2013-03-15

The Minimum Wage Issue Wears Thin


Robert Murphy responds to Daniel Kuehn, providing us with more empirical evidence of disproportionately high youth unemployment and employment volatility, and suggesting that "proponents of a minimum wage increase (or at least, those saying it won’t be harmful) need to do more than simply say, 'This is nothing new.'"

Kuehn writes multiple replies, as he is often wont to do. In the second reply, he asks:
Surely there are more explanations for persistent youth unemployment than just the minimum wage. Are you saying that because you have one potential explanation the ball is in their court?
There are only two reasons youth aren't working:
  1. They can't get a job; 
  2. They don't want a job. 
Seeing as how the youth in group (2) aren't part of the employment statistics, that means we are only really talking about group (1), people who can't get a job.

Someone might not be able to get a job for a variety of reasons: she doesn't have reliable transportation, she can't be bonded, she has a history of delinquency, she has white supremacist tattoos on her face, she is mentally ill, there is insufficient "aggregate demand" (whatever that means), and so on. Most of those things aren't policy questions.

But a few of them are. I mentioned insufficient aggregate demand to be fair to Keynesians, even though I'm not a Keynesian. Keep in mind, however, that stimulating aggregate demand need not have any effect on wages at all, and certainly never involves the minimum wage. (Go ahead, ask Paul Krugman if raising the minimum wage is an effective way to stimulate aggregate demand.) So, let's take that one out of the picture.

What's left to consider?

There are a series of policies that keep youth unemployment higher than it needs to be: Minimum wage laws, child labor laws, payroll taxes, union shops, "forklift operator licenses" (that one kept me out of a few jobs when I was a youth), legal curfews, mandatory benefits provisions, and so on. These are institutional barriers put in place to prevent youth from working as much and as many hours as they might otherwise choose to work.

The fact is, there are only so many considerations that are under our control. We know what those considerations are, and we have the means to address them immediately.

So why do we not take steps to alleviate the problem?