A great piece - Doomsayers Keep Getting It Wrong on Higher
Minimum Wages by Barry Ritholtz:
“Blame a fundamental
misunderstanding of minimum-wage economics and, of course, good old-fashioned
political bias. There have been repeated attempts to misread the data and
conclude it has hurt employment, but so far none of this research has withstood
scrutiny….
Why did so many
economists get this wrong? They looked at the micro and ignored the macro. In
the basic model of supply and demand, an increase in the cost of something
reduces demand. This may be true in an isolated laboratory setting. But when
minimum wages went up in the real world, it affected not just the parties to
that transaction, but the regional economy. By considering only the
relationship between employer and employee, the dismal-science set was focusing
too narrowly. The critics failed to consider the impact of lower-wage employees
earning more money; these folks typically spends almost everything they earn,
which means that when they’re paid more it goes right back into the local
economy.”
Related:
Does a minimum wage increase lead to a fall in employment?
Survey of Economists – Impact of Minimum Wage Hike
An interesting take on the minimum wage debate
http://www.pbs.org/newshour/making-sense/column-claim-wages-go-jobs-will-go-isnt-theory-scam/
http://www.pbs.org/newshour/making-sense/column-claim-wages-go-jobs-will-go-isnt-theory-scam/