Monday, April 26, 2004
ampersand writes, quoting me:
Posted by Ampersand
I hope you don't mind, this probably should be a new thread but I can't resist...
rather than reinvent the wheel on the issue of how living wage laws are classist, i'll point to the literature about how minimum wage laws create job shortages
Having read that literature, the empirical studies tend to show that the minimum wage creates a very marginal effect on unemployment, often completely washed out by other factors in the economy. Ask any low-wage person if they'd be willing to accept being unemployed for an extra day or two the next time they're job-hunting, in exchange for getting paid a few bucks more an hour in the job they eventually get.
The simplistic model of wage work in which the minimum wage causes mass unemployment is an ivy-tower model; they like it at the Chicago school, where none of the scholars has ever had to work for the minimum wage in their lives, but it has next-to-nothing to do with what happens in real life.
---
no full refutation here.
a few data points:
i've worked at minimum wages of $2.35/hr and 3.35/hr.
i've worked under the table for $5/hr, because it was fun.
i had a job where our overtime pay was $6/hr, and that's the job i'm most likely to go back to.
i've spent years unemployed, this being one of them. i live simply on an income of around $400/mo.
so far i've been able to avoid living wage zones.
i'm somewhat tempted to go into a full-on rant about the chicago school and simplistic models.
the model is simplistic because we use it in trying to communicate with liberals, some of whom have [succumed] to years of government brainwashing, who wouldn't be able to find the austrian school on a map.
when economists try to communicate with non-economists or anti-economists*,
we sometimes use the neoclassical model of supply-demand curve graphing.
In order to simplify the model, so that it can be represented 2-dimentionally,
we make some assumptions we know don't hold true in the real world:
- perfect competition, costless information, zero transaction costs, some 4th thing i forget.
liberal: aha! your model fails to fully model the real world, so we reject its utility.
economist: as we said, it's a simplification, because the part of your brain not filled with statist propaganda is the size of a walnut. the map is not the territory. please pay attention.
me: what i find interesting about the model is that, with the internet, the real world is starting to look more like the model. Competition isn't perfect, but go online and you can usually find 5 or more sellers of a good or service, if it's not inherently unique.
me: what i find interesting (just lost chunck of text?) is that with the internet, competition is enhanced, information costs are lowered transactions costs decrease, [and whatever the 4th thing was] so that the real world starts to look more like the model.
Of course, I don't know any economist that claims the neoclassical model accurately models the real world. The austrian school is where the action is -
information does have costs, better information is the engine of change, government policies that get in the way of price signals harm the economy, harming those on the bottom the most.
Having the government control price signals is like putting monsanto in charge of your farm's ecological diversity. because markets use price signals to distribute resources effectively, in the same way ecologies distribute resources effectively, in a way that gets disrupted by monocrop agriculture.
I have yet to hear a liberal who a) gets this point and b) still coherently advocates disrupting price signals. or c) says, why yes. minimum wages are like clearcutting forests, and i'm for both, and here's why:.
That's enough of a rant for today.
* by anti-economist, here, i mean someone ideologically opposed to chicago-school, such as marxists or keynesians. i realize these people would call themselves
economists too.
Posted by Ampersand
I hope you don't mind, this probably should be a new thread but I can't resist...
rather than reinvent the wheel on the issue of how living wage laws are classist, i'll point to the literature about how minimum wage laws create job shortages
Having read that literature, the empirical studies tend to show that the minimum wage creates a very marginal effect on unemployment, often completely washed out by other factors in the economy. Ask any low-wage person if they'd be willing to accept being unemployed for an extra day or two the next time they're job-hunting, in exchange for getting paid a few bucks more an hour in the job they eventually get.
The simplistic model of wage work in which the minimum wage causes mass unemployment is an ivy-tower model; they like it at the Chicago school, where none of the scholars has ever had to work for the minimum wage in their lives, but it has next-to-nothing to do with what happens in real life.
---
no full refutation here.
a few data points:
i've worked at minimum wages of $2.35/hr and 3.35/hr.
i've worked under the table for $5/hr, because it was fun.
i had a job where our overtime pay was $6/hr, and that's the job i'm most likely to go back to.
i've spent years unemployed, this being one of them. i live simply on an income of around $400/mo.
so far i've been able to avoid living wage zones.
i'm somewhat tempted to go into a full-on rant about the chicago school and simplistic models.
the model is simplistic because we use it in trying to communicate with liberals, some of whom have [succumed] to years of government brainwashing, who wouldn't be able to find the austrian school on a map.
when economists try to communicate with non-economists or anti-economists*,
we sometimes use the neoclassical model of supply-demand curve graphing.
In order to simplify the model, so that it can be represented 2-dimentionally,
we make some assumptions we know don't hold true in the real world:
- perfect competition, costless information, zero transaction costs, some 4th thing i forget.
liberal: aha! your model fails to fully model the real world, so we reject its utility.
economist: as we said, it's a simplification, because the part of your brain not filled with statist propaganda is the size of a walnut. the map is not the territory. please pay attention.
me: what i find interesting about the model is that, with the internet, the real world is starting to look more like the model. Competition isn't perfect, but go online and you can usually find 5 or more sellers of a good or service, if it's not inherently unique.
me: what i find interesting (just lost chunck of text?) is that with the internet, competition is enhanced, information costs are lowered transactions costs decrease, [and whatever the 4th thing was] so that the real world starts to look more like the model.
Of course, I don't know any economist that claims the neoclassical model accurately models the real world. The austrian school is where the action is -
information does have costs, better information is the engine of change, government policies that get in the way of price signals harm the economy, harming those on the bottom the most.
Having the government control price signals is like putting monsanto in charge of your farm's ecological diversity. because markets use price signals to distribute resources effectively, in the same way ecologies distribute resources effectively, in a way that gets disrupted by monocrop agriculture.
I have yet to hear a liberal who a) gets this point and b) still coherently advocates disrupting price signals. or c) says, why yes. minimum wages are like clearcutting forests, and i'm for both, and here's why:.
That's enough of a rant for today.
* by anti-economist, here, i mean someone ideologically opposed to chicago-school, such as marxists or keynesians. i realize these people would call themselves
economists too.
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