Dollars and Jens
Thursday, February 01, 2007
The Senate has now passed a version of the minimum wage bill that adds on other, more Republican interferences in the economy, leaving the average libertarian all the more confirmed in his dire conception of the term "bipartisan". But this isn't the political blog, so I'll stick to some economic questions about the minimum wage I've been thinking about:
- The minimum wage, of course, has its well-known disemployment effects, but those effects of course impinge primarily on people who otherwise would be making less than minimum wage; this removes the least productive labor, and should increase economy-wide average labor productivity. Has anyone measured this? It's probably a small effect, but I wouldn't be surprised if it could be teased out of the some data somewhere.
- Higher-skilled labor is partially complementary to lower-skilled labor and partly substitutional, but capital, I would at least guess, is primarily a substitute. Demand for capital should go up; neutral real interest rates should increase. The fed, of course, tends to keep a pretty tight rein on short-term interest rates, so this might play out as inflationary, as would increases in wages among low-wage employees who keep their jobs. Any of these effects would interest me, too; can demand for productive capital be measured easily? Could one inflationary effect be disentangled from the other?