by Levi Russell
Adam Millsap at the Mercatus Center has a great short piece on the effect the $15 minimum wage would have on labor markets. Though Millsap criticizes the $15 minimum wage, he does it in a very different way than any I've seen.
He takes as a starting point Arindrajit Dube's conjecture that the minimum wage should be set at 50% of the median wage. It's important to note that Dube is actually a proponent of the $15 minimum wage but believes that it could create problems, especially if the ratio is above 80%.
Millsap uses data from Washington D.C. and Minneapolis, MN to calculate the (projected) ratio of the $15 minimum wage to half the median wage in each of these cities. Millsap shows that in Minneapolis, the $15 minimum wage is projected to be 86% of the median wage for people 16 years of age and older. In D.C., the ratio is only 53%.
So, given Dube's preference for a minimum wage set at 50% of the median wage and warning about a minimum wage over 80% of the median, the $15 minimum is potentially very problematic for cities like Minneapolis. I imagine that it would be far worse for smaller rural communities.
Showing posts with label minimum wage. Show all posts
Showing posts with label minimum wage. Show all posts
Monday, July 11, 2016
Monday, April 4, 2016
Richard Vedder on the Transformation of Economics
Richard Vedder, who is well-known for his work on the minimum wage, wrote a short op-ed in the Wall Street Journal about a month ago that I thought was pretty interesting. Vedder makes 5 observations about changes to economics over his career. Below I'll share three of them but the whole piece is worth reading.
Vedder starts off discussing ideological creep in the profession:
Vedder starts off discussing ideological creep in the profession:
Economics as ideology in camouflage. Economists who achieve fame for genuine intellectual insights, like Paul Krugman, sometimes then morph into ideologues—predominantly although not exclusively on the left. The leftish domination of American academia is partly explained by economics. Federal student-loan programs, state appropriations, special tax preferences and federal research-overhead funds have underwritten academic prosperity, even at so-called private schools. The leftish agenda today is one of big government; academics are rent-seekers who generally don’t bite the hand that feeds them. The problem is even worse in other “social sciences.”On a related note, he describes the rise of policy think tanks:
The rise of the nonuniversity research centers. A reaction to the liberal ideological orientation and inefficiencies of colleges has spawned this phenomenon. When I was attending college around 1960, the Brookings Institution, National Bureau of Economic Research and the Hoover Institution were among relatively few major independent think tanks. Today there are many, especially ones funded on the right to provide intellectual diversity, including nationally or regionally oriented centers such as the American Enterprise Institute, Cato Institute, Heritage Foundation, Heartland Institute and the Independent Institute, as well as dozens of state-policy think tanks. Universities have lost market share in social-science research.Vedder then turns to his own work on labor economics:
A major cause of America’s economic malaise: the government’s war on work. My own research with Lowell Gallaway has stressed the importance of labor costs in explaining output and employment fluctuations. If the price of something rises, people buy less of it—including labor. Thus governmental interferences such as minimum-wage laws lower the quantity of labor demanded, while high taxes on labor reduces labor supply, as do public payments to people for not working.
Wednesday, March 2, 2016
Off-Topic - The Stagnation of the American Middle Class
Don Boudreaux (GMU Econ) recently gave a talk at the Economics Club meeting at my alma mater.
Since Boudreaux is such a dynamic speaker and so well informed on this topic, I thought I'd share it with FH readers even though it isn't one of the typical topics we cover.
I'd suggest starting at 3:10 and adjusting the speed (using the gear button at the bottom right) to 1.25 since it's a rather long talk.
Since Boudreaux is such a dynamic speaker and so well informed on this topic, I thought I'd share it with FH readers even though it isn't one of the typical topics we cover.
I'd suggest starting at 3:10 and adjusting the speed (using the gear button at the bottom right) to 1.25 since it's a rather long talk.
Wednesday, November 25, 2015
Questioning the Credibility Revolution
If you follow the econonomics blogosphere, you've likely heard a lot about the "credibility revolution." The "credbility" part has to do with the supposed superiority of randomized control trials and quasi-experimental design over traditional models. The "revolution" part has to do with the suggestion that these models should replace, to some degree, theory in determining causality. One popular book, Angrist & Pischke's "Mostly Harmless Econometrics," discusses these methods quite clearly. I've used it a few times as a reference and found it quite helpful.
Of course, this revolution is very important for agricultural economists. We spend a lot of time using empirical methods to examine microeconomic problems. An open mind and critical eye are, I think, important for evaluating the usefulness of these newly-popular methods.
As the title suggests, I'm skeptical of the "revolution" part and somewhat skeptical of the "credibility" part. Experimental methods are nice as far as they go, but the use of experiments (broadly speaking) is more problematic in the social sciences than in the natural sciences. This is especially important if we are going to rely on the data to determine causality for us, rather than relying on sound theory. Further, some people seem to think these methods are the only way to do empirical microeconomics. In this post I'll draw from a few sources to make the arguments that 1) there are some important limitations to these quasi-experimental methods, 2) we shouldn't replace sound theory with data analysis, and 3) the "old" empirical models are just as useful as they always have been.
Of course, this revolution is very important for agricultural economists. We spend a lot of time using empirical methods to examine microeconomic problems. An open mind and critical eye are, I think, important for evaluating the usefulness of these newly-popular methods.
As the title suggests, I'm skeptical of the "revolution" part and somewhat skeptical of the "credibility" part. Experimental methods are nice as far as they go, but the use of experiments (broadly speaking) is more problematic in the social sciences than in the natural sciences. This is especially important if we are going to rely on the data to determine causality for us, rather than relying on sound theory. Further, some people seem to think these methods are the only way to do empirical microeconomics. In this post I'll draw from a few sources to make the arguments that 1) there are some important limitations to these quasi-experimental methods, 2) we shouldn't replace sound theory with data analysis, and 3) the "old" empirical models are just as useful as they always have been.
Thursday, October 8, 2015
Tradeoffs Between Social Policy and Growth
Mark Thoma's recent Fiscal Times column seems to me to be heavy on politics and light on economic analysis. He sets out to convince the reader that there is no tradeoff between social insurance provided by the federal government and economic growth, but I think there are good reasons to doubt this notion.
Sunday, August 23, 2015
Does Lower Unemployment Imply a Stronger Economy?
With all the buzz about a $15 minimum wage, or a $10.10 minimum wage, there's been a lot of discussion about the effects of minimum wage on the labor market. While some of the empirical work on the subject says the minimum wage doesn't affect employment, most of it says otherwise.
Another popular topic these days is Federal Reserve policy; specifically how and when the Fed will raise interest rates. A major concern is that raising rates "too soon" will cause unemployment to stop falling or start rising again. The Fed has cited improvements in labor markets as a sign that it could start raising interest rates soon. Looking only at the unemployment rate, the idea that labor markets are improving makes sense.
In this post I'll discuss unemployment and labor force participation rate data since the recession, then give a numerical example that shows that even if the unemployment rate is falling, the labor market and the economy overall may not be improving as much as we'd like to think.
Another popular topic these days is Federal Reserve policy; specifically how and when the Fed will raise interest rates. A major concern is that raising rates "too soon" will cause unemployment to stop falling or start rising again. The Fed has cited improvements in labor markets as a sign that it could start raising interest rates soon. Looking only at the unemployment rate, the idea that labor markets are improving makes sense.
In this post I'll discuss unemployment and labor force participation rate data since the recession, then give a numerical example that shows that even if the unemployment rate is falling, the labor market and the economy overall may not be improving as much as we'd like to think.
Wednesday, August 5, 2015
Acton Institute's Milton Friedman Quotes
July 31st would have been Milton Friedman's 103rd birthday. Several blogs featured tributes to Friedman, but I really enjoyed the Acton Institute's six quotes by Friedman on economics and freedom.
Friedman was a fantastic communicator of sound economics and the benefits of free markets to the public. His interviews, debates, and televised discussions with other thinkers are still relevant informative decades later.
I've reproduced the 6 quotes below:
The conditions for freedom: “History only suggests that capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition.”
On shortages: “We economists don’t know much, but we do know how to create a shortage. If you want to create a shortage of tomatoes, for example, just pass a law that retailers can’t sell tomatoes for more than two cents per pound. Instantly you’ll have a tomato shortage.”
On private property: “Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.”
On minimum wage laws: “The high rate of unemployment among teenagers, and especially black teenagers, is both a scandal and a serious source of social unrest. Yet it is largely a result of minimum wage laws. We regard the minimum wage law as one of the most, if not the most, anti-black laws on the statute books.”
On freedom and fairness: “’Fair’ is in the eye of the beholder; free is the verdict of the market. The word ‘free’ is used three times in the Declaration of Independence and once in the First Amendment to the Constitution, along with ‘freedom.’ The word ‘fair’ is not used in either of our founding documents.”
On free markets: “What most people really object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really lack of belief in freedom itself.”
Friedman was a fantastic communicator of sound economics and the benefits of free markets to the public. His interviews, debates, and televised discussions with other thinkers are still relevant informative decades later.
I've reproduced the 6 quotes below:
The conditions for freedom: “History only suggests that capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition.”
On shortages: “We economists don’t know much, but we do know how to create a shortage. If you want to create a shortage of tomatoes, for example, just pass a law that retailers can’t sell tomatoes for more than two cents per pound. Instantly you’ll have a tomato shortage.”
On private property: “Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.”
On minimum wage laws: “The high rate of unemployment among teenagers, and especially black teenagers, is both a scandal and a serious source of social unrest. Yet it is largely a result of minimum wage laws. We regard the minimum wage law as one of the most, if not the most, anti-black laws on the statute books.”
On freedom and fairness: “’Fair’ is in the eye of the beholder; free is the verdict of the market. The word ‘free’ is used three times in the Declaration of Independence and once in the First Amendment to the Constitution, along with ‘freedom.’ The word ‘fair’ is not used in either of our founding documents.”
On free markets: “What most people really object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really lack of belief in freedom itself.”
Thursday, June 25, 2015
Potpourri
I haven't done one of these in awhile, so I thought I'd put some stuff I've read recently that caught my eye.
Jayson Lusk recently blogged about my article currently in review at the Journal of Regulatory Economics on the effects of USDA and EPA regulation on ag productivity.
Don Boudreaux, spurred by a back and forth between Russ Roberts and Paul Krugman, has a couple of great posts (here and here) on economics as a science and its ability to generate falsifiable predictions. Very thought provoking.
Marc Bellemare documents the top 5 journals in ag economics based on recently-calculated impact factors. The ordering is interesting, but it's important to remember that there are many measures of journal quality. This paper, sent to me today by a colleague, puts ag and applied economics journals into groups (A+, A, B, C, D). All of this is good information which, as an assistant professor, I find very useful.
Matt Bogard has some interesting thoughts on the abilities required for working as a data scientist outside the academic world.
Jayson Lusk recently blogged about my article currently in review at the Journal of Regulatory Economics on the effects of USDA and EPA regulation on ag productivity.
Don Boudreaux, spurred by a back and forth between Russ Roberts and Paul Krugman, has a couple of great posts (here and here) on economics as a science and its ability to generate falsifiable predictions. Very thought provoking.
Marc Bellemare documents the top 5 journals in ag economics based on recently-calculated impact factors. The ordering is interesting, but it's important to remember that there are many measures of journal quality. This paper, sent to me today by a colleague, puts ag and applied economics journals into groups (A+, A, B, C, D). All of this is good information which, as an assistant professor, I find very useful.
Matt Bogard has some interesting thoughts on the abilities required for working as a data scientist outside the academic world.
Monday, May 18, 2015
Potpourri
I haven't done one of these in awhile, so I thought it was time to share a handful of links to some great stuff I've read recently.
Richard Ebeling at The Citadel offers a fantastic take down of the Keynesian view of recessions for the layman. It's certainly worth a read for the non-specialist in macro.
The always-insightful Don Boudreaux recently discussed the role of theory in measuring the effects of the minimum wage. He also provided a short note on the role of institutions in economic analysis in response to a reader's question and an interesting take on the economic way of thinking. Very good stuff.
Jayson Lusk recently weighed in on the fight between scientific integrity and consumer sovereignty in the food world. He also provided a short discussion of an article on crop insurance subsidies and risk taking.
John Tamny reviews a recent book on the myriad ways gov't policy has and will negatively affect the millennial generation.
Richard Ebeling at The Citadel offers a fantastic take down of the Keynesian view of recessions for the layman. It's certainly worth a read for the non-specialist in macro.
The always-insightful Don Boudreaux recently discussed the role of theory in measuring the effects of the minimum wage. He also provided a short note on the role of institutions in economic analysis in response to a reader's question and an interesting take on the economic way of thinking. Very good stuff.
Jayson Lusk recently weighed in on the fight between scientific integrity and consumer sovereignty in the food world. He also provided a short discussion of an article on crop insurance subsidies and risk taking.
John Tamny reviews a recent book on the myriad ways gov't policy has and will negatively affect the millennial generation.
Tuesday, April 14, 2015
Potpourri
Jayson Lusk provides an update and some thoughts on meat prices. Beef prices are predicted to stay relatively high due to biological factors affecting supply.
Here's an interesting comparison of unemployment rates for European countries with and without the minimum wage. The standard supply/demand story apparently applies in the case of wage controls.
Matt Bogard productively and convincingly tackles the inequality puzzle. Real wealth consists in the goods/services available to us, not our dollar incomes.
Don Boudreaux dissects the "You didn't build that!" meme.
Here's an interesting comparison of unemployment rates for European countries with and without the minimum wage. The standard supply/demand story apparently applies in the case of wage controls.
Matt Bogard productively and convincingly tackles the inequality puzzle. Real wealth consists in the goods/services available to us, not our dollar incomes.
Don Boudreaux dissects the "You didn't build that!" meme.
Tuesday, March 10, 2015
Potpourri
Don Boudreaux discusses the issue of monopsony power and the minimum wage in an interesting fashion.
Prompted by criticism from local food advocates, Jayson Lusk clarifies his position. It continually baffles me that so many people equate opposition to subsidies for or outright government provision of some good or service with opposition to that good or service itself.
Paul Krugman's most recent comments on the minimum wage have sparked several productive discussions in the blogosphere. One post in particular stands out to me. In it, Scott Sumner uses this episode to illustrate the difference between economists who take basic theory seriously when it comes to practical matters of policy and those who don't.
The EPA continues to generate policy uncertainty in the corn markets by failing to set volume obligations. On top of this, repeal of the Renewable Fuels Standard continues to garner support on both sides of the aisle. What exactly this potential repeal would mean for corn producers, I don't know. My initial thought would be that corn prices would fall, causing losses in the short run, but that input prices and planted acres would adjust (over time) and the policy-change-induced losses would cease. Additionally, we could expect lower fuel costs and slightly lower food prices if the RFS were repealed.
Prompted by criticism from local food advocates, Jayson Lusk clarifies his position. It continually baffles me that so many people equate opposition to subsidies for or outright government provision of some good or service with opposition to that good or service itself.
Paul Krugman's most recent comments on the minimum wage have sparked several productive discussions in the blogosphere. One post in particular stands out to me. In it, Scott Sumner uses this episode to illustrate the difference between economists who take basic theory seriously when it comes to practical matters of policy and those who don't.
The EPA continues to generate policy uncertainty in the corn markets by failing to set volume obligations. On top of this, repeal of the Renewable Fuels Standard continues to garner support on both sides of the aisle. What exactly this potential repeal would mean for corn producers, I don't know. My initial thought would be that corn prices would fall, causing losses in the short run, but that input prices and planted acres would adjust (over time) and the policy-change-induced losses would cease. Additionally, we could expect lower fuel costs and slightly lower food prices if the RFS were repealed.
Saturday, January 17, 2015
Potpourri
Jayson Lusk added some interesting questions to the January 2015 Food Demand Survey. The responses are pure gold.
Elise Hilton discusses new technology for reducing the amount of trash that ends up in landfills. Markets generate conservation behavior when the benefit of reusing or recycling a given resource is greater than the cost. Entrepreneurs are agents of change who create these opportunities.
The Cato Institute Blog has a brief roundup of posts around the blogosphere regarding the "common sense" of a carbon tax.
Jeffrey Dorfman at UGA has some suggestions for budget cuts for the new bicameral Republican majority in congress.
Brent Gloy and David Widmar of Purdue discuss 2015 economic issues related to producers and ag bankers.
Don Boudreaux explains why supposed generous behavior by established firms regarding the minimum wage is likely to limit competition.
Matthew Turner of Brown University discusses the economics of land use regulations in an article at PERC.
Bob Murphy's insightful analysis of the Fed's role in recent oil price moves.
Don Boudreaux links to an interesting graph of world-wide incomes in 1820, 1970, and 2000. This graph shows that increases in income and in income equality can happen simultaneously.
Elise Hilton discusses new technology for reducing the amount of trash that ends up in landfills. Markets generate conservation behavior when the benefit of reusing or recycling a given resource is greater than the cost. Entrepreneurs are agents of change who create these opportunities.
The Cato Institute Blog has a brief roundup of posts around the blogosphere regarding the "common sense" of a carbon tax.
Jeffrey Dorfman at UGA has some suggestions for budget cuts for the new bicameral Republican majority in congress.
Brent Gloy and David Widmar of Purdue discuss 2015 economic issues related to producers and ag bankers.
Don Boudreaux explains why supposed generous behavior by established firms regarding the minimum wage is likely to limit competition.
Matthew Turner of Brown University discusses the economics of land use regulations in an article at PERC.
Bob Murphy's insightful analysis of the Fed's role in recent oil price moves.
Don Boudreaux links to an interesting graph of world-wide incomes in 1820, 1970, and 2000. This graph shows that increases in income and in income equality can happen simultaneously.
Wednesday, January 7, 2015
Is the Minimum Wage Helpful?
Though on-farm employment has fallen dramatically through the decades as technology has made us more efficient, the agricultural industry as a whole is still dependent on blue-collar work to build equipment, manufacture inputs, and harvest manual-labor-intensive crops. This reliance on blue-collar work implies that the ag industry is likely greatly affected by policies directed at affecting labor markets.
Don Boudreaux has had a string of posts recently on his blog regarding the effects of the minimum wage. Additionally, last February Bob Murphy wrote a short article reviewing the most recent academic literature on the topic. Though the minimum wage is very popular, professional economists are (typically) more careful about what they say about the effects of the minimum wage on the lowest-skilled workers in the economy.
Don Boudreaux has had a string of posts recently on his blog regarding the effects of the minimum wage. Additionally, last February Bob Murphy wrote a short article reviewing the most recent academic literature on the topic. Though the minimum wage is very popular, professional economists are (typically) more careful about what they say about the effects of the minimum wage on the lowest-skilled workers in the economy.
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