The minimum wage should be abolished

Introductory Con: "PRO"s remarks are nothing more than bare assertions--and he admits as much in conceding that he isn"t sure whether the MW has the effects he claims." Brian: My opponent seems to be implying that anything said that does not reference academic studies done by people with economics PHDs is, for that reason, baseless garbage. Yet there is way more to the social sciences, including economics, than statistical studies, which aren"t actually particularly well-suited to the discipline in the first place. Also, admitting that it is theoretically possible, though not probable, that the MW could have no negative effective on employment in a given application is in no way an admission that everything said on the subject is just a bare assertion. This is just realistic intellectual modesty. Can my opponent truly honestly state that he is sure that the MW will never have any negative effects on unemployment? If made, such a statement would simply be a revelation of hubris, rather than proof that his argument was sound. Con: "if PRO claims that the MW causes unemployment, then the MW should be correlated with higher unemployment, which shows that either one causes the other or a third factor causes both.The absence of this, as my studies show, lays waste to PRO's remarks." Brian: But as my rebuttal of my opponent"s point #4 in the previous round showed, there are tons of studies that correlate increases in the MW with higher unemployment. Does my opponent really mean to claim that there are no empirical studies that have ever correlated increases in the MW with higher unemployment? Such a claim would be truly outlandish, and a sign of the utmost obliviousness. Con: "Theoretical MW analysis assumes perfect competition, rational expectations, equal bargaining power, and perfect information, none of which hold in the real world." Brian: The analysis I presented assumes no such things. It just "assumes", if this is even the right term for it, that employers will not willingly pay more to an employee than they think he is worth to them. Perhaps some Neoclassical analysis of the MW assumes such things, but I did not present a Neoclassical analysis, so the point is moot. Con: "Even if models have their shortcomings, there is no reason at all to discredit them without a valid reason to do so (e.g., a flaw in the study)." Brian: Um, how about the fact that numerous studies of the same phenomenon offer wildly contradictory findings, as any cursory review of the MW empirical literature will show? Doesn"t this indicate that something may be wrong with these models? Unemployment Con: "Further, PRO"s nonsensical anecdote about India is based on the flawed notion that labor costs are the single factor bearing on unemployment." Brian: A nonsensical anecdote about India would be: "I went to India once, and observed that every Indian person can breathe fire". A description of actual observed facts in the hotel industry in India is not "nonsensical". Also, of course labor costs are not the single factor bearing on unemployment, but they are a factor, and I would venture to say a pretty big factor at that. Unless my opponent means to claim that labor costs have no bearing on unemployment, which would seem absurd, than the anecdote retains its utility. Con: "It"s clear workers are being paid significantly lower than their "worth""which by itself is artificial because labor productivity isn"t fixed, cannot be readily ascertained ex ante, and includes qualitative factors" Brian: Really? Is it clear? Than why doesn"t some entrepreneur just start a business, snatch away all the best workers by paying them closer to their true "worth", and have enough "surplus value" left over for a handsome profit for themselves? Also, when I talked about an employee"s worth, I deliberately talked about their worth in relation to a particular employer. All kinds of factors will influence this subjective valuation by the employer, though the most important of these will probably be the anticipated marginal value product that the employee will add to the business. I never stated that employers all know the "true worth" of every employee, whatever that means. I simply stated that employers will have a definite idea of what a particular employee is worth to them, much of which will be based on educated speculations about the uncertain future, and that if the minimum wage is higher than this, the worker will not get a job. Capital Investment Con: "The first thing he does wrong is using the phrase "all else equal" "that"s the basis for his entire case, and it"s patently false and not borne out by reality." Brian: The "all else equal" is a device used to elucidate an economic theorem, it is not supposed to be an accurate description of reality. My opponent doesn"t seem to believe in deductive economic theory, only empirical statistical studies, which explains his confusion. Con: "In many cases, higher productivity and productive capacity do not lead to increases in wage rates. For this, you can look at my evidence that, over the past thirty years, real wages have stagnated for most Americans and the real MW has fallen in spite of a nearly doubling of productivity." Brian: Ah, the real wage/productivity gap. There are a number of explanations for this, including: 1. The data compares total economy real wages to non-farm business employee productivity. But not all employees are in the non-farm business sector, thus why would we expect the two figures to correlate extremely well? Specifically, as government has continued to grow, there are more public sector wages to pay based on this private sector productivity, which would cause the gap between the two figures to grow bigger. 2. Non-wage employment benefits are not included in the wage figures, but employers must pay them out of the employee"s productivity all the same. These benefits have steadily increased, causing the gap to grow bigger. 3. Increased money-printing by the government usually artificially results in higher profits for businesses, and less of a share going to workers, whose real wages are constantly reduced via inflation. This explains some more of the gap. 4. Perhaps employers in industries who have not experienced much of the increase in productivity increasingly don"t have to directly compete for employees with the increased productivity domestic industries, which is the source of increased wages via productivity in these kinds of industries. Shifts in the relative value of low skilled and high skilled labor, as well as globalization, could both be causes of this. In general, these real wage versus productivity figures are way too aggregated and generalized. For determining wage rates, what matters is the individual employer"s evaluation of the worth of the individual employer, not giant aggregates. Con: " PRO fabricated this relationship"meaning that there is absolutely no evidence that the MW will reduce capital investment" Brian: Generally speaking, common sense does not need to be supported by academic studies. If we assume that capitalists are looking for the highest return on their investment, which is not a heroic assumption at all, then we can confidently state that, other things equal, they will prefer paying lower wages to their employees for the same work. Thus, if the MW forces them to pay higher wages to these same employees to do the same work, they will be less happy about their investment. The less happy capitalists expect to be about their investment in a particular region, the more likely they will be to invest elsewhere. This is pretty basic stuff; I think the statisticians have better things to do with their time than to try to "prove" this. Signaling Con: "First, education is extremely hard to attain and expensive for people on the bottom end of the income ladder, and results in crippling student loan debt, which has now outstripped credit card debt (6). Second, as Krugman argues, there is no perfect link between education and incomes (7)." Brian: Firstly, if the education were worthwhile and cost-effective (which more of it would be if the government didn"t keep screwing up the education market, which is a topic for another time), than the student debt needed to pursue it could be paid off with part of the differential between the lower income and the higher income that the education would make possible. Secondly, I never posited a "perfect link" between education and income, in fact I would be stunned if there was, given the many other important factors in any employment relationship. But the fact is that there are a number of skills that most people can successfully learn via educational training, and those that can should be encouraged as much as possible to learn the skills that the consumers on the market find useful. Con: "Prices and wages are not perfect signals for several reasons." Brian: Again, who"s talking about perfection? Does everything worth advocating have to be "perfect"? Contrary to popular belief, pointing out that some aspect of the free-market isn"t "perfect", is not a valid reason for rejecting that aspect in its entirety, nor for downplaying its very real, though "imperfect", benefits. What matters is whether the free-market or the government can do a better job at a particular task. Here, either we leave workers free to respond to free-market wage signals, or the government tells them where they should work. How else could the workforce be organized? I think the former is much better than the latter, and while it is not "perfect", it is a heck of a lot less "imperfect" than the governmental alternative. Conclusion In sum, we should abolish the minimum wage: stop messing with the delicate price mechanism of the free-market and find a less ham-fisted way of helping out lower income people (such as subsidizing them with transfer payments).