Question

Please read the short article "Making the Case for a Higher Minimum Wage" by Arindrajit Dube, this can be found via milkenreview on the search engine. Please write a 400 word analysis of the text with your economic background. There is not particular questions you have to answer, state what you found interesting, surprising, or confusing. Make connections of the text. Avoid summary as much as possible. Thank you, and I will thumbs up a good answer.

Answer 1

In this article, the author makes a compelling point about the importance of increasing the minimum wage for employees in various different sectors. It is a common notion among the economists across the globe that a higher minimum wage might mean lesser jobs available. It is always viewed as a trade off between higher minimum wage laws and employment opportunities. The reason for this is very simple, we know that icnreasing the wages increases the cost to the employers and hence they will employ less people and we will have less number of jobs available in the market which means that there will be more unemployment, and given the nnumber of high school and college graduates out these who are willing to and require work at this stage, rising unemployment levels is not something ay government can afford. Hence, economists prefer to focus more on unemployment reduction than on increasing the minimum wage levels.

This article, however, provides some very valid points contradicting the same and hence porvides a very different view to this trade-off. According to the author, the employment reduction effects of an increase in the minimum wages is very little and also limited to certain sectors only. The author highlights that prominent published literature related to this always tends to show it as a trade off because of "publication bias", which is the problem that social sciences seem to focus on highlighting the studies that have significant results instead of the ones that have inconclusive results. This means that the studies that have predicted no significant reduction in employment when minimum wages are increased are not given as much importance as the ones that show the trade off significantly. This tends to bias the readers to think that the trade off always exists.

The author also goes on to explain that the long term impact is hardly inspected when it comes to measuring the effect of an icnrease in the minimum wages. Most of the published studies tend to focus on the short run. If the long run effects are also taken into consideration, it can be seen that employment levels do not reduce much in the long run when the minimum wages are increased. This is an important observation from the paper. The article also highlights the fact that certain groups of workers, like teenagers or part-time workers, are most likely to be affected in terms of losing jobs, which is only one segment of the labour force. Most other sectors do not see the said trade off at all. Hence, the article does clearly underline the issues and address the shortcomings of prevalent literature on the same and makes a compelling case for an increase in the minimum wages.