04 Mar 2016

New Fraser Study on Minimum Wage

Minimum wage, Shameless Self-Promotion 24 Comments

My co-authors at Fraser and I have a new study on the minimum wage. You guys know I am a fount of modesty, but for real, if this topic interests you, I encourage you to read the study when you can. If you are truly interested in seeing some of the twists and turns in the debate, then you need to read the appendix too.

If you’re just a casual fan of free markets, who doesn’t have time for no stinkin study, then at least watch the video below. This is something that is very powerful when arguing that the minimum wage is a blunt instrument for helping “the poor”–most poor people earn more than the minimum wage, and most minimum wage earners are not from poor households.

24 Responses to “New Fraser Study on Minimum Wage”

  1. Transformer says:

    This bit from the study isn’t very AnCap:

    “Finally, we showed policy makers an alternative measure, namely
    enhancing the Working Income Tax Benefit (WITB), which is supported by
    economists across the political spectrum. This program allows workers from
    low-income households to keep more of their earnings, effectively subsidizing
    them to work more. Unlike traditional welfare programs, the WITB
    is specifically designed to minimize the disincentive effects that can occur
    when government assistance is removed at higher income levels. By more
    accurately targeting the desired individuals and avoiding price controls, the
    WITB is a much more sensible approach to channeling resources to the aid
    of the working poor.”

    • Bob Murphy says:

      An-caps like taxing poor workers? (There are parts in there that Rothbard would not have liked, but I don’t think your quote is one of them.)

  2. Daniel Kuehn says:

    I’m a little disappointed the people in the video don’t look like Terrance and Phillip.

    • Bob Roddis says:

      My thoughts exactly. The End is near.

      And you probably thought I was too old and bitter to know the reference.

  3. Transformer says:

    You still have to tax other people to fund the WITB.

    Pick-pocketing is arguably a less bad crime than armed robbery, but it would be weird to find an AnCap using that argument to persuade policy-makers that pick-pocketing should be made legal.

    • Patrick Szar says:

      Isn’t this a case where that would be true if the government actually balanced its budget, but not so when they use alternative methods for covering current spending than direct taxation?

      Also I think this applies to the argument that a tax loophole for anyone should be embraced by ancaps. Rather than poo-pooing one group being less burdened by the state as an injustice, we should see any group burdened by the state as unjust.

    • DZ says:

      More present-day practical arguments are still worth making even if it doesn’t fit the long-term theoretical goal.

    • Andrew_FL says:

      “I submit, to the contrary, that there is a big and crucial difference between
      the government’s taxing Peter to pay Paul, which is a “subsidy” to Paul, and the government’s allowing Paul to keep more of his own funds. That can only be called a “subsidy” on the grotesque assumption that the government really owns all of our property to begin with.” – Murray Rothbard, The Case Against the Flat Tax

      Rothbard probably wouldn’t have like calling it an “effective subsidy” but substantively he was always in favor of as many loopholes in the tax code as possible.

      You are operating on the assumption that the government must collect a certain about of revenue no matter what, so any break for one person has to be made up by someone else.

      • Transformer says:

        There is good free-market case for replacing min wage with EITC-type stuff.

        I was just surprised to find Bob , who said in one of his recent posts that it would be immoral to take people’s money against their will even to save the planet , making it !

        • Bob Murphy says:

          Guys, the refundable part is of course problematic, but in general I think a lot of the recipients could still be net taxpayers when you include everything.

          • Transformer says:

            The IRS describes EITC as “a refundable tax credit. This means taxpayers may get money back, even if they have no tax withheld”

            So for some people this would just be a reduction of tax and supportable from an AnCcap perspective.

            But for others (whose EITC is greater than their tax) it would be a net transfer payment and therefore probably have its origins in theft somewhere down the line.

        • Andrew_FL says:

          For the Unearned Income Credit? There most certainly is not!

          But for a zero, rather than negative tax rate on low income earners? Yes, just as there is a free market case for a zero rate for everyone else.

        • Andrew_FL says:

          Strange definition of what free market is, that there is a case based on it for the Unearned Income “Credit”

          There is a free market case for a zero (non negative) tax rate on low earners. Just as there is a case for a zero tax rate for all earners.

    • baconbacon says:

      “You still have to tax other people to fund the WITB.”

      You can also just cut spending.

    • Reece says:

      The state is already taxing other people. They have a large amount of money, and it’s reasonable that this money should go to people the state is hurting most first (poor people) rather than go to other purposes. I think most libertarians support restitution for victims.

      I’m not too concerned about the possibility of this leading to more taxes for other people for a couple of reasons. First, I don’t find it all that likely that it would be significant. It could even decrease government spending if it is either more efficient than other welfare programs or if these people end up contributing more because of it. Second, I the risk is not nearly high enough that I’m willing to compromise libertarian principles to stop it. I don’t support violating the rights of other people even when there is a chance that it will reduce crime, so I don’t see why I should support it for poorer people.

      • Transformer says:

        I largely agree with your sentiments. I was just surprised to find Bob also apparently supporting policies consistent with this worldview – though I think he differentiates between EITC as a tax break and EITC as a subsidy.

  4. Andrew_FL says:

    Dang it I mistyped my email address again didn’t I?

  5. Bharat says:

    Wow, I’m surprised, I had no idea the demographics were like that. Any plausibility for the minimum wage has gone out the window.

    By the way, quick question: are the Canadian numbers given in Canadian dollars and the US numbers in US dollars?

  6. Benjamin Cole says:

    I am against the minimum wage. That said, why is the topic always the minimum wage, and never property zoning or the near-universal (in USA) criminalization push-cart vending?

    Sure, do away with the minimum wage, but then allow people to set up their own business is by push-cart. Without property zoning, we might see a fella pull a trailer onto his lot and set up his own retail store.

    I would also like to offset FICA taxes on the lower tax brackets, either through QE or gasoline taxes.

    • Andrew_FL says:

      Good luck with that, you inflationist crank

    • Major.Freedom says:

      Why is the topic with you always aggregate spending falling below wage and capital expenditures, instead of all the myriad of regulations, red tape, subsidies, and ideology that prevents wage rates and prices from falling quickly enough?

  7. Transformer says:

    BTW: Beyond my attempt to find a contradiction in Bob’s support for EITC (which I still think is largely, but not totally, a transfer payment to low wage workers) I thought the paper itself was excellent.

    • Bob Murphy says:

      Transformer I salute you; keep me honest. But keep in mind that when most studies talk about people being net recipients under EITC, they are talking purely about income taxes. Those poor workers are still paying sales taxes, gas taxes, etc.

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