Raising the federal minimum wage would be a net detriment to the U.S. economy

I’m extremely disappointed that Bob has forfeited. Per Rules 2 and 3, I urge our judges to vote CON. I should note that we agreed upon a new round structure in the comments section: Round 1: CON gives rules and structures, PRO gives affirmative case Round 2: CON gives negative case, PRO rebuts CON and crystallizes Round 3: CON rebuts PRO and crystallizes. PRO waives. This structure is still in place, meaning that Bob must waive the next round, and thus will not be able to respond to my case or defend his own. Rebutting PRO’s case Because my evidence remains untouched, I’m going to cross-apply much of it to address PRO’s contentions. Because he failed to provide any evidence to defend his assertions, he doesn’t have anything to balance against mine, meaning that we cannot assess the validity of his impacts. PRO begins by making a concession—that the minimum wage will lead to higher wages for some workers, that these people are likely to spend it, and that the economy will grow. If the minimum wage were deleterious to employment, on balance the economy would shrink, though he concedes to the contrary—this invalidates any claim he intends to make regarding the minimum wage inducing unemployment. He goes on to say that this is a price control, which “artificially boosts the cost of labor.” This is flawed for several reasons. First, it presupposes that there is an organic cost of labor determined by the market mechanism and predicated on productivity, and that this is the value that employers are willing to pay workers. But there are several problems: 1. As I noted last round, productivity over the last 30 years has nearly doubled, but wages for most workers have stagnated, though they have declined in real terms for minimum wage workers. This lends credence to Karl Marx’s notion of “surplus value”—that in order to earn X wage, you require a marginal productivity of X+Y. In other words, workers, due to a lack of bargaining power, will consistently earn below their marginal product of labor. 2. The relationship is completely artificial not only because of asymmetries of bargaining power, but because of imperfect information. PROS’ point necessitates that buyers and sellers have perfect information not only about that worker’s capabilities, but of perfect substitutes. For example, the implication is that, if an employer offered a wage which is below what the workers is willing to accept, that worker would be fully aware of the fact that he could earn a higher wage elsewhere, other employers would know his productivity and of the demands of other firms and offer him a higher wage, and his wage would be bid up to his productivity. However, this is far from the case because, in reality, people do not have perfect information, nor do they behave perfectly rationally. The marginal product of labor, in reality, can hardly be readily ascertained or calculated ex ante. 3. Labor productivity is by no means fixed. I can increase your productivity by taking you to the gym for a few months or purchasing a more efficient computer for you to use on the job. I can also decrease your productivity by breaking your leg, stealing your computer, depriving you of a lunch break or any break or sleep, etc. Productivity is necessarily variable—so the notion that there is an organic cost of labor which exists objectively and independent of this “artificial” cost of labor is ludicrous. Because of this, it is asinine to say that even a modest uptick in wages, which doesn’t even fully account for inflation and productivity, is artificially inflating the cost of labor. He then claims that a MW increase will reduce the demand for labor, but provides no evidence at all to prove this point—I provided plenty of evidence in the last round proving this not to be the case, so I will cross-apply all my evidence from my contentions 2 and 5. Because of the strong empirical backing of the efficiency wage hypothesis, we know that higher wages generate higher productivity, lower labor turnover, more employee discipline, higher labor supply for better, more productive workers, and more—and these will surely offset much if not all of the cost increases of a minimum wage increase. My contention 5 provides evidence, including a thorough review of the minimum wage literature, showing that the minimum wage has no discernible effect on employment—I even provided a study showing that it may in fact boost employment, so there is no merit whatsoever to PRO’s bold assertion. Moreover, PRO’s argument hinges on a basic supply-and-demand analysis you learn in introductory micro, which assumes perfect competition, perfect information, no asymmetries of bargaining power, and that markets are in equilibrium—though these assumptions hardly hold in the real world. Not to mention, even in microeconomics you learn that firms hire until the marginal cost exceeds the marginal benefit, but I’ve provided plenty of reasons as to why the benefits would exceed the cost—and the reason businesses hire people, anyway, is to meet increased demand for their products, meaning that the costs of not hiring are far greater than the costs of hiring. PRO claims that a minimum wage hike is detrimental to interns. How? He admitted that many work for free—which is to say they work for college credit. They aren’t impacted in the slightest by a MW increase because they aren’t earning the MW, nor will they be. Moreover, I provided a myriad of evidence showing that higher wages reduce turnover and the costs of hiring and training, which encompass an internship—if anything, this provides an incentive for employers not only to recruit interns, but to ensure that they hire them down the road because those interns are likely to be more invested in the company, and more productive in their work, if they receive a higher wage for it. PRO’s remarks on inflation are wildly absurd and counter-factual, and even contrary to what basic economics tells us. He claims that raising the minimum wage would create inflation, which would result in higher prices across the board and thus render wage increases useless—in other words, he’s assuming price increases will exactly match nominal wage increases. This is flawed for several reasons, but first, let’s point out a key error he’s making: he asserted earlier that a minimum wage increase would cost jobs. If it will cost jobs, then it will cost consumption, in which case inflation will tend to fall. Granted, he conceded earlier that it would boost consumption, so his arguments are all over the map and cannot be pinned down—it is impossible to glean impacts from the points he has made. But, more fundamentally, he misunderstands what inflation is. Inflation is a rise in the general price level—which is to say a rise in a weighted average of a basket of goods and service that average consumers are likely to purchase. Minimum wage workers account for only about 4.7 percent of hourly paid workers (1), according to the BLS. That PRO thinks this small subset of workers, even counting wage increases of workers earning slightly above the minimum wage, would be inflationary—which is to say it could bear on the overall price level, or prices across the board—is utterly ludicrous. It’s simply too small to have a material impact throughout the system, meaning that higher nominal wages would translate to higher real wages (nominal wages minus inflation) and thus bear positively on consumption. This is especially true because the economy at the moment remains poor and inflation has consistently lagged the Federal Reserve’s two percent target. Coupled with the fact that inflation is highly persistent due to anchored expectations and labor market rigidities, due mainly to nominal wage contracts, there is no way that would see inflation increase rapidly, and this doesn’t even account for the cost savings and productivity gains I noted in my second contention, all of which mollify significantly any increase in costs from a minimum wage increase. On the demand side, it is also unlikely that this would even bear on inflation not only due to the relatively small impact relative to the entire economy, but also because there’s a myriad of empirical literature that shows that the Phillips Curve, or the short-run relationship between unemployment and inflation has flattened, which means that even if the minimum wage were to significantly boost consumption and increase employment, it would hardly bear at all on the overall price level—and, even if it did, it would take a long time, meaning that the Fed would step in even before then to tighten should things get out of control, though that’s highly unlikely to happen. PRO goes on to provide an utterly irrelevant argument of Ford Motor Company in 1914 where workers were paid a rather high wage by today’s standards. There are several problems with this. First, these workers were not paid a high wage because of “competition” or “unleashing the capitalist beast.” As I have already noted, there is no perfect information or perfect, equal bargaining leverage. This is nothing more than evidence of my contention on the efficiency wage hypothesis—Ford Motor Company acknowledged that paying workers more had a multiplicity of positive effects, including increasing productivity and reducing labor turnover, and thus opted to make the right decision. Many employers today, however, have not made that decision, which is why wages have been stagnant for so long. This contention actually turns entirely to support my case. CONCLUSION You’re already voting CON because PRO violated the rules by forfeiting, but there is also no merit to any of the arguments that PRO has put forward. His entire case has been completely refuted and not a single argument of his remains, whereas my entire case remains untouched. Per our structure, he is not allowed to post an argument in the next round. Therefore, you vote to negate. SOURCES 1. http://www.bls.gov...