> Indexing the minimum wage to inflation is a particularly bad idea, if there is ever a big supply shock and stagflation, you'll get a big increase in the minimum wage at the wrong time, when people and companies are struggling to avoid layoffs.

I assume you agree that in the long run the minimum wage should rise with something like inflation.

Put it in the hands of the Federal Reserve. Then can ensure it does not go up at the wrong times, and does go up the right amount over the long run.

I think it would be nice if wages rose faster than inflation.

I just don't think the government can mandate it. There's nothing that special about labor markets that prices shouldn't be set by supply and demand. If the government e.g. the Fed isn't smart enough to constantly set the price, how are they smart enough to set a rule that would be permanently right?

If government mandates a higher than market-clearing wage, people are going to be out of work who otherwise would be happy to work at the lower wage. There's no economic law that says wages for any or every job will always rise as fast as inflation, if productivity isn't growing, and supply of labor for that job is rising faster than demand.

I kind of think the minimum wage should be more like a labor protection, ie set it 10-20% below the bottom 10% of the wage distribution. Basically for those cases where a local employer is a price-setter, as opposed to a price-taker, or a worker really doesn't have much choice of employer for some reason, or is a really bad negotiator, the employer can't totally abuse it. Just like they can't make you use a chainsaw without protective eyewear.

Even that puts some people out of work. Economic conditions and prices can vary really widely, it's a big country. Kids, people with disabilities, at low wages they might want to work and it might be good for them to get experience and be tied to the labor force, and they might not have the productivity to justify minimum wage as messengers, delivery persons etc. But the law should also allow exceptions, eg people with tips, interns, subsidies for legit programs for the disabled.

I'm not saying the market is perfect, I just don't see the sort of widespread abuse or great benefit of government price-fixing here. Mostly populism and bad economics. If it's OK to fix minimum prices for labor, why not for anything else?

Sticky prices and wages are a big part of recessions, layoffs etc. Quantity adjusts instead of price. So you get layoffs, GDP drops. Doing things that make prices and wages more sticky makes things worse.

One group that benefits from a high minimum wage is cash workers/illegals. Once you push people out of legit employment into the casual sector/black market, they don't get any protections.

> I think it would be nice if wages rose faster than inflation.

It is nice, and there is a history of this happening.

> There's nothing that special about labor markets that prices shouldn't be set by supply and demand.

0. There is a significant imbalance of market power between the buyers and sellers of labour.

1. At the low end the price for labour has important welfare implications.

2. It is hard to create transparency about high end jobs.

> If the government e.g. the Fed isn't smart enough to constantly set the price, how are they smart enough to set a rule that would be permanently right?

The Fed is already setting a price, the price of money (Interest Rates), in a way deliberately designed to manage a balance between unemployment and inflation. They are smart enough to do a respectable job of this, and have managed inflation well.

> I kind of think the minimum wage should be more like a labor protection, ie set it 10-20% below the bottom 10% of the wage distribution. Basically for those cases where a local employer is a price-setter, as opposed to a price-taker, or a worker really doesn't have much choice of employer for some reason, or is a really bad negotiator, the employer can't totally abuse it. Just like they can't make you use a chainsaw without protective eyewear.

I agree, this goal of minimum wage policy is the welfare of low paid workers.

> If it's OK to fix minimum prices for labor, why not for anything else?

I am in favour of a minimum price for alcoholic beverages. Perhaps by a tax based on $2 per standard drink.

During a supply shock, the fed should allow inflation to increase because prices are rising for a real reason. But equilibrium wages should remain steady because workers aren't becoming more productive. Basically this is just a way of saying everyone needs to take a hit to consumption, something which is readily facilitated by inflation. If minimum wages rise but equilibrium low-skilled wages don't rise or even fall, it will lead to layoffs and turn the supply shock into a high-unemployment recession. If the Fed tries to react by reducing inflation, equilibrium wages will fall further making the situation worse, and giving rise to a lot of inefficiencies where some people are shielded from the supply shock and others face the full brunt.