John T. Harvey — The Real Argument For Raising The Minimum Wage

There continues to be a great deal of debate over the economic impact of the federal minimum wage. Does it serve as a drag because it raises firms’ costs or do businesses experience higher sales as a result of the rise in their customers’ income? Obviously, if you consider only one side of that equation or the other–as most amateur analysts do–you reach a biased conclusion. The real question is, what is the net impact after all the relevant relationships are considered?

Fortunately, this has already been addressed in myriad professional, peer-reviewed studies using both mathematical modeling and statistical evidence. And there appears to be something of a consensus: changes in the minimum wage have little to no impact on employment (see for example: Why Does the Minimum Wage Have No Discernible Effect on Employment?). Apparently, the change in cost is largely offset by the change in demand and other factors. A little boring, perhaps, but it’s always a cause for celebration in my discipline when we get anything close to an agreement!

But if that is true, then what is the point of raising or lowering it?….

Forbes — Pragmatic Economics
The Real Argument For Raising The Minimum Wage
John T. Harvey

Simon Wren-Lewis — On the Stupidity of Demand Deficient Stagnation

In my last post I wrote about “why recessions caused by demand deficiency when inflation is below target are such a scandalous waste. It is a problem that can be easily solved, with lots of winners and no losers. The only reason that this is not obvious to more people is that we have created an institutional divorce between monetary and fiscal policy that obscures that truth.” I suspect I often write stuff that is meaningful to me as a write it but appears obtuse to readers. So this post spells out what I meant.

Mainly Macro
On the Stupidity of Demand Deficient Stagnation
Simon Wren-Lewis | Professor of Economics, Oxford University

My comment there:

Props for crediting MMT.

As you say, this is not innovation in macroeconomics or politics. At the time of the Great Depression, New Deal and WWII, it was advised by Fed chair Marriner Eccles and FRBNY director and then chair Beardsley Ruml, for instance.

As Paul Krugman has noted, what was known previously has been forgotten. MMT economists admit that most of their contribution has been weaving various existing thread together, for example, Wynne Godley's SFC macro modeling using sectoral balances, Abba Lerner's function finance, and Hyman Minsky's analysis of financial instability, as well as his proposal for an employer of last resort-job guarantee similar the the WPA and CCC of the New Deal, which was later the inspiration for the Peace Corps created by JFK. 

BTW, as you may have heard, MMT economist Stephanie Kelton has just been hired as chief economist for the minority of the US Senate budget committee, and she is taken a two year leave of absence from the University of Missouri at Kansas City. Hopefully, she can get the ball rolling on some of this in the US Congress.

Richard Wood — To the G-20: It Is Demand Deficiency, Not Supply

The Eurozone countries and Japan are now falling back into recession/depression and deflation, and their public debt levels are grossly excessive, and still rising. The deepening economic crisis in these two large economic blocks could have serious implications for other G-20 countries, as aggregate demand is already weak globally. 

Nonetheless, based on the advice of their officials, G-20 Leaders will soon begin arriving at this month’s G-20 meeting in Australia believing that all monetary and fiscal policy options have been exhausted. Based on that understanding, they will announce around 1000 supply-side structural and infrastructure policies: a display ─ like fireworks ─ that will greatly impress the public. 

However, while microeconomic reform and infrastructure spending have their place, such policies cannot possibly provide the locomotive power needed to sufficiently lift aggregate demand and steer troubled economies to safety.…

Should G-20 Leaders not address demand deficiency directly, they, and their advisers, should never be forgiven.

Economonitor
To the G-20: It Is Demand Deficiency, Not Supply

Richard Wood | former Australian Treasury official, is a guest lecturer at the University of Queensland, Australia