At its core, the minimum wage is a coercive extraction of resources from one party (a business owner) to be given to another (a worker) at the behest of elected representatives and/or referendum voters. This is a disconcerting dynamic in a free society where employment is supposed to be a voluntary transaction between employee and employer: a person wants to work, a business needs labor.
This is exactly what Andrew Seltzer found for the introduction of the minimum wage during the Great Depression in certain American industries. In the short-term, the capital was more or less fixed and production methods could not be abandoned easily. In the long run, firms adapted and shifted production methods. This is why Ryan’s argument is convincing. It offers a theoretical explanation for the empirical results observed by Dube, Lester and Reich or Card and Krueger. It fits well with theories of imperfect markets (damn I hate that word that is basically saying that all markets have frictions) like those of Alan Manning (see his Monopsony in Motion here).
This is the kind of work on the minimum wage that, if measured, should force considerable requestionning on the part of minimum wage hike advocates.
Also on minimum wages: Steve Hanke has more evidence of the damage that they unleash on low-skilled workers. (Steve ends his post with this germane observation from Milton Friedman: “A minimum wage law is, in reality, a law that makes it illegal for an employer to hire a person with limited skills.”)
The increasing regulatory burden on the U.S. economy – including the manufacturing sector – is well documented. According to a 2016 study, the Mercatus Center at George Mason University estimated that federal regulation has created a considerable drag on the U.S. economy, amounting to an annual reduction in real GDP growth of 0.8 percent. A 2012 report commissioned by the Manufacturers Alliance for Productivity and Innovation found that the burden of federal regulations on U.S. manufacturers has more than doubled since 2001 – increasing from an estimated $80 billion in 2001 to more than $164 billion in 2011. (Although this report also makes clear that estimates exclude other significant compliance costs.) This report identifies the major cost increases over this decade are attributable to the manufacturing sector’s energy use and emissions. A bold step outlined in President-elect Trump’s contract is a requirement that for every new federal regulation, two existing regulations must be eliminated. This policy would give both Congress and the executive branch agencies a much needed “moment for reflection” before instituting new economically burdensome legislation and administrative rules on manufacturers, among other American industries.