the retarded) lose out.

Re: Today in Backwardsville

WilsonF — Fri, 25 Jul 2008 17:27:30 -0000

Will;

I am a huge fan of the original post, your replies in this thread, and then the older post you linked to. I wish I had started reading your blog sooner, it's really blowing me away lately.

Re: Today in Backwardsville

BP — Fri, 25 Jul 2008 16:51:44 -0000

You may think it's obnoxious to have people accusing you of free-market fantasies, but I think it's even more obnoxious to have libertarian play-economists pretending like they have a clue what they're talking about.

Ceteris paribus doesn't mean "given normal conditions," and if you think it does, then I'm sorry, but you really have no clue what you're talking about. Also, working isn't the only way to become less low-skilled. You're a skilled worker. Did you gain most of your skills through work or school? If this is part of your argument against the minimum wage, then you obviously don't give a shit enough to think your position through.

Try relaxing the assumption of perfect profit maximization across all industries, and then you can do a lot better than monopsony. You don't have to be a Thaler-ite to know that that's a reasonable assumption in many industries; especially in the industries that rely on employees paid the minimum wage.

Re: Today in Backwardsville

GilM — Fri, 25 Jul 2008 16:01:41 -0000

[citation needed]