Thursday, August 20, 2009

The Law of Demand: There Are No Exceptions or Special Cases, That's Why It's Called a Law

New Minimum Wage Could Mean Few Work Hours for Ball State Students

Ball State University students who are employed with on-campus jobs may work fewer hours this fall due to the increase in wages, a school official said. On July 24, Indiana's minimum wage increased from $6.55 to $7.25 per hour.

"There may be fewer jobs and fewer students hired, or more jobs kept at the minimum wage," Beck said about how the minimum wage increase would affect Ball State this year. "So far, it's too early to tell. The jobs constantly change."

John Knox, student employment coordinator at Ball State, said the same number of students will be hired, but they will be scheduled to work fewer hours."A reason for the fewer hours is because the budget has not increased, so the departments may have to reprioritize spending," he said.

MP: Here's another example of one of the adverse effects of an increase in the minimum wage that will NOT necessarily be captured by a change in the employment level or the unemployment rate for unskilled labor. That is, there could be the same number of workers after an increase in the minimum wage, but they might all be working a fewer number of hours.

The correct, testable statistical relationship is not increases in the minimum wage and the number of unskilled workers employed or the unemployment rate for those workers, but the relationship between increases in the minimum wage and the number of hours worked. The Law of Demand would apply more to the second relationship than the first one, and there will be a negative relationship between the minimum wage and hours worked, even though it won't necessarily translate into a negative relationship between the minimum wage and the number of unskilled workers employed.

Originally posted at Carpe Diem.

3 Comments:

At 8/20/2009 2:37 PM, Blogger spencer said...

For the minimum wage workers to be worse off the decline in hours worked have to be larger than the increase in the minimum wage.

If the minimum wage goes up 10% and the hours worked drop 5% all the minimum wage employees in this example are better off.

Do you have evidence that the drop in hours worked is larger than the increase in the minimum wage?

Essentially all of the research on the minimum wage find that the elasticity is much too small for the hours worked impact to be larger than the wage impact so that the minimum wage worker generally enjoys higher incomes.

 
At 8/20/2009 3:00 PM, Blogger gator80 said...

Seen versus unseen. We don't see what would have happened in the absence of a minimum wage. We don't see how many hours would have been worked, how many jobs would be added (or retained).

Further, the relevant base is not the most recent increment. It is no minimum wage at all.

I have mentioned on this blog before how, once wage rates reach a certain level, jobs are automated or business practices are restructured (for example, centralizing activities) to reduce labor costs.

Even if you run the numbers and feel that it is somehow a fair trade-off (which I do not), it is inarguable that a minimum wage is an infringement of liberty. If I own a business in the inner city and wish to hire a local youth at $5 an hour (or $3.50 an hour or whatever I can afford) and it is fine with him, keeps him off the streets and develops a sense of responsibility, why on earth should that be illegal?

 
At 8/20/2009 8:50 PM, Blogger OBloodyHell said...

> If the minimum wage goes up 10% and the hours worked drop 5% all the minimum wage employees in this example are better off.

Does it really?

Or does it depend instead on the actual numbers involved?

EX:
$6.55 to $7.25 per hour

So, if you were working 20 hrs/wk, but instead you now work 16 hrs/wk... (since people get hired in shifts, it's not particularly likely that you're only going to experience a "5%" hour cut, but you're going to lose a half shift or even a full shift).

That's $131 before, $116 after.

In actual fact, READ THE FRIGGIN ARTICLE:

The money budgeted for salaries is staying the same, so the best that might happen is that the money earned will be the same, with exactly the number of hours cut that adjusts downwards.

In actual fact, some will lose full shifts -- they will be the least talented, least educated, and/or least appreciated workers. Or some will be let go, so that the remaining ones make more money but have to work harder to pick up the slack from the lost worker.

The ones who bust their asses or do the jobs well will prob. keep their shifts and make more money.

But a certain percentage of the population will suffer -- the marginal ones.

Gosh, that is exactly what everyone with a clue has been predicting!

 

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