Unemployment rate: how to create causality

samedi 6 mars 2010 ·

So, here you go guys, yesterday Vincent showed you some nice graph about the unemployment rate of young people in the US. By placing strategically some flat red line on the graph, Perry wanted to convince you of a causality link between the rise in the unemployment rate and the increases to the minimum wage.

But there is one major problem with his analysis: he's forgetting a little detail... like a recession! Look at the graph, the increase occurs mostly in the second half of 2008. Overall, the rate is moving from an average of 16% to a peak of more than 26%. All that because of the minimum wage, right? But if we look at the unemployment rate for the entire population, here's what we get:

Starting in 2008, the rate passed from 5% to 10%! In percentages, this increase is actually bigger than the shift from 16% to 26%. And I highly doubt the rate for the entire population is affected that much by the minimum wage. After all, workers in the automobile industry in Detroit were paid way more than 8$ an hour (for those who wonder why this graph is much smoother than the two from Perry, the reason is Perry's data are not seasonally adjusted which is a little bit stupid).

For the record, Mark J. Perry was the same guy who tried to fool us about the GDP of Mississippi being higher than the one from France. All that by using incorrect data from Wikipedia. So please Vincent, stop posting things from this guy, he's almost as bad as Jean-François Lisée, just with a different agenda.

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Bryan Breguet est candidat au doctorat en sciences économiques à l’université de Colombie-Britannique. D’origine Suisse, il a passé les cinq dernières années au Québec au cours desquelles il s’est engagé en politique provinciale malgré le fait qu’il ne possédait pas encore la citoyenneté canadienne. Il détient un B.Sc en économie et politique ainsi qu’une maitrise en sciences économiques de l’université de Montréal. Récipiendaire de plusieurs prix d’excellences et bourses, il connaît bien les méthodes quantitatives et leurs applications à la politique.

Vincent Geloso holds a master’s degree in economic history from the London School of Economics, with a focus on business cycles, international development, labor markets in preindustrial Europe and the new institutional economics. His research work examined the economic history of the province of Quebec from 1920 to 1960. He holds a bachelor’s degree in economics and political science from the Université de Montréal. He has also studied in the United States at the Washington Centre for Academic Seminars and Internships. Mr. Geloso has been an intern for the Prime Minister’s cabinet in Ottawa and for the National Post. He has also been the recipient of a fellowship from the Institute for Humane Studies and an international mobility bursary from the Ministère des Relations internationales du Québec. Currently, he is an economist at the Montreal Economic Institute.

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