By request: a long post in which I link Kathy G several times

Kathy G has been repeatedly taking me to task for not linking her post on monopsony. I don't like to make a policy of linking to people who whine that I am not linking to them--indeed, rather the opposite. (Other new bloggers take note). But in this case, I actually tried to link to her; I just forgot to paste in the link, which I do all too often, a careless habit that I am trying to curtail. So, fair enough.

Here are all Kathy G.'s posts on monopsony, at least as far as I am able to determine.

Another note to new bloggers: you've heard that "blogging is a conversation". Unfortunately too true. By the time you've been doing this for six years or so, you will often sort of forget that the conversation you are having now is not with the same people you were talking to four years ago. You will thus find yourself accidentally referring to past arguments as if everyone reading the current post had lived through them with you. Just as you do in a bar at 2 am when everyone's been arguing for a while, you will, without quite realizing it, make references that are only really comprehensible to a few long-time readers.

Case in point: in a post on the academic job market, I made a side reference to the minimum wage.

I hear economists on the left endorse a monopsony model of minimum wage employment that sounds frankly ludicrous to me, and should to anyone who has worked in fast food or retail--how could employers in industries that fragmented, with turnover rates well over 100%, possibly collude? On the other hand, it's a pretty plausible model for academic environments where a squillion graduate students are all chasing three jobs.

When I wrote this I was thinking of a very long-ago debate that raged through blog comments on my very first blog, the one with the eye-searing candy-colored pastel boxes, using an extremely buggy comment system that I don't even think exists any more. Back then, we didn't have all these bells and whistles that you ungrateful kids take for granted--why, I had to carry water for the comments uphill three miles, and then boil it over an open fire . . .

I'm sorry, where was I? Right, the minimum wage.

The funny thing is that I had lunch with Tyler Cowen the other day, and he actually remembered the debate, and caught the reference when I made it the first time--blogging is a long-term conversation with at least a few readers. But Kathy G. can be forgiven for not having had the exquisite good taste to read my blog way back when.

For those who haven't following along at home, this was an argument over whether the minimum wage market is appropriately described by a monopsonistic model of labor employment. Monopsony, if you fell asleep in Micro 101, is monopoly's evil twin brother: it's what happens when you have a single buyer rather than a single seller. As with monopoly, much un-hilarity ensues.

The reason we were arguing about this is a very famous (to econowonks) study done by Card and Krueger on minimum wage employment in Pennsylvania and New Jersey following a minimum wage increase in New Jersey. Their counterintuitive finding was that employment actually rose in New Jersey.

There are several possible explanations for this divergence from the standard finding that demand curves are downwards-sloping.

1. It was a statistical outlier
2. There was some swamping effect in New Jersey, like a local economic boom.
3. The study was not well done
4. Fast-food employment is monopsonistic, at least in Pennsylvania and New Jersey.

Ignore the first two; it would be fiendishly difficult to establish the truth of either proposition. Let's tackle number four first, because this is the heart of the debate that I was having with a number of people four years ago, and with Kathy G. now. Consider a classic model of minimum wage employment in a simple model where all workers are paid the same wage:

When you institute a price floor, the wage goes up, but the number of people employed goes down.

Under monopsony, things look different. Competitive employers have to offer a market wage, so they maximize production where the market wage is equal to the marginal product of a new worker. Monopsony employers, on the other hand, are not price takers; they can set the wage to maximize their profit. This means that they face an upward sloping marginal cost curve for workers, because raising the wage in order to hire another worker also means raising the wages they pay to their existing workers.

As I hope is easy to see from the graph above, which I shamelessly ripped off from Wikipedia, either a market wage or a minimum wage essentially gives you a horizontal marginal cost curve. Those employers simply pay the wage where MPR=S. But if they are monopsonists who control the wage, then they can probably maximize their profit with fewer workers, because they are only competing with staring home and staring at the wall. They maximize profit not by setting wages where MRP=S, but where MRP=Marginal Cost. That means a smaller workforce.

This looks sort of counterintuitive--why would the marginal cost be higher than the wage? But that's because they have to raise the wages of all the other people as well--thus, marginal cost increases faster than the wage. That's why the company can be better off having a smaller workforce at a lower wage than a bigger workforce at a higher wage, even if the marginal revenue produced by the additional worker is higher than their wages.

And that's why, if you set the minimum wage right, giving them a horizontal cost curve, you could increase both employment and wages (though if you set it too high, you'll still see disemployment effects, as you do in the graph above.)

That is one possible explanation. But I find it unconvincing, for several reasons.

First, there's pretty good evidence for explanation three. The original study was a phone study; when another study asked for actual payroll records, they found the same result the standard model would predict: fast food employment dropped in New Jersey. Additionally, as Kevin Murphy has pointed out, the survey started long after employers knew that a minimum wage hike was coming--he compares it to assessing a midnight curfew by comparing the number of teenagers on the street at 11:59 to the number on the street at 12:30.

But second, I have trouble arriving at a reasonable model for monopsony in minimum wage markets. The retail and fast food industries that employ most minimum wage workers have extremely low search costs on both sides of the market. The burger joints are all right there, next to the one you're already working at--if you can get to one fast food outlet, you can get to ten. Ditto retail stores. When they're hiring, they put signs right there in your window where you can see them. On the other side, the firms wait for someone to walk through the door, and put a hat on them. They don't spend six weeks calling your references and checking out your scholarly work.

Kathy G. likes heterogenous preferences between workers, which is to say workers liking different kinds of workplaces. This could also explain it. Except . . . in the fast food market? This seems unlikely. It's not like you're taking a lower wage at Wendy's because they have a great dental plan and they let you use the pool. The labor is unskilled, the wages are undifferentiated, and the benefits are nonexistent. Maybe there are some people out there who love Wendy's food, or Gap clothes, so much that they never want to consume anything else, making the employee discount super valuable. But I cannot believe that this group is sufficiently large to be driving the market. Besides, there's empirical evidence against this; most people do not stay in only one industry, much less only one firm.

There are a couple other small quibbles, each less convincing than the last; by the end of the debate, we were stuck on collusion, the most plausible thesis. Except it's not plausible. Fast food and retail are extremely fragmented, and also extremely competitive on extremely thin margins. Maybe this happens in some small towns, but they'd have to be awful small. My grandmother's town of 10,000 has dozens of minimum wage employers. Large cartels without legally enforceable deals almost always break down; the incentive to cheat is too high. They might not raise wages, but the perks would get nicer and nicer.

But more broadly, minimum wage markets don't look like we would expect a monopsony labor market to look. Retail and fast food employment is pretty sensitive to even pretty small changes in relative wages, which shouldn't be true if firms really have that kind of control over their labor force. Also, there's decent evidence that raising the minimum wage lowers employment among the groups most likely to be making the minimum wage, especially teenagers. Again, if monopsony were persistent in these labor markets, this is not what we would expect to see--at least, not if the government is doing a good job setting the minimum wage near the 'competitive' wage.

This long argument, which culminated in the (I hope not too boring) analysis above, is what I was thinking about when I wrote a two-sentence throwaway line. Kathy G. can certainly be forgiven for not knowing that; I hope that I can be forgiven for acting as if blogging were a conversation, rather than a lecture.

There's another lesson for new bloggers here, though, one that most of us had to learn the (very) hard way: when arguing with people you disagree with, it's better to leave yourself room to back down. Just off the top of my head, before declaring that the other person is an idiot who has no idea what they are talking about, you should be very, very sure that there is absolutely no possibility that they do know what they are talking about. You're coining a fact--Person X doesn't understand Theory Y. If it turns out that your analysis is wrong, my own hard-won experience is that you do more damage to your reputation than you could ever have hoped to do to theirs--I'd say the ratio is 3 or 4 to 1. So unless you're pretty confident that your opponent cannot demonstrate the basic familiarity you have confidently declared they lack, this one is almost never a win.

Comments

I think your policy of not linking to people who whine about links is an excellent one, that I hope you will stick to it in the future.

Another great policy would be not linking to people who just whine too much in general. To be specific, that would include Kathy G.

Posted by nonesuch | April 30, 2008 10:00 AM

The main difficulty I have with the whole minimum wage discussion is the simple fact that the minimum wage is only a fraction of what would actually be a living wage.

I think the only way employers can ultimately get away with paying less than a living wage (with full benefits) is by expecting that someone else will pick up the rest of the costs of keeping that worker alive and healthy. And that someone else generally is all of us, through taxes. In other words, government subsidies are what allow employers to get away with paying less than a living wage. If you don't pay a living wage, then the workers can't live on it - they have no place to live, they can't buy enough food, they eventually die from this. Of course, employers don't care about that - always more poor people being born (and coming across the border) to replace them.

What I think the minimum wage should be is the wage that actually allows (with benefits) someone to maintain a bare minimum living - that includes housing, food, health insurance, clothing, etc. Otherwise, all of those costs will still have to be paid by someone - and that someone is us - and I would rather not have my tax dollars subsidize paying below-living wages to allow greater profits for certain industries.

One other aspect of the whole minimum wage discussion is the notion that somehow everything will get so much more expensive if the wage is raised. The problem is, these discussions always leave out one half of the equation - all of the increased spending money out there. If workers make twice as much money, they have twice as much to spend. Which means lots of businesses will get twice as much business. And so perhaps all of that increased business and profit will also help pay for the increased wages. I don't pretend to know the exact ratios involved, but certainly, it would offset a lot of the increased labor costs. You can afford to pay a lot more for your labor if you get a lot more business.

Posted by Disgusted Beyond Belief | April 30, 2008 10:16 AM

A really good article, Megan. If we scan across what the other
contributors to "The Atlantic" are doing this is just a different
level entirely.

At the same time I sense more than a bit of frustration. You are
retreating a bit behind complexity and not stating things
quite as clearly and as baldly as they could be stated.
I suspect that's because tired of the zings and the hatred that
so often gets directed your way.

But still this is really quite good.

Posted by Mark Amerman | April 30, 2008 11:11 AM

someone else will pick up the rest of the costs of keeping that worker alive and healthy. And that someone else generally is all of us, through taxes.

Actually, that someone else is usually the parents; most minimum-wage workers are teenagers.

Posted by SamChevre | April 30, 2008 11:18 AM

DBB, I don't understand why an employer would pay an employee more with increased business. Is paying the employee more going to enable or motivate him to service more customers? I doubt it. It seems more likely that an employer would rather hire an eleventh worker than pay each of his current ten workers 10% more wages.

Also, you say, "One other aspect of the whole minimum wage discussion is the notion that somehow everything will get so much more expensive if the wage is raised. The problem is, these discussions always leave out one half of the equation - all of the increased spending money out there."

Wouldn't all the increased spending money out there be EXACTLY what is driving the inflation? So isn't the part of the equation you're discussing precisely the part of the equation they've addressed?

Posted by bcg | April 30, 2008 11:20 AM

Disgusted's post brings up an interesting point. Is it possible that inequality in the US can increase to a point at which consumer spending is insufficient to support the economy? If this happens, what is the "free-market" solution? Is it to let prices fall until we reach equilibrium? It's obvious that Megan and most of the people who post on this site oppose everything FDR did during the Great Depression. If the economy tanks, what is their solution? Is it Andrew Mellon's? I'm really curious about this.

Posted by Stan | April 30, 2008 11:21 AM

As a grumbler, not a whiner, I applaud Megan's policy.

Posted by Michael Tinkler | April 30, 2008 11:28 AM

I think the only way employers can ultimately get away with paying less than a living wage (with full benefits) is by expecting that someone else will pick up the rest of the costs of keeping that worker alive and healthy. And that someone else generally is all of us, through taxes.

No, that somebody else generally isn't taxpayers. It's parents very often. Or retirement savings saved by the low wage worker (who no longer needs a high salary but would like to get out of the house). Sometimes it is a higher-earning spouse.

But what of those minimum wage workers who are partially government subsidized? If the minimum wage were a 'living wage' that was roughly twice as high as the current minimum, many of these poorly-educated, low-functioning, low-productivity workers would be out of work (and 100% subsidized by unemployment compensation or social security disability payments).

There is a naive believe among living wage proponents that employers would have to have the same number of employees as before doing the same jobs in the same ways and would only be affected by making a bit less money.

But that's nonsense. Employers can substitute automation or self-service for low-wage workers. They can hire fewer healthier, educated, high-functioning, high-productivity workers instead of more uneducated, sicker, low-functioning, low-productivity workers.

The business may be done by undocumented workers or the self-employed (who are not required to pay themselves a 'living wage'). And employers who can't do any of the above, may just close up shop (either by choice or bankruptcy). There are many non-essential goods and services, and if they cost more in labor than customers are willing to pay--those goods and services will simply not be offered.

Much better to allow people to earn what their skills and productivity will allow and make up the difference than have the government provide 100% of their income.

Posted by Slocum | April 30, 2008 12:28 PM

DBB - "I think the only way employers can ultimately get away with paying less than a living wage (with full benefits) is by expecting that someone else will pick up the rest of the costs of keeping that worker alive and healthy."

That's true to an extent, but a true living wage, for one person, is lower than you might think. People can live on less than most people would want to live on.

More importantly most of the minimum wage employees do not rely on the minimum wage job as their sole means of support, and I'm not talking about welfare or crime. Many have such a job as a 2nd part time job, or they are married to, children of, or otherwise living with someone who has a better job. Should teens just starting out in the workforce have to be given enough money to support themselves, when they do not, and are not expected to, support themselves?

Some might say, well we don't have to give them this much money, but why not do so? But doing so is not without cost, and the cost doesn't just include the business owner and his customers, but also the group of people that you want to give these "living wages" to. Many of them will simply be priced out of a job, if you force employers to pay them more than their labor is worth to an employer. You may even cause the business to go under, and than all its employees lose their jobs. And then with less competition and higher costs, the consumers will have to pay more, which will make you "living wage" less able to actually support people, and will also hurt consumers making more than this living wage.

Posted by Tim Fowler | April 30, 2008 2:08 PM

I often hear the claim trotted out that min wage workers are really just mostly teenagers working for extra money - yet I don't think the data actually supports that contention.

But then if that is really the case, you could allow a lower minimum wage (like the one we have now) that is not a living wage, but then only allow it to be paid to teenagers who are claimed as dependents. Problem solved.

As for inflation - unless minimum wage jobs make up more of the economy than I thought, I somehow doubt they would have all that much impact on inflation. As it is, inflation is going up pretty fast these days and wages are stagnating. At least if wages keep up with inflation, people's lives don't get any worse.

I just think there is something fundamentally wrong where people have to work two or three jobs just to be able to live. What exactly is wrong with setting a floor on the amount you pay someone and making that floor that which that person needs to live? Taking up someone's time to the degree that a full time job requires and not paying them enough to even keep themslves fed, clothed, and sheltered seems rather cruel and is also short-sighted. You certainly won't be able to keep that worker for very long - they'll either die from the strain (particularly from having to take other jobs), die from lack of sufficient funds to live, or quit to take a job they may like even less just to make a bit more money so they can live.

And as someone else pointed out, what happens to our economy if so many people can't support even themselves that consumer spending drops off a cliff?

One other discussion left out of minimum wage discussions is the fact that wages are probably kept artificially low as it is, given the uneven bargaining power between employers and those who take such jobs. I suppose that would add an upside if you had socialism vis a vis - providing everyone with somewhere to live, clothes, and food, and then only requireing work if you want to go buy anything else (like, the fun stuff). Then people would truly only take a job if they felt like the pay compensated them for their time (as opposed to taking it out of desperation or sheer survival). (Note: I don't really adovocate this for a myriad of reasons, this is just a thought experiment). I mean, think about it - if you didn't have to work to live, if you could sit at home and read books and live comfortably, how mcuh would they have to pay you to make you go pick up garbage? As opposed to sit in a cushy office? I think I'd need three times as much pay to do the garbage job, frankly. Of course, tastes may vary. As it is, there are a lot of really shitty jobs with pay so low that no one would take them except out of desperation or lack of any other choice. As opposed to the pay one would have to give to actually get someone to do that if they had the free choice to consider which job to take. You know, as if it were a free market.

I think Henry Ford had it right - he covered both sides of the equation - he made his products cheaper AND he made his wages a lot higher - because he knew that for his cars to really sell he'd need a lot more consumers who could actually afford to buy them. Employers, if they could get away with it, would pay their workers pennies a month. Which is all well and good for their profit margines, but it leaves no one who can buy their goods.

Posted by Disgusted Beyond Belief | April 30, 2008 2:29 PM

The main difficulty I have with the whole minimum wage discussion is the simple fact that the minimum wage is only a fraction of what would actually be a living wage.

I understand that a lot of illegal immigrants earn less than minimum wage. And are not supported by anyone else. And yet they live.

A rather obvious conclusion occurs to me.

Posted by ad | April 30, 2008 2:34 PM

I think Henry Ford had it right - he covered both sides of the equation - he made his products cheaper AND he made his wages a lot higher - because he knew that for his cars to really sell he'd need a lot more consumers who could actually afford to buy them.

No, he didn't. Who started this myth, anyway? It hardly makes sense to argue that he gave away lots of money in the hopes that some of it would come back. Ford paid higher wages in order to reduce employee turnover.

Employers, if they could get away with it, would pay their workers pennies a month. Which is all well and good for their profit margines, but it leaves no one who can buy their goods.

Employees, if they could get away with it, would only work for a million dollars an hour. Which is all well and good for the bank account, but it leaves no one to hire them.

Of course, each argument is equally silly. Employers can't get away with it, and it's not because of the minimum wage, but because of supply and demand. If the minimum wage were what kept employers from paying pennies a month, then we'd expect that all employees would get the minimum wage. But they don't, because government price fixing isn't what drives wages.

What exactly is wrong with setting a floor on the amount you pay someone and making that floor that which that person needs to live?

Because "need" has nothing to do with what a person's services are worth.

Posted by David Nieporent | April 30, 2008 3:07 PM

Disgusted: Why is there something "fundamentally wrong" with people being expected to work two jobs? That's 80 hours a week, and there's a lot of people out there who work 80 hours a week. Is it unfair to lawyers, doctors, or investment bankers that there's a large portion of their career where they're expected to work such hours? Or how about the fact that 100 years ago, such hours were normal, and that 200 years ago, they'd be considered easy by many people? The idea that 40 hours a week is the most any person should be forced to work is an artifact of either historical ignorance or fundamental delusions about how the world functions. Don't get me wrong, I like my leisure time as much as the next guy, and I have no desire to work those kind of hours. But given the choice between a second job and starvation, I can pretty safely pick the second job and not feel too bad about it.

Also, this argument that the minimum wage is below a living wage is ludicrous. A quick estimation of costs for a single person working 40 hours/week at minimum wage, using data for a mid-sized city in Ontario (that being where I live):
Minimum Wage Job = $8.00*2080 hours/year = $16,640/year
Taxes = circa $1000
Rent = $400/month = $4800 (gets you a small place by yourself, utilities included)
Food = $1.50/meal = $1600 (decent grocery eating)
Internet, home phone = $50/month = $600/year (low usage)
Bus pass = $140/3 months = $560
You've still got around $8000 left over - that has to cover clothes and incedentals, plus your entire recreation budget and savings, but that's more than enough for that purpose.

Similarly, a family of four with two minimum-wage employees will earn just over $33,000, and spend a couple thousand on taxes, $6000 or so on food(kids are cheaper than adults), spend maybe a grand on telecoms, a grand on buses, and can either rent a decent apartment for around $12-14,000 a year, or get a $150,000 townhouse, amortize it over 25 years, and spend about $12000 a year on mortgage payments, $2000 on property taxes, and $2000 on utilities. This leaves about $10,000 a year in slack for the renters, or $7000 a year for the buyers. Again, it's not a life I'd want to live long-term, but it's hardly starvation.

Posted by Alsadius | April 30, 2008 3:31 PM

Disgusted . . . says, "But then if that is really the case, you could allow a lower minimum wage (like the one we have now) that is not a living wage, but then only allow it to be paid to teenagers who are claimed as dependents. Problem solved."

So employers would just hire teenagers and low-skilled adults would just be unemployed. New problem created.

Posted by pauld | April 30, 2008 3:45 PM

Ten or so years ago, I saw a claim that the average (or maybe median) household income of households with a minimum-wage worker was around $60,000 (the explanation being teenagers). Anybody have an accurate, up-to-date figure?

Posted by Alan Gunn | April 30, 2008 4:42 PM

> So employers would just hire teenagers and
> low-skilled adults would just be unemployed. New
> problem created.

Please keep in mind that an employer who might be willing to hire an unproven, untrained worker only BELOW the minimum wage might very well be willing to pay MORE than the minimum wage to retain that worker once the worker is actually up to speed.

To extend that opportunity only to teenagers seems rather cruel.

Posted by Jens Fiederer | April 30, 2008 5:19 PM

DBB - Re: "I often hear the claim trotted out that min wage workers are really just mostly teenagers working for extra money - yet I don't think the data actually supports that contention."

The point isn't that they are mostly teenagers, its that many of them are. Why shut out these many? Why keep them from gaining basic job skills that can help them earn more later?

And they ARE mostly people who don't dependent on a single minimum wage job as their sole source of support. Ass people with a 2nd job, people who are young and live off their parents, people who have a part time minimum wage job while their spouse works full time etc., and you have a clear majority of minimum wage workers.

I think Henry Ford had it right - he covered both sides of the equation - he made his products cheaper AND he made his wages a lot higher - because he knew that for his cars to really sell he'd need a lot more consumers who could actually afford to buy them.

That's often repeated but its pretty much false.

Even if 100% of the additional pay went to employee purchases of Ford cars (and the reality was no where near this), and even if producing the additional cars cost nothing (which is of course ridiculous. Than he would only be breaking even. And since only a relatively small fraction of the additional pay went to purchases of Ford cars, and because producing more cars costs more money (even if the per unit cost goes down with economies of scale the total production costs go up), there is no way Ford could avoid losing money from such a practice if that was the only benefit from rising wages, and there is incentive to rise wages for that reason.

Not that he didn't raise wages and lower the price of his product over time. But he raised wages so that he could get and keep employees, luring the best of them away from competitors while he reduced his own turnover. He lowered prices because his production efficiencies improved, and he could continue to make higher profits as he beat out his competitors and also grew the whole market. Lower prices for items newly moving in to the mainstream is nothing new. Look at the price of VCRs, than DVD players, computers etc. And those price reduction happened in the context of a greater amount of inflation. Getting nominal price reductions in an inflationary situation requires even bigger real price cuts.

Posted by Tim Fowler | April 30, 2008 8:35 PM

I attempted to post this below the other day, but got blocked by
the spam filter. I imagine the conversation has moved
on, but it's likely worthwhile exercise to try to figure out what
is being objected to. (3rd attempt, part 1)

"Disgusted",

I believe that most people that earn minimum wages are people that
are entering the workforce and have no real skills. Rarely are
they heads of households or even supporting themselves on these
wages. Or at least that's they way it used to be.

When I was in high school I worked thirty hours a week in fast
food restaurants. Most of the people that worked at these jobs
were the same age. If the wages for these jobs were at anything
like a "living wage", I don't think they would have been available
to high schoolers at all.

One issue here is how do we teach people to work. How do they
become productive members of society?

It doesn't happen in a vacuum.

Posted by Mark Amerman | May 1, 2008 4:02 PM

(part 2)

Mandating a wage that would truly support an adult would make it
difficult for the young, or people who come from troubled backgrounds,
to even get in the door in the first place.

We can see this actually happening in europe. In most countries
where minimum ages are set at a "liveable" wage, youth unemployment
and in fact unemployment of people in their twenties is extremely
high.

Posted by Mark Amerman | May 1, 2008 4:08 PM

I cannot seem to post the remainder of my message no matter
how hard I try even though it seems utterly innocuous.

Posted by Mark Amerman | May 1, 2008 4:35 PM

Is the word "money" an issue? Is the word "paid" an issue?

Posted by Mark Amerman | May 1, 2008 4:37 PM

Is the word "paying" an issue?

Posted by Mark Amerman | May 1, 2008 4:44 PM

When very ordinary sentences cannot be posted for totally obscure reasons, then I'd say the spam filter has become quite the issue.

Posted by Mark Amerman | May 1, 2008 4:57 PM

I'm not surprised at the reactions of the folks on this thread. After all, if you study human behavior, it's not unlike studying animal populations - there are individual survival dramas, but overall, the species prospers or it doesn't.

The problem is that we don't treat human life this way. People need a wage that supports them and their family, they need health care, they need their children educated and they need to retire. You can always live for a month on what they pay you at Burger King. Two people can do even better - even generate a small surplus. But what about kids? If you both work, how do you pay for daycare? Health insurance? Save a bit? Not possible. Even in the rural Midwest and South you can't do all three on the minimum wage.

You see, people aren't like frogs - we really can't assess them based on really high reproductive rates and therefore acceptable survival rates. We have a bias toward keeping the ones we have alive and functioning, and that means they have to survive high variability in their environmental conditions - illness, recession, childbirth, etc. Economically, that means the living wage has to be some number greater than subsistence - perhaps 130%-150% of subsistence.

Why doesn't that occur to economists? Because their nice middle class families had that kind of income (or better), and so they never had to face bankruptcy and homelessness due to a sick child. So they keep their health insurance and pay for their day care by drawing up charts that show that it would be terrible to raise the minimum wage - largely funded by conservative think tanks and state restaurant associations. No one has ever starved, after all, for arguing the divine right of kings.

Fortunately, the voters are a bit smarter, and occasionally they raise the minimum wage. And magically, the increase does not lead to vast lines of unemployed souls. Instead, a few million of the working poor get a 10% raise. A bit of progress, a bit at a time, over the objections or our hostess here.

Posted by Dollared | May 13, 2008 6:37 PM