Monday, July 18, 2011

Does raising the minimum wage increase unempolyment?

There is an intense debate going on at Cafe Hayek ( about whether raising the minimum wage increases unemployment. Mr. David Sirota from the Huffinton Post doesn't seem to think it matters at all, while Don Boudreaux, John Stossel, and myself among others think it does matter on the margins. My 2 cents concerning the debate is below.

"One simple question I have for Mr. Sirota is whether he believes that raising the minimum wage from its current level to say $100/hr would cause an increase in unemployment. I doubt that anyone would think that it would not. So it seems to me that the real question is not whether raising the minimum wage increases unemployment but by how much and at what threshold. Is $5.15 to $7.50 enough? $7.50 to $10.00? $10.00 to $13.00? To argue that the wage level doesn’t matter at all, which is what Mr. Sirota appears to do, goes against not only sound economic theory, but common sense."

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