Agenda driven "economists"
Six hundred and fifty economists have signed a letter supporting a "modest increase" in the minimum wage.
Russell Roberts at Cafe Hayek responds:
What were they thinking? Little or no effect on employment? How can you sign your name to something like that and call yourself an economist? I guess you could argue that there's little effect on TOTAL employment. That effect is very hard to find empirically because so few workers are affected by the minimum wage and its impact gets swamped by other factors. But among low-skilled workers, the ones we want to help? Maybe the people who signed believe that "modest" increases in the federal minimum wage (to $7.25) would effect so few people (many of whom are already covered by state minimum wage laws), that the effect is mainly symbolic. So signing a petition is more of a political statement than a statement about economic reality.If you own a small business and you operate at a certain budget that includes your labor costs and suddenly the government gives your lowest paid employees a $2.15 raise (the most talked about wage increase is to $7.25 from the current $5.15) then you are going to have to cut some people loose. Minimum wage laws hurt the very people who they are meant to help.It wouldn't bother me if they petitioned for social programs that would help workers who lose their jobs due to an increase in the minimum wage. You can be in favor of that and still be a first-rate economist—you believe that the benefits of increasing the minimum outweigh the harm and you'd like to mitigate the harm. But to argue that there's no harm, that there's a free lunch because the demand curve for low-skilled labor is vertical? How do you defend that?
Hat tip to the Club for Growth.
Comments
I get the feeling we'll never see eye-to-eye on the value of there being a minimum wage, but one point where I'd agree with you is an increase of +/- $2.00 doesn't qualify as "modest." That's a pretty big hit to employer budgets to require all at once. If there's going to be a minimum wage at all, they can't just go nearly ten years without increasing it and then ask for a huge increase all at once. They need to do it a little at a time and correlate it with inflation.
Posted by: Rusty | October 12, 2006 01:39 PM
The Cato Institute did a study a few years back where they found that fewer than one out of every five minimum wage workers actually had to support a family.
I don't see the point in giving high school and college kids $2 extra per hour to blow on condoms, beer and weed.
Posted by: Jason | October 12, 2006 01:53 PM
If there's going to be a minimum wage at all, they can't just go nearly ten years without increasing it and then ask for a huge increase all at once.
My views on the minimum wage are different than yours' but I would still say that this worry isn't as large as we might think it would be.
Because of inflation, $5.15 in 2006 isn't the same as $5.15 in 1996. I don't have the numbers in front of me, but I would think that the percentage of jobs in the U.S. that paid the Minimum Wage is lower today than it was a decade ago.
This is because even jobs that we think of as minimum wage "McJobs" likely pay more than $5.15 an hour. Other than inflation, another reason why these jobs pay more than $5.15 is that technology has made it so even the most unskilled worker can have enough productivity in a given hour to justify paying more than today's current minimum wage. Therefore a bump up to $7.25 an hour wouldn't be as large a leap as it seems. The more likely scenario is these "McJobs" employers having to increase their wages from, say, $6.25 an hour to $7.25.
That being said, I agree with Jason that such minimum wages really only affect those between the ages of 15-24 who are either (A.) high school kids working their first job, or (B.) high school dropouts who have never held a steady job of three months or longer.
And making it more expensive for employers to hire such low skill and inexperienced employees will only cause these employers to hire less of them. And that ain't a good thing.
Posted by: Doug | October 12, 2006 05:30 PM