![]() The same goes for every other narrow category of worker.ģ. Low-skill workers only spend a tiny fraction of their income on goods produced by other low-skill workers. More importantly, the magnitude of these effects almost has to be small. So the severe tension between the minimum wage and immigration literatures persists.Ģ. Advocates have made this argument before. You could just as easily argue that the minimum wage increases workers’ income, leading to higher demand, offsetting the effect of the minimum wage. In all fairness, though, Adam can probably fix his figure and restate his argument. So workers’ demand for goods should fall, not rise. And given vertical labor demand, the effect of increased labor supply would be to reduce total labor income (lower P times constant Q means lower PQ). Perfectly inelastic labor demand is vertical. ![]() Unless I’m seriously confused, Adam’s diagram doesn’t have perfectly inelastic labor demand. ![]() Imply but has not just labor supply but labor demand shifting out as a Has the perfectly inelastic labor demand that the minimum wage results Immigrants move somewhere they don’t just increase labor supply, butĪlso increase demand for goods and services, and businesses in turn will Adam Ozimek has an interesting objection to my claim ( here and here) that empirical work on the disemployment effect of the minimum wage contradicts empirical work on the wage effect of low-skilled immigration:īryan’s immigration example is missing an important point. ![]()
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