Monthly Archives: October 2019

This Explains a Lot: Why Minimum Wage Increases Haven’t Reduced Employment

Posted on October 31, 2019 by Michael Froomkin

One of the striking features of the US economy is how much concentration we’ve allowed in major industries: national monopolies, regional monopolies (e.g. cable), oligopolies. Now come economists tying that trend to why raising the minimum wage doesn’t cause the job losses that micro-economics might predict: one of the things that makes market concentration profitable is that it allows firms to underpay workers (that is, pay them below their marginal productivity). So long as the raise in minimum wage doesn’t rise to a level exceeding the value of the work, businesses rationally decide to hold on to the workers.

José Azar, Emiliano Huet-Vaughn, Ioana Marinescu, Bledi Taska, and Till von Wachter: Minimum Wage Employment Effects and Labor Market Concentration:

Why is the employment effect of the minimum wage frequently found to be close to zero? Theory tells us that when wages are below marginal productivity, as with monopsony, employers are able to increase wages without laying off workers, but systematic evidence directly supporting this explanation is lacking. In this paper, we provide empirical support for the monopsony explanation by studying a key low-wage retail sector and using data on labor market concentration that covers the entirety of the United States with fine spatial variation at the occupation-level. We find that more concentrated labor markets–where wages are more likely to be below marginal productivity–experience significantly more positive employment effects from the minimum wage. While increases in the minimum wage are found to significantly decrease employment of workers in low concentration markets, minimum wage-induced employment changes become less negative as labor concentration increases, and are even estimated to be positive in the most highly concentrated markets. Our findings provide direct empirical evidence supporting the monopsony model as an explanation for the near-zero minimum wage employment effect documented in prior work. They suggest the aggregate minimum wage employment effects estimated thus far in the literature may mask heterogeneity across different levels of labor market concentration.

Spotted via Brad DeLong.

Posted in Econ & Money | Comments Off

Check this Out

Posted on October 29, 2019 by Michael Froomkin

My brother has a new project: Press Watch, “a collaborative project to monitor political reporting and encourage more responsible, informed and informative campaign and government coverage before the 2020 election.”

About This Site

The problem

We’re entering a critical period in American politics and American political journalism is not up to the task. Donald Trump’s campaign and presidency have exposed and exploited chronic weaknesses like never before. And despite some progress, elite political press coverage insufficiently rebuts lies; normalizes abnormal behavior; asserts false equivalences; remains overly susceptible to spectacle, conflict, and gamesmanship; fails to contextualize the news with expertise – and on and on.

The opportunity

Over the past several years, a considerable number of expert groups, commissions, panels and individuals have voiced elements of what, writ large, is a fairly coherent and consistent critique of the current practice of political journalism at our major news outlets (see above). But on a day-to-day basis, it’s diffuse. Press Watch will aggregate, amplify, curate and centralize the consistent application of that critique by a network of smart, critical readers.

We’ve also identified some solutions, such as prominently rebutting misinformation; practicing radical transparency; holding politicians accountable to the citizens’ agenda; imbuing our work with civics lessons; pursuing solutions journalism; and encouraging civic engagement. But too much of our discussion of these solutions is theoretical. There’s an urgent need for practical, recreatable models and best practices.

The work product

A four-day-a-week, real-time assessment of political coverage in the form of a column with critiques harvested from a wide network of expert readers. Our first publishing partner is Salon.com

Guided, goal-oriented workshops – physical and virtual, held in collaboration with journalism schools and other organizations — that dive into specific elements of political reporting and generate concrete deliverables including guidelines, examples, and recreatable models.

The impact

Political reporters are hard to influence. But they are more likely to respond to pressure if the critiques are reasoned, detailed, constant, and coming from respected members of their profession and other experts. They are more likely to do their jobs better if we offer them plausible alternative approaches that don’t create more work or risk. Meanwhile, a lively ongoing discussion of political coverage will encourage the public to read more critically.

The project lead

Dan Froomkin is a trailblazer in the area of online accountability journalism with 21 years of experience building, editing and contributing to websites including the Huffington Post, The Intercept, and the Nieman Foundation’s Watchdog Project. Over 12 years at the Washington Post, he served as Editor of the website and wrote its enormously popular White House Watch column, which aggregated and amplified insightful political coverage. He has taught online journalism at the Poynter Institute and the American University Graduate School of Communication.