Azar, Marinescu, Steinbaum (2018) as SSRN [NBER WP version] [preprint at J.Human Resource]:
Addendum, 2/8 8am Pacific:
And here is a very recent survey of labor market monopsony: Manning, ILR (2021).
Azar, Marinescu, Steinbaum (2018) as SSRN [NBER WP version] [preprint at J.Human Resource]:
Addendum, 2/8 8am Pacific:
And here is a very recent survey of labor market monopsony: Manning, ILR (2021).
Your link does not work but this one should:
https://www.nber.org/system/files/working_papers/w24147/w24147.pdf
A product market is concentrated when a few firms dominate the market. Similarly, a labor
market is concentrated when a few firms dominate hiring in the market. Using data from the
leading employment website CareerBuilder.com, we calculate labor market concentration for
over 8,000 geographic-occupational labor markets in the US. Based on the DOJ-FTC horizontal
merger guidelines, the average market is highly concentrated. Using a panel IV regression, we
show that going from the 25th percentile to the 75th percentile in concentration is associated with
a 17% decline in posted wages, suggesting that concentration increases labor market power.
Concentrated labor markets pushing wages below what one would expect in a competitive market. Actual evidence which Princeton Steve will dismiss as it is not a one company town. Besides he thinks he is standing up for the right of black criminals on drugs to shine his shoes for $3 an hour.
The study notes 3.2 companies recruiting on average for some unspecified position. I would argue that both recruiting and non-recruiting firms set wages, as firms rotate hiring and wages are set by all of the firms in a market. Thus, if I am not hiring, but a competitor is, then I will lose my employees if wages are below market. Therefore, to suggest that just hiring firms set wages is counter to real world experience. Thus, you may have a dozen firms, of which only three are hiring at any given time. Bit I think the whole pool counts, not just those posting jobs on Career Builder, which by the way may be no monopoly of job postings, either.
Second, a concentration of buyers is not a monopsony, but rather a cartel, and therefore the terminology is incorrect. A monopsony is one buyer — a take-it-or-leave-it option only. The authors fail their own test.
Third, there is no accomodation for geographic mobility. I worked 55 miles from my home when I worked in New York. People do commute and move, when economic forces so dictate. Therefore, over a period of time, net wage levels will be influenced by long-term mobility trends, to wit, people moving to the south and west for lower taxes, and they have left rural areas for cities.
So let’s take a specific example: Berkshire County in western Massachusetts hard up against the New York border. If I plug in ‘retail’ jobs, last seven days, within 30 miles of Pittsfield (the county seat, apparently), Career Builder returns nearly 300 jobs from well over a dozen employers. This is a county which the authors deem to be ‘very high concentration’, their worst category, and it has 300 retail (not minimum wage, just the subset of retail) jobs within about a 30 min drive (I-90 goes through Pittsfield). It seems to me, therefore, that the authors’ designations appear to be something of a joke, at least with respect to minimum wage labor, the question du jour.
https://www.careerbuilder.com/jobs?cb_apply=false&cb_workhome=false&emp=all&keywords=retail&location=pittsfield+mass&page_number=4&pay=&posted=7&radius=30
Steven Kopits: So we better get rid of several thousand papers on “monopolistic competition”. I’m sure you’d want to burn them.
Wouldn’t be funny if Stevie applied to work for the Department of Justice working on mergers. Even if this complete incompetent offered to work for a dollar a day, I doubt they would give his resume more than two seconds before it was filed in that circular filing system under the desk.
If you want to call it monopsonistic competition, then yeah, sure. But they didn’t say that. And there’s a reason: because it’s problematic. Monopolistic competition is essentially product differentiation in non-commodity markets. What is monopsonistic competition?
What the hell do you teach your students, Menzie? “Well, you know, here’s the theory, but let’s not get carried away with it in real life.”? Why would anyone want to be an economist when the bulk of your views seem to revolve around exceptions to the rule, about presumptions that you are smarter than the market or that markets don’t work?
Steven Kopits: Let me put it this way: we often talk about “monopoly power” when there is not literally a monopoly. You can have monopsonistic behavior, w/o literally having a monopsony. How often do you hear the term “oligopsony”?
“Monopolistic competition is essentially product differentiation in non-commodity markets. What is monopsonistic competition?”
Labor economics addresses the employment of people not commodities. But a stuck up egghead who cannot get out of his Ivory Tower wants to treat people as mere goods. Keep it coming Stevie pooh as your total lack of understanding for other people has become crystal clear.
By the way, I think monopolistic competition is a very interesting area. There are many, many ways companies try to differentiate their products, and indeed, the very products customers are buying are often not the products they think they are. A case in point is GE industrial products like turbines (rotating equipment, as they call it). The profits did not come from equipment sales, but rather through the associated financing at GE Capital. GE got rid of the latter as a result of the GFC, and we haven’t heard much from the company since. So, yes, monopolistic competition is a very interesting area, in my view.
“A case in point is GE industrial products like turbines (rotating equipment, as they call it). The profits did not come from equipment sales, but rather through the associated financing at GE Capital.”
Oh Lord – Joan Robinson is laughing from her grave at you. She is the one who first coined the monopolistic competition and explained the economics. Buying a car with a loan or buying equipment with this type of financing is NOT want she meant by monopolistic competition.
Dude – you are an IDIOT. We got that a long time ago. Please stop writing such stupidity on topics where you have no effing clue.
“a concentration of buyers is not a monopsony, but rather a cartel, and therefore the terminology is incorrect. A monopsony is one buyer — a take-it-or-leave-it option only. The authors fail their own test.”
Lord I never imagined any human being could be this utterly stupid but OK Princeton Stevie pooh – I was wrong. You are truly the dumbest troll ever.
Still showing all you know is how to mis represent what Career building says? You know if you actually want to get this issue – Barkley’s comment and my reply might help unscrew the nonsense in your limited little brain.
But of course we know could care less about trying to understand an actual policy issue. That would get in the way of getting your next appearance on Fox and Friends where you can hit upon the blonde bimbo of the day as you joined the crew in more of your racist garbage.
“there is no accomodation for geographic mobility. I worked 55 miles from my home when I worked in New York. ”
And I had to drive to work 63 miles 3 times a day for a high paying position in NYC when I had kids. Now if you think that the commuting costs are trivial for someone making $10 an hour, I want to ask your preK teacher how the F*** would we allowed to be in 1st grade. Lord you are beyond STUPID.
Steven,
Have you had zero industrial organization? Or is this one of those topics where you think your “real world experience” makes you more informed than people who have taken courses or read actual literature>
You show how completely misguided you are when you state “a concentration of buyers is not a monopsony, but a cartel.” Gag. This is wrong in several ways. First of all, “cartel” is a concept for the sellers’ side, the particular situation where a group of firms collude to act as if together they were a pure monopoly. It is well known that such cartels are hard to maintain in the long run due to the prisoner’s dilemma.
So, even if we were to allow use of “cartel” on the buyer’s side, you somehow think that if the firms become a “concentration” then they are a “cartel” but not a “monopsony.” Here is where you really fall on your face. “Concentration” refers not to a grouping but to a measure of the degree of monopoly power if one is looking at the sellers’ side or of monopsony power if one is looking at the buyer’s side. In fact if you have a “cartel” of buyers, they would be acting like a pure monopsony. These are not mutually exclusive terms.
Fundamentally all along you have been opeating as if there is no such thing as an intermediate degree of monopoly or monopsony power between pure competition and pure monopoly or monopsony. But there is, and that is exactly what is shown on this map Menzie has presented here. If in fact you have taken an IO course but just forgotten about it, I remind you of some of the numerous intermediate forms on the sellers’ side between pure monopoly (or cartel) and perfect competition: Cournot solution, kinked demand curve, Bertrand solution, Stackelberg solution. price leadershiop, contestable markets, and a few more. And these have their buyers’ side equivalents.
Reallyi, you should know more than you seem to on this matter.
Barkley –
The paper Menzie linked above uses the term ‘monopsony’ 23 times. Menzie posted the paper because we were debating the topic of monopsony. The simple read of the map above is the labor markets do not work in the US, that we can dispense with basic economic theory because it does not apply over the majority of the US in terms of geography. The labor market is broken all over the US.
I believe this is a very radical view, and I believe it is fundamentally wrong. The bar for monopsony is not low and casual, and it high and rigorous. This paper, therefore, is either revolutionary in bringing to our attention how little traditional economics is applicable as it exposes the shocking frailty of US labor markets, or it is pure garbage.
As I pointed out for a single red county, Berkshire County in Massachusetts, on the authors’ map, we can find 300 jobs in retail alone (a subset of minimum wage jobs), using the authors’ data source, jobs listed as posted in the last seven days, and within 30 miles of the country seat (I think). If this is monopsony, then there is monopsony in US labor markets at every time in every place, and the basic economic theory of free markets mediated by prices is fundamentally wrong.
Menzie very casually dispenses with the basic theory and posts front and center a map of which the plain vanilla interpretation is US labor markets don’t work. If Menzie believes that — if this is the lesson he takes to his students, that functioning markets are the exception and not the rule — then I hardly know why he is in the economics, rather than sociology.
Steven,
This has been answered in later threads, but again you engage in these misleading simplifications that are just bs. Either there is this perfectly competitive market where “economic theory works,” which you claim on the basis of zero evidence is the overwhelming case, or it is a pure monopsony for which economic theory just breaks down. Sorry, but to use a technical term, this last argument is just a pile of ignorant crap.
There are economic models for pure monopsony, and there are economic models for a lot of the intermediate cases. Please stop making yourself look like such an ignorant fool. I happen to think you are smarter and more knowledgeable than the likes of Bruce Hall. But with your persistent insistence on this silly dichotomy with its inaccurate characterization of the relevance or lack thereof of economic theory, you put yourself down into the sort of low place he and some others lurk in drooling.
Barkley –
Here’s a buyers’ cartel: http://news.bbc.co.uk/2/hi/business/7646408.stm
A monopsony in minimum wage unskilled labor? You’re going to have to work pretty hard to convince me of that, Barkley. This does exist, of course, for undocumented labor in one horse towns in Alabama and Mississippi, but the cartel exists specifically due to a lack of legal status for workers. A monopsony is labor is just hard to pull off. If you want to call Div I NCAA football and basketball a monopsony, I could probably go along with that. I could call it a lot worse than that.
But otherwise? Do I think Dunkin’ Donuts is a monopsony? Stop ‘n Shop? Walmart? CVS? Gamestop? Home Depot? Forever 21? (Apparently not forever.) Hell no.
Steven,
Well, the map that Menzie posted at the beginning of this thread seems to be consistent with the old school view of Bain/Lerner/Weiss, that one is likely to see more monopsony power in less densely populated places. In short, the fewer the number of the firms hiring in a locale, the more monopsony power they have coming out of their own oligopsonistic interactions, even if they are Stop’n’Shop, Walmart, whatever.
The opening of this paper cites a lot of good economic research that the Three Stooges (Bruce Hall, Manfred, and Princeton Steve) refuse to read. So let’s help these economic know nothings out:
The monopsony literature in labor economics approaches the issue of market power through
questions such as the impact of the minimum wage and unionization. This literature focuses
on the elasticity of labor supply to the individual firm, as opposed to market concentration2. In such “New Monopsony” models, employers trade off wages with their employees’ quit rates,
and they face an upward-sloping supply curve due to search frictions, firm-specific amenities,
and limited geographic mobility of workers, in addition to other mechanisms. If workers have
a high labor supply elasticity, then firms pay them more to get them to stay. The literature
generally finds low elasticities of labor supply and interprets this as evidence for firm-level
monopsony power to reduce wages below the marginal product of labor (Webber, 2015; Dube
et al., 2019).
Here’s a link to what I assume is the same paper at NBER:
https://www.nber.org/papers/w24147
It is the same paper. We both figured this out this morning. It is also a must read paper.
http://www.bls.gov/webapps/legacy/cpslutab5.htm
January 15, 2021
United States Union Membership Rates, 2020
United States ( 10.8)
Hawaii ( 23.7)
New York ( 22.0)
Rhode Island ( 17.8)
Alaska ( 17.7)
Washington ( 17.4)
Connecticut ( 17.1)
California ( 16.2)
Oregon ( 16.2)
New Jersey ( 16.1)
Minnesota ( 15.8)
Michigan ( 15.2)
Maine ( 14.7)
Illinois ( 14.3)
Pennsylvania ( 13.5)
Nevada ( 13.4)
Ohio ( 13.2)
Maryland ( 13.1)
Massachusetts ( 12.0)
Montana ( 12.0)
Vermont ( 11.8)
West Virginia ( 10.7)
New Hampshire ( 9.8)
Delaware ( 9.7)
Nebraska ( 9.6)
Missouri ( 9.4)
Kansas ( 8.9)
Wisconsin ( 8.7)
District of Columbia ( 8.6)
Indiana ( 8.3)
Alabama ( 8.0)
Wyoming ( 7.6)
Kentucky ( 7.5)
Colorado ( 7.4)
Mississippi ( 7.1)
New Mexico ( 7.1)
Iowa ( 6.6)
Florida ( 6.4)
North Dakota ( 6.2)
Oklahoma ( 6.0)
Louisiana ( 5.9)
Idaho ( 5.6)
Arizona ( 5.3)
Texas ( 4.9)
Arkansas ( 4.7)
Georgia ( 4.6)
Tennessee ( 4.4)
Virginia ( 4.4)
South Dakota ( 4.3)
Utah ( 3.7)
South Carolina ( 2.9)
North Carolina ( 2.3)
http://www.bls.gov/webapps/legacy/cpslutab5.htm
January 15, 2021
United States Union Membership Rates
1983 ( 20.1)
2020 ( 10.8)
Government workers
1983 ( 36.7)
2020 ( 34.8)
Private workers
1983 ( 16.8)
2020 ( 6.3)
February 7, 2021
Coronavirus
US
Cases ( 27,611,403)
Deaths ( 474,933)
India
Cases ( 10,838,843)
Deaths ( 155,114)
UK
Cases ( 3,945,680)
Deaths ( 112,465)
France
Cases ( 3,337,048)
Deaths ( 78,965)
Germany
Cases ( 2,291,441)
Deaths ( 62,128)
Mexico
Cases ( 1,926,080)
Deaths ( 165,786)
Canada
Cases ( 804,260)
Deaths ( 20,767)
China
Cases ( 89,692)
Deaths ( 4,636)
February 7, 2021
Coronavirus (Deaths per million)
UK ( 1,651)
US ( 1,430)
Mexico ( 1,278)
France ( 1,208)
Germany ( 740)
Canada ( 547)
India ( 112)
China ( 3)
Notice the ratios of deaths to coronavirus cases are 8.6%, 2.9% and 2.4% for Mexico, the United Kingdom and France respectively.
https://news.cgtn.com/news/2021-02-08/Chinese-mainland-reports-no-new-local-COVID-19-cases-XHO27XiX9C/index.html
February 8, 2021
Chinese mainland reports no new local COVID-19 cases
The Chinese mainland reported no new locally-transmitted COVID-19 cases for the first time in nearly two months on Sunday, the National Health Commission’s (NHC) data showed Monday.
Meanwhile, 14 new cases from overseas were recorded on Sunday, according to the NHC.
No new deaths related to COVID-19 were registered and 72 patients were discharged from hospitals.
A total of 16 new asymptomatic cases were recorded, while 639 asymptomatic patients remained under medical observation.
The total number of confirmed COVID-19 cases on the Chinese mainland has reached 89,706, and the death toll stands at 4,636.
Chinese mainland new locally transmitted cases
https://news.cgtn.com/news/2021-02-08/Chinese-mainland-reports-no-new-local-COVID-19-cases-XHO27XiX9C/img/273b2388e9fb451fab7923174650ed04/273b2388e9fb451fab7923174650ed04.jpeg
Chinese mainland new imported cases
https://news.cgtn.com/news/2021-02-08/Chinese-mainland-reports-no-new-local-COVID-19-cases-XHO27XiX9C/img/bbfbe8535d5e44a6aabca9f371da894d/bbfbe8535d5e44a6aabca9f371da894d.jpeg
Chinese mainland new asymptomatic cases
https://news.cgtn.com/news/2021-02-08/Chinese-mainland-reports-no-new-local-COVID-19-cases-XHO27XiX9C/img/714e88fe706a4c7da9b941a302ba2b4f/714e88fe706a4c7da9b941a302ba2b4f.jpeg
I wanna thank Menzie for taking the time to put this up. If our resident David Duke of New Jersey way doesn’t learn anything from this, I feel I might pick up a couple gold nuggets here.
Princeton David Duke will probably avoid this paper too. He is too busy prepping for his next appearance on Fox and Friends.
Interesting to see the metro areas white. Also interesting that Houston TX is not white.
i noticed the same thing about metro areas. regarding texas, looks like the metro areas are much lighter than the rural areas in general. houston is not white in the figure, but i bet it is pretty close to the borderline. the houston area is still an island of light pink surrounded by darker reds.
a lot of the deep red in the graph corresponds to deep red conservative states as well. look at the slab of red running through the plains and mountain states. also, i find the variety in colors in ohio and pennsylvania particularly interesting. those two states are fighting for direction.
In broadest terms, high population density (and so high firm density) reduces monopsony power.
Urban areas are generally tend to have higher wages and to be more productive. Monopsony is not the only reason non-urban areas are less productive, and likely not the main reason, but it’s one reason.
Urban areas also tend to vote Democratic. Funny how monopsony is concentrated in Republican areas. Simple hypothesis: Republicans oppose regulation when regulation offsets market power – labor markets, for instance. They favor regulation when regulation protects market power – patents and copyrights, for instance.
Take Manhattan for example. Lots of law firms, accounting firms, large banks, newspapers and the like so if one were a secretary – the potential number of employers is vast. Of course leave it these type of employers to find some way to collude and get away with it!
Here is an “ungated” version of the updated 2021 Manning paper Menzie links to above in the addendum. My genuine ocean of apologies to Menzie if this link differs in a material way, as it is the December version of Manning’s paper, not the June version:
http://eprints.lse.ac.uk/103482/1/MonopsonyILR_Revision.pdf
I was struck by the 2nd sentence in the introduction:
“High levels of inequality and a falling labor share in national income have led to renewed
interest in the idea that there is an imbalance in economic power between employers and
workers in the labor market. The belief that employers have considerable market power
over their workers is not a new one: Robinson (1933) introduced monopsony as one way to
model this asymmetry in power.”
Joan Robinson was the first woman star in economics and her work was path breaking. Yet the Three Stooges (Manfred, Bruce Hall, and Princeton David Duke) likely have no clue who she was. They certainly have not read her writings on labor markets.
@ pgl
Still digesting it, but I think at least one sentence had jumped out at me. I think I remember you discussing Joan Robinson in a thread some time back, so yeah curious about her, what do they call it, path-breaking?? Couldn’t have been easy. It kind of amazes me how many young people think they are so “courageous” about gender issues now. It’s easy to run around telling everyone “The Earth revolves around the Sun!!!” in 2021. Try that one out in 1633. I feel that’s what many “feminists” are today, they are the scientist running around the room, hands waving around in the air, telling us “the Earth revolves around the Sun!!!!”. I guess some people are impressed with that?? I guess I’m a “horrible person” because I have to say it mostly bores the hell out of me. These women like Oprah Winfrey and Rose McGowan running around showing everyone their feminist “bonafides”. We’re supposed to call them “brave”?? Put them in Joan Robinson’s time and all that would be left is a sweat puddle on the floor. Not that I actually care, just saying.
Moses,
I expect pgl will answer and say plenty about the late Joan Maurice Robinson, who died in 1983. I shall just note a couple of things.
It is currently widely viewed that it is a scandal that she did not receive the Nobel Prize before she died in 1983. She did many different things that were important in economics, some of which do not get talked about much. Her discovery of the concept of “monopsony” appears in her first book in 1933, _The Economics of Imperfect Competition_.
She was one of the closest advisers and protegees of J.M. Keynes, being one of the three people he thanked in the Preface to his General Theory of Employment, Money and Interst, 1936, his most important work.
She contributed to Menzie’s specialty in a 1937 paper, “Beggar My Neighbour,” she described how competitive devaluations during the Great Depression spread misery from one nation to another.
In 1954 she published the paper “The Production Function and the Theory of Capital” set off what has since come to be known as “the Cambridge controversies in the theory of capital.”
She coined the term “post-Keynesian economics.”
The likely reason she did not get the Nobel was that she became more radical and left wing as she got older, although she pulled back from some of her more radical views in the last few years of her life, with her being quite sympathetic to Maoism in China. She became quite feisty, and the most important figure on the Nobel committee, Asser Lindbeck, was known to fear that she would be too feisty and make a speech that would excoriate many other economists. Indeed, I heard it through a personal source that Lindbeck said she would get it “over my dead body,” and he was still on the committee when she died. Now I think a majority of the profession thinks this was an embarrassing mistake by Lindbeck et al.
And she did a whole lot more. Maybe pgl will cover some of he other items, but her discovery of the concept of monopsony was certainly one of her most important contributions.
“Beggar My Neighbour” was among her classic contributions to the literature. Yea – she definitely deserved the Nobel Prize.
She was severely discriminated in employment for her gender. Her husband, Austin, an industrial org economiist, held a prestigious professorship at Cambridge while she had part time if any jobs there, although she was far more important and famous than he was. She only got a full time appointment when he finally retired in the 1970s.
She contributed to many other literatures. In 1942 she wrote an important essay on Marxian economics, which she was sympathetic to while not fully accepting it. A famous quote from her on that is “The only thing worse than being exploited is not being exploited” (that is, unemployed).
Her Accumulation of Capital in 1957 was a masterpiece of growth theory and did have equations in it, even as she was often accused of “not being mathematical” enough. She had some amusing names for some of the solutions, such as the “bastard golden age.” Oh yes, she also was the one who coined the term “bastard Keynesianism” for the neoclassical synthesis of Paul Samuelson, with whom she especially went at it with.
In 1974 she wrote a book, Economic Philosophy. My fave quote out of that is “I do not know why they make such a fuss about taking the rabbit out of the hat when they put it into the hat in full view of the audience.”
There is a lot more, but i need to go cook dinner now.
Thanks for the link to this other Manning paper:
‘Researchers’ interest in monopsony has increased in recent years. This article reviews the accumulating evidence that employers have considerable monopsony power. It summarizes the application of this idea to explaining the impact of minimum wages and immigration, in anti-trust, and in understanding how to model the determinants of earnings in matched employer–employee data sets and the implications for inequality and the labor share.’
It is another must read even if people like Manfred, Bruce Hall, and Princeton David Duke will likely skip it.
https://www.thenation.com/article/economy/inequality-patents-taxes-copyright/
February 8, 2021
Want to Reverse Inequality? Change Intellectual Property Rules.
Changes in IP have done far more than tax cuts to increase inequality—and US protection of IP could lead to a cold war with China.
By Dean Baker
The explosion of inequality over the past four decades is appropriately a major focus of the political agenda for progressives. Unfortunately, policy prescriptions usually turn to various taxes directed at the wealthy and very wealthy. While making our tax structure more progressive is important, most of the increase in inequality comes from greater inequality in before-tax income, not from reductions in taxes paid by the rich. And, if we’re serious about reversing that trend, it is easier, as a practical matter, to keep people from getting ridiculously rich in the first place than to tax the money after they have it.
While the Reagan, George W. Bush, and Trump tax cuts all gave more money to the rich, policy changes in other areas, especially intellectual property have done far more to redistribute income upward. In the past four decades, a wide array of changes—under both Democratic and Republican presidents—made patent and copyright protection both longer and stronger.
In the case of patents, the TRIPS * provisions of the World Trade Organization, which went into effect in January 1995, extended the length of patent monopolies from 17 years from the date of issuance to 20 years from the date of filing. The 1980 Bayh-Dole Act allowed for patents on government-financed research. In 1982, Congress established a special patent-friendly appellate court to hear cases on patent disputes. And court rulings extended patent coverage to include life forms, software, and business methods.
For copyrights, two revisions to the law, in 1976 and 1998, extended the maximum duration from 56 to 95 years. The Digital Millennial Copyright Act of 1998 imposed strong rules for copyright enforcement on the Internet. Washington has also sought to impose stronger intellectual property protections on our trading partners in every trade agreement that the United States has negotiated over the last three decades….
* Trade-Related Aspects of Intellectual Property Rights
In broadest terms, high population density (and so high firm density) reduces monopsony power.
Urban areas are generally tend to have higher wages and to be more productive. Monopsony is not the only reason non-urban areas are less productive, and likely not the main reason, but it’s one reason.
Urban areas also tend to vote Democratic. Funny how monopsony is concentrated in Republican areas. Simple hypothesis: Republicans oppose regulation when regulation offsets market power – labor markets, for instance. They favor regulation when regulation protects market power – patents and copyrights, for instance.
One suspects this post is Menzie’s way of saying that arguments against minimum wage laws which fail to take market structure into account are hollow.
Similarly, arguments against minimum wage laws which ignore modern empirical work on the subject aren’t worth the electrons used to post them.
The other day Bruce Hall quoted some brain dead reporter on increasing the minimum wage would lead to 1.3 million job losses. Not to be outdone Rand Paul put that at 4 million. Bruce Hall did not have the integrity to link to the CBO report so I did and asked Bruce to read it. I guess he did not so here is the link following by the summary:
https://www.cbo.gov/system/files/2019-07/CBO-55410-MinimumWage2019.pdf
The federal minimum wage is $7.25 per hour for most workers. The Congressional Budget Office examined how increasing the federal minimum wage to $10, $12, or $15 per hour by 2025 would affect employment and family income.
• In an average week in 2025, the $15 option would boost the wages of 17 million workers who would otherwise earn less than $15 per hour. Another 10 million workers otherwise earning slightly more than $15 per hour might see their wages rise as well. But 1.3 million other workers
would become jobless, according to CBO’s median estimate. There is a two thirds chance that the change in employment would be between about zero and a decrease of 3.7 million workers. The number of people with annual income below the poverty threshold in 2025 would fall by 1.3 million.
• The $12 option would have smaller effects. In an average week in 2025, it would increase wages for 5 million workers who would otherwise earn less than $12 per hour. Another 6 million workers otherwise earning slightly more than $12 per hour might see their wages rise as well. But the option would cause 0.3 million other workers to be jobless. There is a two-thirds chance that the change in employment would be between about zero and a decrease of 0.8 million workers. The number of people with annual income below the poverty threshold in 2025 would fall by 0.4 million.
• The $10 option would have still smaller effects. It would raise wages for 1.5 million workers who would otherwise earn less than $10 per hour. Another 2 million workers who would otherwise earn slightly more than $10 per hour might see their wages rise as well. The option would have
little effect on employment in an average week in 2025. There is a two thirds chance that the change in employment would be between about zero and a decrease of 0.1 million workers. This option would have negligible effects on the number of people in poverty.
The two main sources of uncertainty about the changes in employment are uncertainty about wage growth under current law and uncertainty about the responsiveness of employment to a wage increase.
If the papers Menzie have been linking to about the role of monopsony power are right (and the empirical work is impressive), increasing the minimum wage to $12 an hour will likely not lead to any material decreases in employment and could even raise employment. But of course our Three Stooges (Bruce, Manfred, and Princeton Steve aka NJ’s David Duke) will never admit this.
Menzie,
Thanks for posting this paper that verifies my claim in another thread that there are likely to be degrees of monopsony power in different locations/industries, just as there are well known degrees of monopoly power on the other side of markets.
But but but Princeton Steve notes the authors failed to cite any single employer towns so there can be no more discussion of monopsony power. Never mind that there measure of labor market concentrate highly correlates with lower wages. You and I might appreciate how they noted this was a movement along the labor supply curve predicted by the excellent writings of Joan Robinson. But of course Princeton Steve does not need to read her writings as he learned his economics from Fox and Friends!
Kevin Drum does something Bruce Hall is incapable of doing:
https://jabberwocking.com/cbo-says-impact-of-15-minimum-wage-will-be-mixed/
Bruce reads a short cherry picked line from the CBO analysis of the effects from a $15 minimum wage and presents this as its ultimate conclusion. Of course Bruce Hall was doing what he excels at – lying.
Kevin Drum reads the entire report, actually THINKS, and provides a coherent and honest summary. Take a look at what Kevin wrote – we know Bruce Hall won’t.
I told all my friends in QAnon this is the next step in the great liberal conspiracy after they kidnapped Archie Yates at the basement of Comet Ping Pong. Now Republicans are joining the Covid-19 hoax!!!!
https://www.cnn.com/2021/02/08/politics/ron-wright-congressman-dies/index.html
/sarc
CBO weighs in on minimum wage:
https://www.cbo.gov/system/files/2021-02/56975-Minimum-Wage.pdf
About what Menzie and/or the economics orthodoxy would have expected the CBO to say.
The latest from the genius Princeton Steve. Suppose you are working in New Haven for a mere $7.50 and some NYC firm offered you $9 an hour – which amounts to an extra $12 a day. Let’s see the cost of the Metro North ticket and the value of your time for a commute over 3 years has to be a lot less than $12 – right?
Isn’t this settled? Princeton Steve is the dumbest troll ever. Hey Bruce Hall – you need to try harder!