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Minimum wage laws during a pandemic

Summary:
From Michael Strain at Bloomberg: In July 2019, the nonpartisan Congressional Budget Office estimated that a minimum wage would eliminate 1.3 million jobs. The CBO also forecast that such an increase would reduce business income, raise consumer prices, and slow the economy. The U.S. economy will be very weak throughout 2021. The nation will need more business income, not less; more jobs, not fewer; and faster, not slower, economic growth. A minimum wage would move the economy in the wrong direction across all these fronts. I fully agree, and in fact would go further.  On Twitter I wrote in response to Noah: Surely in a pandemic these businesspeople are right and the accumulated non-pandemic research literature doesn’t apply so much, right? Pretty much all models imply we should cut

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From Michael Strain at Bloomberg:

In July 2019, the nonpartisan Congressional Budget Office estimated that a $15 minimum wage would eliminate 1.3 million jobs. The CBO also forecast that such an increase would reduce business income, raise consumer prices, and slow the economy.

The U.S. economy will be very weak throughout 2021. The nation will need more business income, not less; more jobs, not fewer; and faster, not slower, economic growth. A $15 minimum wage would move the economy in the wrong direction across all these fronts.

I fully agree, and in fact would go further.  On Twitter I wrote in response to Noah:

Surely in a pandemic these businesspeople are right and the accumulated non-pandemic research literature doesn’t apply so much, right? Pretty much all models imply we should cut the minimum wage, if only temporarily, for small business at the very least.

Put in whatever exotic assumptions you wish, a basic model will spit out a lower optimal minimum wage for 2020-21, again for small business at the very least.  This is the advice that leading Democratic economists should be offering to Biden.

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Tyler Cowen
Tyler Cowen is an American economist, academic, and writer. He occupies the Holbert C. Harris Chair of economics as a professor at George Mason University and is co-author, with Alex Tabarrok, of the popular economics blog Marginal Revolution. Cowen and Tabarrok have also ventured into online education by starting Marginal Revolution University. He currently writes the "Economic Scene" column for the New York Times, and he also writes for such publications as The New Republic, the Wall Street Journal, Forbes, Newsweek, and the Wilson Quarterly.

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