Megan McArdle has what I think is a reasonable post on the minimum wage. Read the whole thing but I’ll summarize it as bullet points:
- Small minimum wage hikes don’t seem to produce large, immediate declines in employment.
- Companies are not rationally maximizing machines that automatically find the best, perfect price for their products.
- ncreasing wages can lead to greater productivity.
- Some jobs can’t be automated.
- Doubling the minimum wage is a whole different story.
- Timing matters,
- A big hike means big cost increases for industries that employ a lot of minimum-wage workers.
- It can’t all come out of profits.
- Companies aren’t all-knowing value maximizers, but they probably know more about their pricing power than a random person on the Internet.
- Time frame matters.
- Most of the efficiency wage arguments you read fundamentally misunderstand how efficiency wages work.
- It isn’t true that paying workers at the bottom a lot somehow magically makes the economy grow.
She fleshes out each of her points a bit but that’s the gist. I agree with nearly all of what she writers here. Her post is the sort of “more light less heat” post that I wish there were more of.
I think the bottom line is that we just don’t know. That’s why I’ve been asking questions. For those who think that a sharp immediate increase in the minimum wage is worth the gamble, that’s just as faith-based a position as being convinced that such an increase would be disastrous. We just don’t know.