The Resolution Foundation Discovers Labour Economics

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The Resolution Foundation thinks of itself as a think tank, one that can – and does – uncover the secrets of how we should live our lives. The one problemette with this is that they are remarkably unaware of the reality outside that window.

Always a useful example of whether people are observing reality is their reaction to minimum wages. It’s fine to say that yes, it’ll be low paid people who lose their jobs that carry the costs – but those costs are worth it. We can disagree with you but your statement is factual, at least the bits that are factual are factual you understand. If you go around saying that rises in the minimum wage don’t lead to anyone losing their job then you’re wrong and aren’t competent to opine on the subject.

The Resolution Foundation is in that second camp. Higher minimum wages are nice so therefore they never will have any deleterious effects. Then, today, they start to actually meet labour economics:

Young workers most likely to have lost jobs during Covid-19 crisis
Resolution Foundation report confirms under-25s hardest hit by the economic fallout

Well, yes, obviously.

In a report published on Tuesday ahead of unemployment figures expected to show the first signs of the pandemic’s impact on the labour market, the Resolution Foundation said younger and older workers were the most likely to have lost their jobs or had their incomes reduced.

Clearly this is what will happen. There’s less demand out there. So, some workers aren’t needed in the various production processes to make stuff to meet that demand. We’re not really stretching intellects in explaining this so far. So, who is going to get junked?

Well, if you were running a factory and demand fell which machines would you turn off first? Those that are most expensive to run, obviously. But it’s not those with the highest input costs, it’s those with the highest input costs related to revenue from their output. You turn off the least efficient machines first.

Young people are, by definition, those with fewer skills and experience. They’re going to be less productive. So, who gets fired first in the hard times? Those young, inexperienced and relatively inefficient workers.

Again, we’re not entirely stretching the bounds of credulity with our explanation here.

Cool, economic hard times hit the young get fired.

What happens when the price of labour rises? The economic hard times have just hit. So, who gets fired? The young and inexperienced. So, who carries the costs, the weight, of a rise in the minimum wage? The young.

As and when the Resolution Foundation wakes up to this perhaps we’ll allow them to call themselves a think tank – until then there’s not enough thinking going on there, is there?

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John B
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John B

‘ Those young, inexperienced and relatively inefficient workers.’

Also known as last in, first out.

john77
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john77

“last in, first out” wasn’t purely done on efficiency – it was to buy loyalty from the workforce by pretending that the boss was loyal to long-serving employees.
You do have a point, it’s just not quite that simple.

Michael van der Riet
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Michael van der Riet

So showing loyalty to long-service employees by giving them security of tenure is pretending to show loyalty to long-service employees. I’m trying to match this with my list of tortured logic to see where it fits in.

TD
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TD

The young are disproportionately minority. If they lose their jobs there’s a reasonable chance they’ll move away. Blacks have been moving out of the American north for years. Any reason to believe that isn’t also a goal of minimum wage increases? Progressives are kind of sneaky.

Spike
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Spike

Young workers are indeed less productive, but not necessarily less efficient (productivity as a ratio of pay) provided you can pay them appropriately. When a minimum wage means you have to pay a premium to take a flyer on them, they are indeed the first ones laid off, just as – when we crank the minimum wage even higher to be even fairer to them – they aren’t hired in the first place.

Snarkus
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Snarkus

have to disagree, at least in high skill industries like IT. Older workers with highest skills were and are first out the door. Even very effective sales staff at big companies are finding this or there would not be class actions against IBM, Oracle etc.
Modern management sack the most expensive staff first because there is no assessment of cost benefit in any multinational or a few government jobs I have worked in. Cut costs is mantra, no matter how self defeating.