The fight over the minimum wage continues. AP Photo/John Raoux
For decades it was conventional wisdom in the field of economics that a higher minimum wage results in fewer jobs.
In part, that’s because it’s based on the law of supply and demand, one of the most well-known ideas in economics. Despite it being called a “law,” it’s actually two theories that suggest if the price of something goes up – wages, for example – demand will fall – in this case, for workers. Meanwhile, their supply will rise. Thus an introduction of a high minimum wage would cause the supply of labor to exceed demand, resulting in unemployment.
But this is just a theory with many built-in assumptions.
Then, in 1994, David Card, an economist at the University of California, Berkeley, and one of this year’s Nobel winners, and the late Alan Krueger used a natural experiment to show that, in the real world, this doesn’t actually happen. In 1992, New Jersey increased its minimum wage while neighboring Pennsylvania did not. Yet there was little change in employment.
When I discuss their work in my economics classes, however, I don’t portray it as an example of economists providing a definitive answer to the question of whether minimum wage hikes kill jobs. Instead, I challenge my students to think about all the ways one could answer this question, which clearly cannot be settled based on our beliefs. But rather, the answer requires data – which in economics, can be hard to come by.
Using models to study behavior
Economics studies the production, distribution and consumption of goods and services. And so, like other social sciences, economics is fundamentally interested in human behavior.
But humans behave in a wide variety of often hard-to-predict ways, with countless complications. As a result, economists rely on abstraction and theory to create models in hopes of representing and explaining the complex world that they are studying. This emphasis on complicated mathematical models, theory and abstraction has made economics a lot less accessible to the general public than other social sciences, such as psychology or sociology.
Economists also use these models to answer important questions, such as “Does a minimum wage cause unemployment?” In fact, this is one of the most studied questions in all of economics since at least 1912, when Massachusetts became the first state to create a minimum wage. The federal wage floor came in 1938 with the passage of the Fair Labor Standards Act.
And it’s been controversial ever since. Proponents argue that a higher minimum wage helps create jobs, grow the economy, fight poverty and reduce wage inequality.
Critics stress that minimum wages cause unemployment, hurt the economy and actually harm the low-income people that were supposed to be helped.
A tale of two theories
Most students in my introductory microeconomics class can easily show, using the standard supply and demand model, that an increase in the minimum wage above the level that the market sets on its own should drive up unemployment. In fact, this is one of the most commonly used examples in introductory economics textbooks.
However, this result assumes a perfectly competitive labor market in which workers and employers are abundant and employees can change jobs with ease. This is rarely the case in the real world, where a few companies frequently dominate in what are known as monopsonies.
And so others theorized that because monopsonistic companies had the power to set wages artificially low, a higher minimum wage could, perhaps counterintuitively, prompt companies to hire more workers in order to recover some of their lost profitability as a result of the increased labor costs.
How can economists tell which of these two theories may be right? They need data.
David Card won the Nobel Prize for his work on the minimum wage.
AP Photo/Noah Berger
Data trumps theory
Studying the real world is difficult, and it’s constantly changing, so it is not easy to obtain all the relevant evidence.
Unlike in medicine or other sciences, economists cannot conduct rigidly controlled clinical trials, a method vacinologists used to test the efficacy of COVID-19 vaccines. Due to financial, ethical or practical constraints, we cannot easily split people into treatment or control groups – as is common in psychology. And we cannot randomly assign a higher minimum wage to some and not others and observe what will happen, which is how a biomedical scientist might study the impact of various treatments on human health.
And in studying the minimum wage, we cannot simply look at past times when it was increased and check what happened to unemployment a few weeks or months later. There are many other factors that affect the labor market, such as outsourcing and immigration, and it’s virtually impossible to isolate and pin down one factor such as a minimum wage hike as the cause.
This is where the pioneering work of natural experiments like the ones Card and Krueger have used over the years to study the effects of raising the minimum wage and other policy changes comes in. It began with their 1994 paper, but they’ve replicated the findings with other studies that have deepened the amount of data that shows the original theory about the minimum wage causing job losses is likely wrong.
Their approach isn’t without flaws – mostly technical ones –- and in fact economists still don’t have a clear answer to the question about the minimum wage that I posed earlier in this article. But because of Card, Krueger and their research, the debate over the minimum wage has gotten a lot less theoretical and much more empirical.
Only by studying how humans actually behave can economics hope to make meaningful predictions about how a policy change like increasing the minimum wage is likely to affect the behavior of the economy and the people living in it.
Veronika Dolar ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d’une organisation qui pourrait tirer profit de cet article, et n’a déclaré aucune autre affiliation que son organisme de recherche.
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Creating an XML Sitemap Index is a terrific way to draw in search
engine web traffic and also enhance your ranking.
For best results, the XML sitemap must be structured as a tree.
For more info, see a sample XML Sitemap.
XML Sitemap Index documents have certain formatting rules.
They have to be in a message data with an optimum dimension of 50MB as well as need to
have no header or footer info. The file can be
compressed with gzip, which will certainly lower data
transfer. Utilizing this approach, the XML Sitemap Index will be
noticeable on search engines. When you produce an indexed file, make certain to include the
xhtml: link tag and the root directory.
XML Sitemaps are totally free as well as easy to produce.
All that is needed is a text data, which have to have a
name, a title, as well as a summary. It must have no headers or footers and must be in UTF-8 encoding.
It must be a single page and also has to be in the root directory of your web site.
It is also vital to keep in mind that all URLs in an XML Sitemap
must be from the exact same host.
You can easily develop XML Sitemap Index data.
To include an XML Sitemap to your site, go to the Google Look Console and add an URL to your sitemap.
A sitemap needs to consist of a list of URLs.
The Links ought to remain in the appropriate order. There need to be no replicate URLs in an XML Sitemap.
It needs to be in UTF-8 encoding. If you have more than fifty thousand URLs, damage them up right into smaller sized XML maps.
The XML Sitemap Index ought to consist of the Links of
all mapped Links. The Links must be short.
Utilizing the XML Sitemap Index, you need to have more than one sitemap.
You can also make use of a free XML sitemap generator to produce a
sitemap.
The XML Sitemap Index must be a documents providing all of the Links on your site.
The XML Sitemap Index need to follow the same XML requirement as the corresponding websites.
The XML Sitemap index should be tagged with a/ sitemapindex > extension.
To add an XML Sitemap to your site, go to the Google Browse Console and also add an URL to your sitemap.
The XML Sitemap Index should have the Links of all mapped Links.
Using the XML Sitemap Index, you ought to have more than one sitemap.
You can also utilize a complimentary XML sitemap generator to produce a sitemap.
The XML Sitemap Index should comply with the same XML criterion as
the equivalent websites.
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Adres skrytki podawczej Politechniki Częstochowskiej w systemie ePUAP:
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Politechnika Częstochowska
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42-201 Częstochowa
NIP: 573-011-14-01
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Adres skrytki podawczej Politechniki Częstochowskiej w systemie ePUAP: /PolitechnikaCzestochowska/SkrytkaESP
Politechnika Częstochowska
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Yes! Finally something about xml.
I know this if off topic but I’m looking into starting my own blog and was curious what all is required to get setup?
I’m assuming having a blog like yours would cost a pretty penny?
I’m not very web smart so I’m not 100% certain. Any suggestions or
advice would be greatly appreciated. Appreciate it
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Adres skrytki podawczej Politechniki Częstochowskiej w
systemie ePUAP: /PolitechnikaCzestochowska/SkrytkaESP
Politechnika Częstochowska
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thank you lots this fabulous website is usually proper as well as
laid-back
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ePUAP: /PolitechnikaCzestochowska/SkrytkaESP
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logo ePUAP
Adres skrytki podawczej Politechniki Częstochowskiej w systemie ePUAP: /PolitechnikaCzestochowska/SkrytkaESP
Politechnika Częstochowska
ul. J.H. Dąbrowskiego 69
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NIP: 573-011-14-01
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Adres skrytki podawczej Politechniki Częstochowskiej w systemie ePUAP: /PolitechnikaCzestochowska/SkrytkaESP
Politechnika Częstochowska
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w systemie ePUAP: /PolitechnikaCzestochowska/SkrytkaESP
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Adres skrytki podawczej Politechniki Częstochowskiej w systemie ePUAP: /PolitechnikaCzestochowska/SkrytkaESP
Politechnika Częstochowska
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logo ePUAP
Adres skrytki podawczej Politechniki Częstochowskiej w systemie ePUAP: /PolitechnikaCzestochowska/SkrytkaESP
Politechnika Częstochowska
ul. J.H. Dąbrowskiego 69
42-201 Częstochowa
NIP: 573-011-14-01
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