Minimum wage theory = the law of supply-and-demand is suspended
(only for labor of course)
(some material for Drag Queen Story Hour)
Static demand and supply analysis indicates a reduction in the use of labor when wages increase. The amount of the reduction in the static case depends on the responsiveness of demand for labor and the supply of labor to wages. Typically, neither is very responsive ( the technical term is inelastic ) in the short run which is why I suspect it is rare to find a noticeable result. Over longer periods of time, neither demand or supply remains unchanged which makes teasing out the sole effect even more difficult.
Never mind "longer periods of time"; In any situation where some disposable incomes increase (higher wage) and others decrease (reduced hours and/or job losses), demand certainly changes, and the total size of the economy likely also changes.
The instant you change minimum wage, you also necessarily change supply and/or demand.
But not if you change the price of anything else. This suspension of supply-and-demand is a magical phenomenon which happens only when something about labor changes but not any other commodity in the market or anything else in the universe.
The overall effect is impossible to ascertain by a simplistic calculation based on the false assumption that neither demand nor the total size of the economy has varied.
And we haven't even considered that productivity will likely also change. If a team of ten staff is reduced to nine, those nine will likely still get the same work done, at least for a time. Equally, it might be harder to get the same work done if an eleventh employee is hired, as the new guy needs training and may generate additional work fixing their errors while they're learning. Productivity is VERY elastic. And most workplaces have some slack "built in" to allow for unexpected increases in demand, or unexpected employee absences, or both.
The real world isn't simple, and a simplistic analysis of it by simpletons is rarely useful.
Increasing minimum wage could easily lead to increased employment, . . .
Of course increased employment could follow, just as tougher gun laws could lead to double the cases of mass shootings.
But we're entitled to reason what the CAUSE of the change is and to discount something unlikely. Of course there's NO ABSOLUTE CERTAINTY -- 100% probability to any prediction or explanation of the outcomes and causes.
But forcing up the price of labor is unlikely to cause an increase in the demand for labor, just like the price of anything else in the economy. We always assume, safely, for good reason, that a higher price for something in itself will cause some reduced demand for it. There's no reason to set aside this reasonable assumption only in the case of wages, or a forced higher wage level, imposed higher cost.
What other example is there in the economy where we assume a higher cost of something leads normally to more demand for it?
There are some RARE EXCEPTIONS you could probably name. But this is not the norm, and we're entitled to assume the norm for most cases of higher cost. Usually the law of supply & demand does apply, meaning a higher cost causes less demand. We can name many examples of it, from historical precedent. Plus also it's a basic axiom of economics that buyers prefer LOWER cost, not higher. And for labor theory, the employers are BUYERS and the workers are SELLERS, and these buyers and sellers show the same normal behavior patterns as all other buyers and sellers.
. . . easily lead to increased employment, rather than the reduced employment that a crude analysis suggests.
What's "crude" about assuming that the normal supply-and-demand conditions apply to a given case where there's no evidence to suggest otherwise?
. . . rather than the reduced employment that a crude analysis suggests. And remember, the moon-landing never really happened. It's de . . . .
J-u-u-u-u-ust kidding. He never really said that. I'm just checking to see if you're awake.
It's dependent on the starting conditions and the magnitude of the increase, and the likelihood is that the direction, as well as the magnitude, of any changes will vary from one location to another.
O-o-o-o-K so then tell us which are the locations where the law of supply-and-demand does not apply. Where is it that higher cost results in higher demand from buyers rather than lower? where buyers flock to the store or gas station where the prices doubled and away from where there's a discount? where the plumbers are paid minimum wage and the hamburger-flippers $50/hour?
Is this happening on some planet where the law of gravity also has been suspended?
