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Comment by A12-B | Hacker News Reader

> something minimum wage can’t do because of the labor shortage it creates

It's important to read economic literature beyond old dead economists because many modern economists disagree with this, or think it doesn't paint a full picture of the situation. Noah Smith comes to mind.

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Here's some studies of the effects of Seattle's minimum wage hike:

https://www.washington.edu/news/2019/02/06/two-new-studies-p...

"The most common strategic response reported by the businesses has been to raise prices or fees of child tuition and to reduce hours of or number of staff. Center directors reported that employee wages and benefits comprise the majority of business expenses and that child tuition was the primary source of business income. Thus, most businesses reported they would need a mix of strategies to accommodate increased labor costs to ensure that added expenses were not falling entirely onto the families they serve."

>To accomplish this, we assembled the entire set of published studies in this literature and identified the core estimates that support the conclusions from each study, in most cases relying on responses from the researchers who wrote these papers. Our key conclusions are: (i) there is a clear preponderance of negative estimates in the literature; (ii) this evidence is stronger for teens and young adults as well as the less-educated; (iii) the evidence from studies of directly-affected workers points even more strongly to negative employment effects; and (iv) the evidence from studies of low-wage industries is less one-sided.

https://www.nber.org/papers/w28388

Come on, when there is a labor surplus companies don't have to employ all workers. They can just pick the lowest bidders and if you deny people the ability to bid lower they might not get employed at all.

Or how about the big elephant in the room that nobody seems to be bring up; the effect on small businesses that can’t afford to pay employees $15 or $20/hr. So, instead of helping the poor, these policies raise unemployment and actually are a detriment to the overall health of the economy.

Everyone talks about it. This is pretending that businesses would do nothing in response to the changes. They'd do a lot of stuff, like raise prices, invest in efficiency improvements, invest in their employees, reduce employee hours, offset the increase in lower level wages by reducing upper level wages, etc.. What the response would be just depends on the business and their circumstances.

Edit: also, I can't find the study, but I know there was one done about statewide minimum wage changes in states with large differences in cost of living. It's a smaller scale version of what you'd see on a nationwide hike given the differences in cost of living (i.e,, NYC vs Buffalo). Generally speaking, businesses adjusted.

E2: here's a study that isn't the one I was looking for, but is topical: https://www.epi.org/publication/webfeatures_viewpoints_raisi...

> This is pretending that businesses would do nothing in response to the changes

No it's not, it's proposing that one of the things they'll do in response is hire fewer people. Which will absolutely happen in a non-zero fraction of cases. The only question is how big a fraction.

Sure, but that isn't the topic I was responding to. The previous poster suggested that its not a topic that anyone talks about, when it is; and suggested that businesses hiring fewer people is the only possible outcome/side-effect, when it isn't.

The past 25-30 years of research do not show this to be true. The link between the minimum wage and unemployment isn't really a thing. I recognize your position was the conventional wisdom in the 1990s but newer research and analysis (along with tons of states experimenting with minimum wage over the various decades) paint a clear picture that it helps not just low-income workers but can help firms too by boosting productivity.

Sources:

1. https://www.nelp.org/wp-content/uploads/NELP-Data-Brief-Rais...

2. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2705499

3. https://americanprogress.org/wp-content/uploads/kf/minimumwa...

4. https://www.piie.com/blogs/realtime-economic-issues-watch/hi...

There is no concussion among economists that "link between the minimum wage and unemployment isn't really a thing."

A lot of research suggests the effect is pretty small when the increase in minimum wage is small compared to the market wages for unskilled labor.

But there isn't a lot of data about a large change in minimum wage that affects a substantial number of people.

If there was no downside, why not $100 an hour?

Most certainly businesses as a response will be forced to raise prices and thus increase inflation and make everyday products more expensive.

These studies are obviously politically and progressively motivated (coming from firms such as american progress) so we have to assume a large scale national increase of minimum wage as significant as this would have unintended negative consequences.

If businesses can increase prices they have done so already and that would show in the form of higher demand for labor.

So really, the only benefit is a psychological trick. Simply handing out money to underpaid workers would drive inflation much more effectively and do the exact same thing.

You need to re-read the comment you’re replying to.

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