The article does not give a single concluding answer to the question: Correlation between changes in minimum wage and unemployment and productivity.
It does bring about an interesting fact; minimum wage effects only about 12.7% people from poor households. Most people earning minimum wage are young adults from middle income families who do part time jobs as a side activity.
It is also interesting that U.K. calls minimum wage "living wage." I also wanted to read about the general price index and inflation and see if those factor in deciding minimum wage.
Here is the link: http://www.economist.com/blogs/buttonwood/2016/04/minimum-wages
I agree I think you have made some good points. I would be curious to learn more about the origin of the UK referring to it as "living wage". I wonder if it is viewed in the same way the term would be portrayed by Bernie Sanders, or if it has more alignment to when that wage level was earned by a higher proportion of people. Such as when the "living wage" was first enacted. I also find it interesting that only 12.7% of people are effected by it. This statistic leads me to question why the minimum wage is such a hot topic if it isn't affecting many people. I would be interested in learning about the lower middle to middle class wages and examining their effect on the economy. Has anyone seen studies like that out there?
ReplyDeleteThis article was very eye-opening for me. I did not realize that minimum wage only effects 12.7% of people from poor households. This fact can shed some light on California and NYC's choice of a high raise in minimum wage. Maybe its effect on unemployment will not be as significant as I thought. I disagree on the idea of calling minimum wage, "living wage". For some reason, too many people, in the U.S. as well, think that minimum wage is something that they can solely live off of. Even in the past, minimum wage was not set forth as an avenue for a quality standard of living, it was simply a backbone to aide people. What I am trying to say is that minimum wage should only be there for very young workers and people starting off in their respective careers. It should only be there in order to help out in tough situations, not a complete support system. People need to be more motivated and willing/able to increase their personal capital so that minimum wage is not an issue and remains at a consistent, reasonable rate. I do not believe in calling minimum wage "living wage" because it makes people think they can completely rely on it.
ReplyDeleteThis can cause 2 effects that will happen almost right away.
ReplyDeleteOne is that increase the unemployment in the economy due to the strong trade union powers while the owners of the company will try to survive on their out put prices
The second effect is this minimum wage will lead to reduce the voluntary unemployment in the economy because it reduce the difference between the minimum wage and unemployment benefits
After reading this article, it seems the minimum wage is a useful go-to for politicians in order to increase their appeal to the public. Without serious macroeconomic considerations about the effects of a minimum wage, an increase or decrease in the minimum wage may not have the effects of helping a majority of poor-income families and individuals. The article made it clear that benefits from minimum wage are not clear in terms of cause and effects, so other factors of the economic situation are clearly in play, such as the question of whether productivity is boosted by the a wage increase because they are more motivated by the increase or because the firm was forced to become more efficient because of the higher wage. Because of facts like these, policies from the government that solely focus on minimum wage increases should be looked at with skepticism and more comprehensive macroeconomic polcies should be urged for.
ReplyDeleteThis is an interesting article. Even though we talked about in class that increasing minimal wage actually cannot increase most people's income because we said most people take wages higher than minimal income, but it's still hard to believe that the most mentioned method only influences about 12% of people. I feel that even though increasing minimal wage only influences a limited amount of people, however, increasing minimal wage might be a good way to increase expected consumption and also brings a kind of positive expectation. Positive expectation, to some extend, can also influence the economic potentially.
ReplyDeletedo you think this analysis ties into efficiency wages in a meaningful way?
ReplyDeleteIn class, we talked about that the increase in minimum wages would not affect most people's wages, because their wages are above the minimum wages. Only employees who have low skill or no working experiences might receive minimum wages. Increasing minimum wage, however, would increase the unemployment rate slightly. Recently, I saw a lot of articles about minimum wage in blogger, it implies that minimum wage is becoming hot and I am curious what happened.
ReplyDelete