In this photo taken, Aug. 1, 2013, demonstrators protesting what they say are low wages and improper treatment for fast-food workers march in downtown Seattle. In an interview with The Associated Press, Mayor Mike McGinn said he thought $15 was a “fair starting point” for the minimum wage discussion. McGinn challenger Ed Murray recently announced that he would push for a $15 minimum wage but planned to proceed with a phased-in approach. Washington already has the nation's highest state minimum wage at $9.19 an hour. (AP Photo/Elaine Thompson, File)Seattle has raised its minimum wage to $15. Many on both sides of the minimum wage debate are looking to this public experiment to validate their claims.

There is an article on Bloomberg, “Early Returns From Seattle’s Minimum-Wage Experiment, by Megan McArdle that inspired the writing of this piece. It is stupefying to learn that there actually are people who think that raising the minmum wage could possibly result in either high total wages or higher total employment. And maybe more importantly, who bothers to give them publicity?

Why does anyone need to study the minimum wage market in Seattle to see if anything changed? The study, which if any is needed, should look for the amount of decrease in employment for minimum job wage holders. Why would you even assume there would be a rise? 

One way to show that an increase in the minimum wage will decrease employment is to invoke a comparison between the laws of physics and the laws of economics. If you threw a boulder into a lake, physicists would say that the water level would rise. There is no need even to measure the water level. The laws of physics tell us this is the case. In the world of physics this is established law.  

The same holds true for economics. The “Law of Supply and Demand” has not been shown to be false. It is a fundamental law of economics just like matter and volume are to physics. It is taught in all fundamental courses in economics. For the proponents of an increased minimum wage to make the claim that an increase in the minimum wage would actually increase employment or total wages is a priori false. This is like claiming that the level of the lake would decrease if the boulder were thrown in. Before claiming that an increase in a mandated wage would increase either total employment or total wage would FIRST require them to prove that the Law of Supply and Demand is in fact false.  

However, let’s say for experiment sake you decide to measure the rise of the lake level. The wind, currents, waves and people getting in and out of the lake make accuracy of measurement difficult and the errors of measurement throw the results into doubt. But of course, really, there is no need. We measure the size of the boulder and physics equations tell us the amount of the rise in the lake. That’s because we believe the laws of physics. 

We don’t measure the lake. We measure the boulder. Why do we throw away the hard-won laws of economics? Because some disgruntled people demand that they be ignored? Who are they to demand this? 

Just as you can’t accurately measure the level of the lake, you can’t measure the entire employment market. The boulder” that you measure is a representative sample of minimum wage businesses. Then you extrapolate to the larger market. 

The reason for my use of the lake is to show that measurement in a fast changing environment is about impossible. The percentage in the amount of wage change compared to the market would have to be greater than percentage errors of the measurement of the entire market for there to be any statistical reliability. The article does not discuss the amount of employees involved or the amount of wages as compared to the total wages in the industry or in the city. Any findings would be buried in the measuring errors and make the study of no use.

The initial problem gets back to the idea that no one has suspended the law of supply and demand. For anyone to demand that the total market for minimum wage employment or the total wages has to be investigated to see if there has been a change is complete nonsense. These fundamental ideas are taught in Economics 101. No one has refuted them. If they have then send me the paper where they have done so. Send it from a peer reviewed journal where other well-trained economists have investigated the research. I’ll save you the trouble. It doesn’t exist. 

There are no physicists that would talk to anyone demanding that the lake needs to be measured. This is the same with any economist. Anyone demanding to measure the entire employment market is a fool and fools are not to be suffered. 

 

 

http://vandanson.com/wp-content/uploads/2016/08/Seattle-Minimum-wage.jpghttp://vandanson.com/wp-content/uploads/2016/08/Seattle-Minimum-wage-150x150.jpgVanDansonEconomicsFeaturedInstitutional EconomicsSeattle has raised its minimum wage to $15. Many on both sides of the minimum wage debate are looking to this public experiment to validate their claims. There is an article on Bloomberg, 'Early Returns From Seattle's Minimum-Wage Experiment, by Megan McArdle that inspired the writing of this piece. It is...Countering the Myths of Economics and Politics