Illustrating Minimum Wage Folly:
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May 14th, 2007 at 2:09 pm
so Tristan, will you be putting forwards proposals to reverse offical party policy which is in favour of making the UK minimum wage for under-22s the same as for over-22’s?
http://www.libdems.org.uk/commerce/story.html?id=12145
May 14th, 2007 at 7:11 pm
Edis
Will you support your party policy, or what is moral?
May 14th, 2007 at 8:42 pm
It takes ten party members to put down a conference motion.
You can count me in.
May 15th, 2007 at 10:03 am
I will on moral and strict economic grounds support the existing party policy, as I think the argument implied in the cartoon is based on inadequate economic analysis. For example I think it assumes that the ‘model of perfect competition’ actually applies in the real world of labour markets. Other, equally rigorous models which do seem to mirror more exactly what actually happens in the real world show different results. Including one apparently counterintuitive one, that in certain circumstance raising the minimum wage results in an increase in jobs on offer not a decrease.
May 15th, 2007 at 11:55 am
You probably ought to supply some references to support these assertions.
May 15th, 2007 at 12:28 pm
I am aware of one paper which claimed that Minimum Wage increases had a positive effect. It was used by Bill Clinton to justify an increase.
Unfortunately the results were not reproducible, the methodology was seriously flawed and it failed to account for elasticity and the time effects take to be realised.
May 15th, 2007 at 7:34 pm
The model for imperfect competition is a standard one given in all economics textbooks. The apparently perverse results of increasing employment not reducing it at certain limited levels of imposition of a minimum wage is one of the classics sprung on economics students to make them think about the need to take account of the assumptions behind models.
There have been quite a few studies of minimum wage impact since the political rows of the early Clinton presidency. One is
Pollin, R., Brenner, M. and Wicks-Lim, J. (2004) Economic Analysis of the Florida Minimum Wage Proposal, PERI (Political Economy Research Institute)/Center for American Progress.
And OK it is a source that has ‘form’ (like Cato institute papers have ‘form’ from another perspective, but for what it is worth…