Monday, January 18, 2016

A Mercatus Center Economist Becomes Confused About the Impact of the Minimum Wage

Scott Sumner, Director of the Program on Monetary Policy at the Koch-funded Mercatus Center at George Mason University, writes that the deeply flawedDvaid Card and Alan Krueger study on the minimum wages has changed his views on the impact of the minimum wage:

I became less confident that modest increases in the minimum wage would lead to substantial job loss, due to studies such as Card and Krueger. I still believe minimum wage laws have costs apart from job loss, such as reduced working conditions, and would still prefer a low wage subsidy targeted at adults. But I now think the job loss effects are much less clear than before.
This comes after the Director of the Mercatus Center, Tyler Cowen, wrote that Card and Krueger deserve a Nobel Prize.

For the many flaws in  Card and Krueger, see here.

 -RW

4 comments:

  1. A modest increase will result in modest job losses.

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    1. Unless a large number of employees have income on the edge of their productive value and cheaper alternatives are available. IE you could bump up fast food workers salaries little by little until the straw that breaks the camel's back causes a large portion of the industry to invest in automation. Where is this "tipping point"? I don't know, and for damn sure neither do the hacks dictating these policies.

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  2. I don't see the problem with Sumner's comment. In many parts of the Bay Area, we have relatively high minimum wages and relatively low reported rates of unemployment. In a high cost place like San Francisco, it may be the case that potential workers won't be willing to offer their services on the legal labor market for less than $12 per hour (choosing instead to rely on government benefits and/or to work under the table). If that's the case, raising the minimum wage from $11 to $12 doesn't make much difference.

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    1. I remember fast food places offering starting wages at $15/hour during the dotcom boom in 1999. SO what?

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