Minimum Wage

It’s disappointing that CON has forfeited. I’m going to offer a brief summary of this debate and explain why I’ve won. The Resolution and Burdens The resolution required that I defend the existence of the MW, not some particular value of the MW, while CON was required to argue that the MW ought not exist. The two of us bore equal burdens due to this being a normative resolution, and thus you evaluate this based on weighing impacts. CON’s Case Con’s case provided not a single impact. His monopoly analogy, which described rent-seeking, was highly flawed and not reflective of the real world, as I noted at length in the last round. His entire case featured unsubstantiated assertions that I’ve already thoroughly refuted, such as his claim that the MW kills jobs. He offers not a single study bearing this out, whereas I have offered four studies and a literature review demonstrating otherwise. I explained why we must examine the MW in the aggregate, rather through the lens of an individual worker, and why on balance having a MW would be beneficial because it would create opportunities for low-wage workers and enhance productivity and efficiencies for businesses. My Case I. Consumption CON actually never challenges in depth whether the MW would boost consumption, but merely postulates that the possibility of job losses may damper this effect. I generally agree that if the MW cost jobs, it would cost consumption. However, because I’ve demonstrated at length that the MW, at least in modest amounts, does not cost jobs, as even these three studies finding substantial consumption effects also substantiate, I’ve won not only on employment, but on consumption – and, as I also noted in the last round, it is conceivably possible to incur some job losses and still boost consumption, though obviously that isn’t the case we’re dealing with. Impact: I provided several numbers in this round, all of which were dropped, and thus conceded: -$31 billion in new income from an increase in the MW to $10.10 (CBO) -$48 billion in new spending and a .3 percentage-point increase to real GDP from an increase in the MW to $9 (Aaronson and French) -Incomes would rise on average $250 per quarter and spending would rise by $700 per quarter (Aaronson et al. ) Every single one of these points, alone, is enough to win for me to win this debate. II. Efficiency Wage Hypothesis In this contention, I argued, and provided a plethora of evidence, for the fact that higher wages produce a myriad of efficiencies for employers, such as boosting productivity, improving morale and employee discipline, reducing turnover, and more. I’d like to direct your attention to two of the studies I raised in this round: Holzer (1990) and Georgiadis (2008). The former found that firms could offset more than half of the cost of higher wages through productivity gains, lower turnover cost, and lower hiring costs. The latter found that firms can more than offset the cost of higher wages through lowering monitoring costs alone. Note that this entire contention was dropped, and thus you must extend it. Impact: CON’s assertion that higher labor costs would have adverse effects on business and thus reduce employment is simply not borne out by the facts, and this contention provides a tangible explanation, backed by real-world data, as to why this may be the case. This contention alone, once more, is impactful enough to affirm. III. Income Inequality Almost everything from this contention were dropped, and thus you need to buy these harms. CON concedes that income inequality exists and even that it’s a problem, but he postulated that eliminating the MW would actually solve this because it would “increase competition for labor. ” First of all, labor mobility is by itself imperfect, nor is bargaining power perfectly symmetric, so by all accounts even the ability to switch jobs would nevertheless depress wages as part and parcel of a three-decade long secular trend. Second, he doesn’t tell you that one of the main reasons that inequality is so bad today – and Autor et al. from MIT, which I cited in Round 2, demonstrates this – is because the MW is not indexed to inflation, and thus it’s been falling in real terms since its peak in 1968. The falling MW, it bears reiterating, contributing to inequality, which leads us the logical conclusion that eliminating said minimum standard and allowing wages to fall further would only exacerbate inequality by allowing wags to fall even further. We would see inequality on par with the pre-New Deal era which is far worse than it even is today, and we know from three decades worth of data that a MW is necessary to correct for assymetries of bargaining power. Impact: The impact from this contention comes in several ways. First, take my Autor et al. evidence demonstrating that the decline in the real value of the MW has in fact increased inequality. Then take my Stiglitz evidence as to the tangible harms of inequality: reduced consumption, lower tax receipts, lower investment in education and innovation, and a more volatile boom-bust cycle. Then take the evidence from Autor et al. and Mishel showing that increasing the MW would actually reduce these harms, whereas eliminating it would only exacerbate them. CON has, as expected, nothing to balance against this. IV. Jobs I’ve already discussed this at length, so there isn’t much worth repeating. Even if there were moderate job losses, they would be so modest – and, for that matter, offset by monetary policy – that you would weigh reducing income inequality over them. However, I’ve provided several empirical studies showing that this is not the case. CON’s only “evidence” on this is an article from Forbes, which is not only biased because it’s an opinion piece from an entrepreneur, but simply disingenuous in asserting that the MW actually reduces employment. It takes one isolated increase amid the worst financial crisis since the Depression and asserts a causation where there isn’t one, and it even has to go forward two years, since the MW increase was passed in 2007, in a feeble attempt to separate it from the impact of the recession, though that simply isn’t the case. I also don’t know where the 4 percent figure came from. Here’s RGDP data from the St Louis Federal Reserve site: . http://research.stlouisfed.org... The series we want to look at is “continuously compounded annual rate of change,” or in other words taking a quarterly GDP growth rate and annualizing it via multiplying by 4, assuming that growth rate is constant for the remainder of the year. For 2009, we get the following numbers: Q1: -5.58% Q2: -0.54% Q3: 1.3% Q4: 3.85% In other words, the 4% figure was also wrong. That applied to a single quarter, not to the entire year. The GDP growth rate for 2009, taken as an average of these quarterly annualized growth rates, was actually -0.24% (in other words, a contraction). CON’s source cherry-picked Q4 in a feeble attempt to say that the economy was growing but employment wasn’t. That wasn’t the case, but even if it were the case, it’s true that employment tends to lag GDP due to various behavioral and contractual issues businesses face, but not this contraction in 2009 (and, before you ask, I know for a fact that the 4% wasn’t nominal, because the U. S. was actually experienced DEFLATION via the headline PCE index, so nominal GDP was even lower). In other words, this disingenuous author is trying to attribute a decline in employment caused by the financial crisis to a MW policy passed two years prior, irrespective of the evidence which attempts to isolate the impact of that policy and which finds no negative impact. In other words, blame the subprime mortgages, not the fast-food workers trying to sustain themselves. Impact: I provided several studies showing that, at worst, the MW has no net effect on employment and, at best, it boosts employment via boosting consumption and productivity. CON has nothing to balance against it. This, once more, is reason enough to affirm. V. Poverty There were several impacts in my case, all of which CON ignored. First, the CBO study found that raising the MW to $10.10 would lift 900,000 people from poverty, and Dube found that a modest increase would lift 4.6 million people from poverty immediately and 6.8 million people from poverty over time. This is a huge impact, because it means the at these people would be less dependent on the government for social services, which would reduce the budget deficit and free up funds to be spent elsewhere. The study from Algretto et al. out of Berkeley found that, merely on fast-food works, the government would save $7 billion in money it otherwise would have spent effectively subsidizing corporate giants, like Walmart, who are holding down wages for the sake of consuming each worker’s surplus value. CON’s only argument for this involved a reduction ad absurdum and a non sequitur fallacy. The first was the absurd suggestion that we increase the MW to $50 or $100. This is notably absurd, as I even acknowledged in my first round, and I don’t need to defend it. But acknowledging that something may be true of something when you take it to absurd, unrealistic extremes is not the same as proving that to be true for a base case. In other words, it does not follow that because a $100 MW would be deleterious to employment, that a $1 increase would also harm employment. I’ve, again, provided you plenty of evidence that that the latter would not harm employment, whereas all CON has done is loosely related pieces, broken links, and a disingenuous opinion piece from Forbes. Impact: Millions of people would be lifted from poverty and spending by the government on stabilizers would fall appreciably, thus freeing up funds to be spent elsewhere. CON has nothing to balance against this, so once more you can affirm simply based on this.