Margins of Adjustment—Again

February 24, 2021
I posted about my student's paper on non-employment margins of adjustment before I'd seen Jeffrey Clemens' paper on the same topic. In the context of the minimum wage, Clemens' paper invites us to re-capture the "old learning" when process and property rights thinking formed the core of economists' approach to understanding markets. He writes:
In response to a minimum wage increase, a firm might adjust its noncash compensation offerings. Academics and their employers, for example, contract over the generosity of benefits including health insurance, pensions, research budgets, and travel budgets. Across all US workers, the US Bureau of Labor Statistics (2020b) documents that wages and salaries account for roughly 70 percent of total compensation costs. Benefits including health insurance, paid leave, and pensions account for much of the rest.
In addition to changing noncash compensation, employers may adjust job attributes like effort requirements, schedule flexibility, and training opportunities in response to changes in minimum wages. Positive aspects of jobs are often referred to as “non-compensation amenities,” while negatives are known as disamenities. Conceptually, a firm facing minimum wage increases might seek to offset some of the increase in costs by raising productive disamenities (like effort requirements) and reducing unproductive amenities (like the quality of office furniture).
An opening for future research would attempt to explain variation in the margins of adjustment in the face of price controls.