Can't cut the minimum wage.

Paul Krugman: Would cutting the minimum wage raise employment?

Krugman ably demonstrates the strange calculus that governs large, complex economies. The basic argument goes like this:

1. If you cut minimum wage, the cost of offering goods and services will decrease, and prices will go down.

2. Employers will use the cost savings to hire more workers, lowering unemployment.

(This will happen even in above-minimum wage jobs, as many jobs are indexed to minimum wage in some fashion.)

Seems sensible, but the problem is:

1. Employers, being in a bad mood and scared, will probably not hire anyone anyway.

2. Because so many people are in debt, falling wages will make their debt burdens more painful.

3. Because most of their income will go to debt service, people will actually spend LESS.

4. It will increase the amount of labor available, reducing in even further depression of wages, leading to 1-3.

5. The local decline in prices will strengthen the dollar. This seems like a good thing because it will reduce energy prices, but it's actually bad as it makes debt burdens heavier.

Nope, apparently what you need to do instead is....RAISE THE MINIMUM WAGE.

Economics is hard. But that's only because it is the study of a large group of people, each with their own contradictory desires.