There are a number of relevant articles out about the labor market right now. Despite the tedious-sounding moniker, matters related to medical insurance, overtime, minimum wages, outsourcing, and H1-B visas are arousing a lot of passion, and not merely amongst the high wonkery. The following is summary of some thoughts and useful links on this understandably provocative subject.

First, to my readers from India or thereabouts: I want to extend a heartfelt and vehement apology for the garbage muttered about "shipping jobs to India." I can't emphasize enough my embarrassment at the petulance of the discussion about call-centers in Bangalore. Partly this is simply a matter of common decency; the developed world impacts the economy of countries like India in so many ways, to snarl when the shoe is on the other foot (if that is what it is) is not worthy behavior. Actually, it reminds me of a nursery rhyme from my childhood:

Down in Burma where the bananas grow
A grasshopper stepped on an elephant's toe
The elephant said, with tears in his eyes
"Why don't you pick on someone your own size?"

Folks, the West has spent four centuries thrashing the landscape and the material culture of the world to please its vanity. It is not mete that we object when India or Sri Lanka or the Philippines assume their separate but equal station amongst the call and data entry centers of the earth. Besides, the organization of retailing and production/service for the world economy is in perpetual flux. When I was a lad—and I am not really as old as some readers might suppose—the federal government built a freeway from Bakersfield to Ontario, where it intersected Interstate 10. At the age of eight, I remember this new road (I-15) ran through nothing but irrigated fields and scrubland (like this). Now the area in that photo—actually, a place that used to look just like it—looks like this. Except, it's so garish it makes Las Vegas look like Semipalatinsk. What happened was that the economy of Los Angeles spilled over into the area like the lava flow from a volcano. That lava of frenzied enterprise can flow discontinuously into other areas like Rajarhat, West Bengal, about as easily as to Valencia, California.

Outsourcing is only one of many trends in employment that shape our world. Another, more important one is change in the technology of labor markets—labor markets in the USA have altered drastically in my lifetime, mainly in the advent of the Internet for job searches, leading to a shift in qualifications considered by employers—but also by the glacial response of employers to a new regulatory landscape, one shaped by increased burdens on firms and managers. Outsourcing is sometimes overlooked in favor of labor migration (this writer recalls the H1-B controversy during the go-go 1990's—again, largely affecting Indian engineers immigrating to the USA to work in Silicon Valley) or imports from low-wage countries. Ironically, more American jobs are lost to high-wage countries like France and Italy than to China or Indonesia. Perhaps that requires more explaining, so people ignore it.

The Minimum Wage

The USA has a federal minimum wage of $5.15 per hour. Before it was raised to that, Dick Armee—Republican Majority Leader at the time—said he would "fight an increase with every fiber of [his] being." The argument is that there is a market for labor, just as for fresh tomatoes. Raise the price and demand plummets (unemployment soars). This argument is really old; Nassau Senior, an extremely influential economist of the 1830's, argued that restricting the hours of industrial workers to a maximum of 12 per day would shutter the entire economy of Britain overnight. Imagine that! He argued that all enterprise existed to make a profit, and all profit came from the last hour worked (early marginalism). A century later, AG Pigou and Friedrich Hayek made a similar argument for do-nothing economics, namely, that the reason there was a depression was that labor unions were holding the wage artificially high—preventing wages from falling to a market-clearing price). Pigou and Hayek were ignoring the existence of a country called "the United States of America," where labor unions were virtually illegal and organizers were often lynched; the Depression was far deeper in the USA than it was in the UK, where unions were widespread.

Several states are proposing to raise minimum wages (EPI). Several states have minimum wages set higher than the federal level (map); Washington, my home state, has the highest ($7.15/hr; but San Francisco has a minimum wage of $8.50/hr). Washington has the highest unemployment rate in the nation as well, a coincidence that has not escaped the attention of wage hawks. This is one of those annoying coincidences, because it proves nothing but is very persuasive to TV viewers. If I were in a debate on TV, and my opponent made that point, I would want to say, "that doesn't prove anything, that's statistically meaningless." And I would loose the debate. Washington's labor force was devastated by the debacle at Boeing, whose employees are paid a lot more than minimum wage.

The other point made quite well in the linked EPI essay is that efforts to link unemployment with high minimum wages founder on the timing. Alaska and Oregon have high unemployment and high minimum wage rates, but Oregon's minimum wage law was passed in 1999; the recession there began in '99. Alaska's unemployment rate is high because the population is growing so fast—outpacing a rapidly expanding economy.