Great post Zach. I think the issue is that the equilibrium for wages is currently above the minimum wage, so raising it will likely have little effect right now. But that doesn't mean it's the right thing to do.

Of course the critical difference is that labor is not just "like any other commodity."

That is until you show me a pork belly that buys itself a house, a car, etc. Or that needs the (taxpayer-funded) social service net when it falls ill and cannot afford medical insurance.

I.e. labor also consumes and its consumption patterns are a function of how much we pay for it. Moreover there are resources that labor will consume whether or not we pay labor; then the only difference becomes whether or not labor itself pays for that consumption (out of its own pocket) or society pays for it, in the form of welfare assistance, etc.

Finally, I am not terribly fond of the prognostications of economic theorists with regard to minimum wage issues, particularly because economists are apt to become too enamored of the efficacy of their models while too ready to discount the experience of the real world. When you've built your whole academic career on the premise of supply and demand, you're not going to be exactly warm to the notion that there may be a commodity (labor) that doesn't respond to the premise.

I think a far better task would be to examine our historic experience with wage laws. The minimum wage in our own country was higher than it is now for most (if not all, I have to go check) of the 1950s and all of the 1960s (when it hit an all-time high of $8.50 an hour in today's dollars).

Have things become, economically, better for those at the bottom of the wage scale as the minimum wage dropped over the past three decades -- as the economist's models tell you "must" have happened?

Are those at the bottom of the wage scale in other western countries, all of which have significantly higher minimum wages than the US', worse off than those at the bottom of the wage scale here -- as a result of their country's $10-$11/hour minimum wages? Ireland, often held up as an emerging low-take, free-market utopia has a minimum wage of $11 an hour.

How do we square that with the fact that it seems to be doing better than the economists' models predict?

Great post.

In addition to the question of whether raising the minimum wage will raise unemployment, there are other negative side effects which are nearly certain to occur to some extent. One is that if you increase the price of labor, prices of goods will also increase, and that will erase some of the benefit of increased wages for low-income workers. Another is that increased cost of *legal* labor will lead to an increase in paying undocumented workers "under the table."

Then again, "increasing the price of labor," (raising the minimum wage) puts more money in the pockets of low-wage workers, allowing them to spend more on goods and services.

From what I gather, the overall consensus is decidedly not that "it is more likely that raising the minimum wage will hurt employment," but that modest increases in the minimum wage (as the Dems are proposing), have little to no impact on corporate bottom lines and/or rates of unemployment.

Meanwhile Gallup and CNN polls show public support to be extremely high (up in the 80% range). Remember the '06 midterms? The American public has made it's wishes known, and now the Dems are gonna act.

Meanwhile Gallup and CNN polls show public support to be extremely high (up in the 80% range). That sentence refers to support for raising the minimum wage. Sorry.

"...if you increase the price of labor, prices of goods will also increase, and that will erase some of the benefit of increased wages for low-income workers."

I still cannot accept this at face value. Give me an example of such a phenomenon. Use the example of the '96 federal hike raising good costs country-wide or city or state examples (like Chicago or Oregon 1998).

What goods specifically? Certainly none that the low-income laborer partakes in. Would Walmart raise the price of milk if they had to pay their workers more? They live in a vaccuum uninfluenced by the dairy farming market or pasturizing process? This is simply not true becasue Costco and other retailers already pay above minimum wage and Walmart would need to compete - thereby keeping their good prices low no matter their costs in labor. The argument is terribly foolish, IMHO.

Every dollar increase in the minimum wage will cause another million or more Mexicans to enter the country illegally. However, the irony of unintended consequences is always lost on those who favor this and other aspects of socialism.