There are some books that ought to be read by people whose attachments to certain ideas is well intended but misplaced. There are many, for example, who insist on the benefits of increasing the minimum wage. However, a large number of empirical studies have demonstrated that raising the minimum wage destroys jobs. The book in question is Minimum Wages by David Newmark and William Wascher, published in 2008. The good thing about the book is that the authors researched a great number of studies throughout decades and that they were supporters of increasing the minimum wage before they embarked on their research. They concluded that there is plenty of evidence that “minimum wages reduce employment opportunities for less-skilled workers.” It is really interesting how advocates reach when it touches their pockets. As Pierre Lemieux tells us in his article “From Minimum Wages to Maximum Politics”, last year the left-wing magazine The Nation demanded that Walmart raise worker’s wages from $8 to $12 an hour. They started an online petition and Walmart replied. They noted that The Nation paid its interns only $4.25 an hour! In the most revealing fashion, The Nation replied: “We are not yet certain how this will work out long term, but for the fall we are anticipating hiring 10 interns rather than 12.” Why do most people in the general public support an increase? First, most people do not look at economics, they just feel themselves through these issues. Second, they are not personally affected because 95% of workers in America already make more than that. That 5% of workers tend to be very young people, many of them students, not heads of households. Although the CBO just told us that about 500,000 workers will lose their jobs if the minimum wage is raised to $10.10 an hour, most people figure that nothing wrong will come “to me.” Economists are split on the issue and that split is almost smacked right down the middle, 50-50. Interestingly, many of them have not done what Newmark and Wascher have: review the literature. They go on with their own theories coated with a thin layer of arcane ideology (on both sides of the issue). Most remarkably, many economists seem to have a naïve understanding of liberty. Please, do not assume that economists integrate sound notions of political economy into their work. Again, from Lemieux, in 2006 a survey was given to economists who have signed a paper supporting increases in minimum wage. Roughly two thirds admitted the possibility of increases in unemployment due to the minimum wage increase; although many added that such would be “minor.” But a number stated that they do not believe that the imposition on employers was against liberty! Some responses were revealing as these economists associated liberty only with “free speech.” Most revealing here is that their ideological commitment to “equality” allows these people to accept a trade-off against some people losing their jobs as long as their preferred ideological commitment obtains: money is transferred from these hands onto the hands of those other people. Ideology is the motive, not economics. There are extra-economic values and ideas leading them. But when they pen their support to campaigns calling to raise the minimum wage, the public thinks, Well, if the economists say so... That is why books like Minimum Wages are so important.
Posted on: Tue, 26 Aug 2014 13:42:20 +0000
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