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we talk about the minimum wage in the economy all the time on this program we
do interviews about the subject
and every once in awhile were asked to address debunk
or read but particular arguments videos that are online I was sent the video
by a libertarian Skyler Lehto
who does has a YouTube channel don't know much about him but I know he's a
self-described libertarian and he has a video where he talks about
why there is information missing about the discussion around the minimum wage
and I thought we would just go through and go point by point and really look at
where Skyler is wrong I assume Skyler is a perfectly nice guy
I assume Skyler is making every argument here in this video in good faith in
other words
he really believes what he is saying he is not
citing data simply because he thinks it will help his cause
in spite of being misleading I am giving Skyler the benefit of the doubt I don't
know if I should but because I don't know him I'm going to assume
any incorrect statements he makes are merely the result of a misunderstanding
or him not having all the information
let's start with point number one what I'm going to do in this videos make
several points to confront the Mets in a trust the reality behind the minimum
wage
point number one Elizabeth Warren's assertion about a twenty two
dollar-an-hour productivity just a minimum wage is highly misleading
first of all the fact that the minimum wage is falling behind in value does not
mean that the job themselves have been held back just as much
okay productivity his analysis about product idi
is actually completely accurate how are we measuring productivity
what is productivity really mean in terms of wage inflation deflation
overtime however this is really not a key argument the entire discussion
around product immediate more or less a straw man
when we look at policy on the minimum wage I've not actually heard
anyone serious suggests that the next step for wage in the United States
need to be matching 1968 level product give a deeper wage ratio
I've never called for that I've not talked to other economists were
suggesting that so for the purposes of argument about
a minimum wage that is either a living wage a keeps up with inflation
it's not really part of the argument let's go on to Part two
point number two the minimum wage is not a big stimulus to the economy
any proponents a higher minimum wage argue that giving workers more money to
spend will set off a virtuous cycle leading to more jobs and more economic
growth
the quantitative a fact for minimum wage increase on spending is actually quite
trivial
as Obama's former chief economist Christina Romer rights
the income increase from the higher minimum wage would be about $50 billion
dollars
even assuming out the higher income was redistributed from the wealthiest
families
the difference in spending behaviors likely to translate into only an
additional $10 to $20 billion in consumer purchases
that's not much to $15 trillion dollar economy now granted thousand
consideration of a nine dollar minimum wage proposal by even if a minimum wage
hike boosted total spending by as much as $40 billion dollars
now it still amount to less than one quarter of one percent of GDP
now we're getting into the meet a bit the argument is a higher minimum wage
will not create this cycle love spending
that would lead to economic prosperity or betterment of the economy
now if the argument is that it would lead
to some increase in spending but not
that much that argument can easily be debunked by saying well
if you don't increase the minimum wage by that much
the total amount of spending in the economy is not going to increase by that
much that is only logical that
actually is only an argument for increasing the minimum wage
even more but we need to go further than that what's not being considered
in these numbers are the multiplier for
the different types of government spending as we know
if you look at the multiplier effect above
consumer welfare low-income type programs like
food stamps unemployment insurance increases in the minimum wage
the money goes to people who need the money therefore it is not going to be
saved
is going to be spent and that money will have a multiplier
back the roughly between 1.25
and 1.75 times the initial spend
when we compare that to the multiplier effect that spending on things like tax
cuts for the rich
on cutting the corporate tax rate cutting taxes on dividends and capital
gains
all of those things have very low economic multiplier effect between point
25
and .5 maybe point 75 in some cases so therefore
the numbers which are arguably not high enough
simply because they match low
spending increases on these increased minimum wages
are not even taking into consideration the multiplier
fact and the amount of times that that money will cycle through the economy
if you give a thousand dollars to someone who is rich
they're going to save roughly two-thirds to three-quarters of that money by
recent estimates and it even higher according to some estimates
if you give that thousand dollars to someone who earns the minimum wage
or who gets it is food stamp benefits or unemployment
almost all that money will be spent and then much it will multiply because it
goes
to local stores and then to their suppliers
et cetera one more thing on this cycle love spending that allegedly doesn't
happen when you increase the minimum wage
olive Skyler's data all the data in the video is based on pre 2010
saving and spending proportions for those who are richer and for those who
are poor
remember that in the last three to four years
those who are rich have been saving at higher rates than ever before
and that is also something when you do the comparison %uh
if you shift money from rich to minimum wage
how much more will they be spending that
that ratio has increased since these numbers
were were originally sampled and that would actually
even further exacerbate that cycle spending okay let's look at the third
argument
point number three Australia's minimum wage is not sixteen dollars an hour in
US terms
people who make this claim are not doing the currency conversion properly
the exchange rate between two currencies in the foreign exchange market is not
necessarily reflect with the currencies are valued at domestically
the nominal change rate is often skewed from the real exchange rate due to
various factors
such as taxes on imports and exports or international financial flows that paper
one currency over another
this is again another distraction red herring straw man argument I'm assuming
in good faith that Skyler leido
thinks that what the minimum wage actually is in other countries has some
kind of bearing on what we should do
here in this country that's why he's attempting to adjust to the minimum
wages in other countries to really reflect
not only the currency exchange but also the trade policy
%uh the country's relative to the US that's fine but
particularly if you're a libertarian a Skyler claims to be
why do you care what the minimum wages in another country were concerned with
the united states were concerned with what the United States should do
it would be weird to look at other countries
as evidence for what the US should or shouldn't do
if you as a libertarian in part are arguing that we should be concerned with
ourselves and nobody else
the fourth argument this is a very important one point number for the
minimum wage does little to reduce poverty
supporters have a minimum wage hike usually take it as an article of faith
that our
actuator reduction in poverty by raising incomes for the working poor
yet the vast majority of empirical evidence suggests otherwise
most studies such as new mark in washer 1997
veteran gallo in 2001 sabe in Burghausen 2010
inside the annual summit 2012 find that minimum wage hikes have no significant
fact orchard easing poverty
okayed this is this is a case study in what we call weasel language
I'm not accusing Skyler deliberately doing this but he's doing something Fox
News often does
listen to the terms uses the vast majority
other empirical evidence and then he goes on to say most studies
like these and then he talks about for
specific studies this is with the language we should identify and
immediately
if you actually research the net as studies and the individual studies on
the question of whether an
increase to the minimum wage decreases poverty in other words is there a
negative relationship
as you increase the minimum wage poverty goes down
actually more studies say yes that relationship exists than those that say
no there is a highly publicized study
from actually someone who it was or may still be in the University of
Massachusetts economics department were actually hold an undergraduate degree
an economist whose last name is Dubay or do be I'm not exactly sure how he
pronounces it
this study shows their is absolutely no negative employment affect
remain increase to the minimum wage meaning if you increase the minimum wage
you do not decrease employment which is one argument sometimes made by the
libertarian right
but poverty does decrease
as the minimum wage goes up specifically raising the minimum wage
10 percent for example from $7.25
too close to eight dollars adding seventy two and a half cents an hour to
that
would reduce the number of people living in poverty
by 2.4 percent
if you have an economics background the minimum wage
according to these numbers has an elasticity
above minus point 24 when it comes to poverty
reduction now interestingly enough up are Skyler
sided new marquee mentions Numark several times in this video who is
out and out against increases to the minimum wage however
if you look at a 2011 paper by Numark cited by Schuyler here
the opponent minimum wage David Neumark
actually says you have to back the numbers out he doesn't say explicitly I
wonder why
that and increase in 10 percent to the minimum wage
would reduce poverty point by by 2.9 percent in other words
Numark who is against increasing the minimum wage
fines almost the same elasticity minus point 29
for 20 12 44-year-old family heads
as does a the U-mass economist Dubay
new market doesn't mention this but the data is there so
even Numark agrees that the minimum wage
increase does reduce poverty and what looked a little bit more broadly because
focusing on one study or two studies is not really effective if you look at 12
different studies
starting in the nineteen nineties in going through the 2000's
above the 54 elasticity elasticities that are observable
in the papers 48 have them are negative meaning
minimum wage up poverty down forty
8 out of 54 so this is an example
love a statement that is just wrong I don't know if Skyler didn't look at the
full data
if he was using weasel language unknowingly
I am again assuming in good faith he was making the best and most
accurate argument he thought existed he just happens to be completely
wrong about it here's another thing to look at at around six minutes into the
video
a slide comes up which makes two claims it says that
higher food prices are the result of an increase in the minimum wage
and that a reduction in work hours in other words a negative affect
unemployment are also part love
the increase in the minimum wage to make matters worse raising the minimum wage
comes with adverse side effects
among these include higher food prices and a decrease in employment
opportunities which brings me to my next point
first the wall studies have shown no reduction in positions are work hours in
any broad sense and then we can also talk about
the higher food prices I wanna call your attention to San Francisco which was
very very early on
I a an early adopter up increasing the minimum wage well beyond
the federal minimum tamraz's to raise the minimum wage to $10.74
and during that the observable period between 2004 and 2011
private employment grew 5.6 percent
in other counties in nearby counties private employment dropped
4.4 percent significant difference
higher employment growth in the area with the
significantly higher minimum wage further
the issuer food prices going up
and this really hurting in in particularly those who are young
minimum-wage workers in the food industry we're talking about
fast-food essentially here among food service workers
those described here on-screen employment grew
seventeen-point seven-percent
during this time period in San Francisco with the higher minimum wage
faster than anywhere else in the area and
yes there was a small increase in food prices
up 2.8 percent that's true Skyler got that right
however it ignores all of the other benefits that
were seen in San Francisco and the Bay Area
that far outweigh this would increase
that took place okay let's look at the next argument point number five
the minimum wage worsens unemployment for the low-skilled
but a few studies have purported to find a zero or positive effect of the minimum
wage
on employment so this is basically an argument we've already had it been
rehashed slightly differently saying that
there is a negative employment effects associated with an increase in the
minimum wage we've already discussed this at Newmark who is very anti minimum
wage
says that the studies that show a positive correlation are flawed
those who have conducted the studies that Numark criticizes
say that new markets work is the work at that is flawed
this is a complex topic the only conclusion we can come to you by looking
at the studies
cited by Schuyler and the studies that those
who are criticized by Numark are critical
love is that there are many moving pieces here there are many factors to
consider
it goes well beyond the scope of this video but what is clear
is that to say flat-out there is a negative employment effects from an
increase in the minimum wage is wrong and again i would point you back
the San Francisco example to see how it is just absolutely
not true