Wednesday, May 31, 2017

the scare-mongering around minimum wage hikes seems intuitive, but it is actually rooted in the irrational premise that increasing the costs of labour will decrease the demand for it. that's the crux of it. if we want to be technical, we should be talking in terms of poor modelling. more specifically, the scare-mongerers are modelling labour as perfectly or strongly elastic, when they should be modelling it as nearly perfectly inelastic! but, you almost lose something in context by getting technical.

think about the argument: increasing the cost of labour will decrease the demand for it. that's ridiculous. why would you think that?

it's the same kind of goofy thinking that wants to conceptualize a government budget the same as a household budget. it's really not intuitive at all, it's ridiculous on it's face.

but, this is the crux of the junk economics on the right. they throw ideas at you that are barely comprehensible enough to even be wrong, then they repeat them so often that you take them as obvious. of course increasing wages will reduce jobs - i've heard that every day of my whole life. why? well, because increasing the cost of labour will decrease demand for it. obviously.

this link explains.

https://jonmalesic.com/2013/03/10/the-minimum-wage-and-elasticity-of-labor-demand/