As I mention in the post, it’s not just theory and common sense, but also evidence from other domains. If the demand curve for labour low skilled labour is vertical, then it is all but impossible that a massive influx of Cuban workers during the Mariel boatlift had close to zero effect on native US wages. Nevertheless, that is what the evidence suggests.
I am happy to be told of other theoretical explanations of why minimum wages don’t reduce demand for labour. The ones I am aware of in the literature are monopsonistic buyer of labour (clearly not the case), or one could give up on the view that firms are systematically profit-seeking (also doesn’t seem true).
The claims that are wrong are the ones I highlight in the post, viz that the empirical evidence is all that matters when forming believe about the minimum wage. Most empirical research isn’t that good and cannot distinguish signal from noise when there are small treatment effects e.g. the Card and Krueger research that started the whole debate off got their data by telephoning fast food restaurants.
As I mention in the post, it’s not just theory and common sense, but also evidence from other domains. If the demand curve for labour low skilled labour is vertical, then it is all but impossible that a massive influx of Cuban workers during the Mariel boatlift had close to zero effect on native US wages. Nevertheless, that is what the evidence suggests.
I am happy to be told of other theoretical explanations of why minimum wages don’t reduce demand for labour. The ones I am aware of in the literature are monopsonistic buyer of labour (clearly not the case), or one could give up on the view that firms are systematically profit-seeking (also doesn’t seem true).
The claims that are wrong are the ones I highlight in the post, viz that the empirical evidence is all that matters when forming believe about the minimum wage. Most empirical research isn’t that good and cannot distinguish signal from noise when there are small treatment effects e.g. the Card and Krueger research that started the whole debate off got their data by telephoning fast food restaurants.