Tuesday, November 19, 2013
Freakonomics: Minimum Wage
I have read the entire Freakonomics book before and am a huge fan on how Levitt and Dubner explain "the hidden side of everything". This blogpost did not disappoint as again I found it interesting how a Chris Baltman explained the minimum wage dynamic. He presented the question of whether minimum wage increases unemployment by citing sources for both Indonesia and Depression-stricken America. One of the reasons minimum wage increases worked in Indonesia and not America is because Indonesia has a much bigger under the table, informal employment market. When minimum wage increased it moved informal employment to formal businesses sectors thus increasing the demand for products on a scale of those products who are reported excluding under the table markets. They saw increased demand in localized businesses. Indonesia also has more room for improvement as they do not already have some of the new technologies that could help their market. Indonesia has much more room for new policies, increased wages, stricter labor laws, etc. America has already seen much of the reform that came to Indonesia in the 1990s. This explains why different things work for different countries. Countries are in different stages of development, have different policies, or have yet to implement new policies. Also, markets from different countries vary. They have different natural resources, different governments, different capital, and different trading agreements (tariffs).
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Indonesia is especially interesting to look at now for how business can possibly resume after the typhoon and if the business will revert back to pre-1990s. People don't have business anymore because money means nothing in many locations and business's don't have necessary products, locations to sell, or materials. Minimum wage may have been more formalized in the last decade or so but now it will be interesting to see what happens to this still emerging country.
ReplyDeleteIt will be interesting to see what happens to Indonesia. This could be a learning experience for several countries on how they can possibly increase their economy as well as help solve unemployment. Which we could really use in the US right now.
ReplyDeleteI wonder what you think about the possible connections between Marx's ideas about how capitalists systematically underpay employees--meaning they pay them less than they actually produce--and the claim in this article that the minimum wage increase was not destructive because of the same reason--employees were actually being paid less than they were producing! And people say that Marx is out of date!
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