Friday, January 10, 2014

Fwd: wages

'"In March, every Republican in the House voted against a measure to raise the minimum wage. `When you raise the price of employment, guess what happens? You get less of it,' said Speaker John Boehner in February, espousing a party-line theory that most economists agree has been discredited." -- New York Times editorial, Jan. 2, 2014.


This is one of the more outrageous political statements dressed up as economic theory from the editorial board of the New York Times. They should be ashamed of themselves.


As for the discredited theory -- the law of supply and demand -- here's Paul Krugman in a Feb. 17, 2013, New York Times column, explaining it to his colleagues on the opposite page:


"Economics 101 tells us to be very cautious about attempts to legislate market outcomes. Every textbook -- mine included -- lays out the unintended consequences that flow from policies like rent controls or agricultural price supports. And even most liberal economists would, I suspect, agree that setting a minimum wage of, say, $20 an hour would create a lot of problems."


Krugman goes on to support an increase in the $7.25-an-hour minimum wage, relying on a 20-year old study of the fast-food industry in New Jersey and Pennsylvania that found no adverse effect on employment. In fact, it stands out like a sore thumb.


Economists David Neumark and William Wascher reviewed more than 100 studies on the minimum wage in a 2006 paper for the National Bureau of Economic Research: "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research." Here's a summary of their findings: "The oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect." What's more, almost all the papers they reviewed "point to negative employment effects" for the U.S. and many other countries.'



'Job creation stumbled in December, with the U.S. economy adding just 74,000 positions even as the Federal Reserve voted to take the first steps in eliminating its stimulus program.


The unemployment rate dropped to 6.7 percent, below economists' estimates and due primarily to continued shrinkage in the labor force.


It was the weakest job creation in almost three years. Economists said the frigid weather might have had an impact.


"I describe this as a weather-related clunker," said John Canally, investment strategist and economist at LPL Financial. He pointed to a 16,000 drop on construction jobs, which are mostly outdoors, versus a drop of 1,000 in transportation and warehousing.


He added that the weather was pretty frigid in January, too, so it may take a couple of months before there's a clearer reading on the employment situation.


Economists Mark Zandi and Austan Goolsbee said on CNBC the numbers likely will be revised higher in future counts.


Economists had expected the U.S. economy to add 200,000 jobs in December, with the unemployment rate holding steady at 7.0 percent.'


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