Friday, July 24, 2015

Whoa, NYT Columnist Recognizes That Raising the Minimum Wage Causes Unemployment

David Brooks writes:
Some of my Democratic friends are arguing that forcing businesses to raise their minimum wage will not only help low-wage workers; it will actually boost profits, because companies will better retain workers. Some economists have reported that there is no longer any evidence that raising wages will cost jobs.

Unfortunately, that last claim is inaccurate....

Recently, Michael Wither and Jeffrey Clemens of the University of California, San Diego looked at data from the 2007 federal minimum-wage hike and found that it reduced the national employment-to-population ratio by 0.7 percentage points (which is actually a lot), and led to a six percentage point decrease in the likelihood that a low-wage worker would have a job.

Because low-wage workers get less work experience under a higher minimum-wage regime, they are less likely to transition to higher-wage jobs down the road. Wither and Clemens found that two years later, workers’ chances of making $1,500 a month was reduced by five percentage points.
Yes, I know Brooks is using empirical data to explain something that can be more correctly explained on  a theoretical level using  deductive logic, but give the guy a break, he is on the right track and not in denial over the consequences of the minimum wage like many lefties.

Brooks goes on:
The best reasonable guess is that a gradual hike in high-cost cities like Seattle or New York will probably not produce massive dislocation. But raising the wage to $15 in rural New York will cause large disruptions and job losses.
And I am tempted to give him some kind of Henry Hazlitt award for this sweetness:
 The key intellectual upshot is that, despite what some people want you to believe, the laws of economic gravity have not been suspended. You can’t impose costs on some without trade-offs for others. You can’t intervene in the market without unintended consequences. And here’s a haunting fact that seems to make sense: Raising the minimum wage will produce winners among job holders from all backgrounds, but it will disproportionately punish those with the lowest skills, who are least likely to be able to justify higher employment costs.


  1. I didn't read the article,. Does Brooks suggest lowering or eliminating the minimum wage? I suspect his solution would be to offer more government benefits to these low skilled people who are "disproportionally punish(ed)".

  2. Did Walter Block sneak in to the NYT in disguise?

  3. Yes, but you keep a huge dependency class going so that armies of over paid, under worked bureaucrats can retain their jobs.