So the talk these days involves raising the minimum wage to $9. This is not supposed to have any effect on unemployment, even teen unemployment. Now it seems at least conceivable that some teens, who tend to have no experience, are not worth hiring at that wage. We are told not to worry about this. All other prices matter, but raising the cost of hiring a teenager by 24 percent won’t have any effect.
Bob Murphy has had a series of posts and a video on the minimum wage in recent days, and I recommend checking out this one in particular. (I suggest scanning his blog for other interesting posts on this and other subjects.) He notes that Paul Krugman’s support for the minimum wage increase seems hard to square with the Keynesian argument for monetary stimulus, which is this: we need to increase the money supply to push wages down relative to prices in order to increase employment. We are supposed to believe that it simultaneously makes sense to raise some wages by 24 percent.