Resolved: A Minimum Wage Should Exist.

Pro has brought up some interesting points regarding the minimum wage. I will address them and then turn to dropped arguments. Before I go on, I would like to give a fair warning: there is math ahead. Firstly, I will talk about the flaws in pro's consumption argument. We now turn to the fundamental identity that defines real GDP, which is represented by Y. Y=C+G+I+NX Where C is consumption, G is government, I is investment, and NX is net exports. For simplicity's sake, we will only consider a closed economy, so NX is zero. Y=C+G+I Now, an factor that causes an increase in one factor may provide a decrease in another. For example, increasing government spending whilst increasing taxes on companies will decrease investment. By taking money out of the pockets of companies that want to purchase capital goods, which increase long term production, long term economic growth may be harmed. This is what the minimum wage does. It takes money out of the pockets of businesses, that are more likely to invest, and gives it to those not fired, who are more likely to consume. [1] Whilst it is true that the minimum wage increases consumption, it "has no discernible impact on overall GDP and could actually hinder growth in certain low-wage sectors," according to a study by Joseph Sabia. [2] I will talk about unemployment in a little bit. It seems we are going pretty deep into economics, so I will introduce a factor known as demand elasticity with respect to price. Its definition is "the absolute percent change in quantity demanded divided by the percent change in price." [3] This concept is extremely important in understanding the economics of the minimum wage. If the quantity demanded changes a lot with respect to price, we say the demand is elastic. Now, if the demand curve for the fast food restaurants is elastic, then with an increase in the minimum wage we would see a large decrease in the labour demanded, leaving more people without jobs. In this case, unemployment would measurably increase. However, in cases where the amount of labour demanded is inelastic, meaning it doesn't change much with an increased wage rate. In this situation, it would be harder to observe the effects of the minimum wage, and it may be a small enough increase that other, random factors would obscure the change. Now, the Card-Krueger study picked an extremely inelastic market available to study. The fast food industry is mostly focused on technological capital, not having a large number of employees. [4] For these restaurants, the name of the game is basically to hire just enough workers to man the machines. Therefore, we can expect that, since they already hire almost the feasible minimum amount of workers, they will not be able to sack workers without taking a major hit in productivity, implying their demand curves for workers would be highly inelastic. If Card/Krueger had chosen a more elastic market, they may have been better able to document the effects of the minimum wage. However, there is unfortunately another reason why the study failed to show a decrease in employment. They did not correctly analyze the data. According to a later paper published by David Neumark and William Wascher in the American Economic Review, the same paper that published the Card-Krueger paper, the same data actually showed the increased minimum wage led to an approximately 4% decrease in employment. [5] Card and Krueger were proven wrong. Unfortunately for them, bad analysis leads to incorrect conclusions. Pro also talks about income inequality. However, he fails to show income inequality is a bad thing. Income inequality is the measure of the difference between the successful and the very bottom. The more successful people are, the higher this will be. Until pro proves to us there is something morally wrong with income inequality, there is no reason to believe there is. Finally, pro claims "The main reason (for the minimum wage) is that it gets people out of poverty." This is a nice sentiment, but is unsupported by evidence. A study by the National Bureau of Economic Research found "no compelling evidence" that the minimum wage reduces poverty, writing that it pushed some families out of poverty whilst pushing some into poverty. [6] Now, we have a significant problem to address. Pro failed to address my arguments last round. To drop an argument means to fail to respond to it at first opportunity. Pro has therefore dropped my arguments and, by standard debate etiquette, my arguments should be considered true for the remainder of the debate. However, in the spirit of a good debate, I shall allow pro one more round to address these arguments. I had a rough time a while ago with dropped arguments, and I have some sympathy. [7] Please do not let this happen again. Good luck to pro once more! Sources 1- http://www.stlouisfed.org... 2- https://www.epionline.org... 3- http://www.investopedia.com... 4- http://www.forbes.com... 5- Neumark, David, and William Wascher. 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment." American Economic Review, 90(5): 1362-1396. 6- http://www.nber.org... 7- http://www.debate.org...