Thursday, March 21, 2013

Minimum wage

In the discussion of minimum wage, I don't see a lot about wage subsidies. The Germans, who've managed several crises pretty well, use them. 

There's some empirical evidence that raising the minimum wage does not reduce employment (Card & Kreuger comparing NJ and PA). Most left economists see the additional consumer power of a raise will increase demand and therefore production and employment. But increasing demand also raises prices, which can cancel out not only the employment increase but also the increase in wealth at the bottom. A wage subsidy wont solve the latter, but it does solve the former. 

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