Thursday, March 31, 2016

A UMass Professor is Challenged: Should Economists Use Low-Skilled Workers as Guinea Pigs?

A Don Boudreaux letter to UMass Prof. Arindrajit Dube:

Prof. Arindrajit Dube
University of Massachusetts – Amherst

Dear Arin:

Washington Post columnist Charles Lane, writing today on California’s plan to raise that state’s minimum wage from $10 to $15 per hour, reports that you told him by e-mail that “California’s experiment is worth running and monitoring.”

With genuine respect, I must strongly disagree.  Even you, who generally support the minimum wage, concede that such an unprecedentedly high mandated minimum might well destroy jobs for many low-skilled workers.  So what right have we as economists – what right has anyone – to use poor people as guinea pigs in such an ‘experiment’?  I think none.

If this ‘experiment’ fails, the costs of the failure will not be borne by professors, pundits, or politicians; they will be borne by workers who lose not only current incomes but also opportunities to gain job experience and on-the-job training – experience and training that are key to raising their future wages.  And you must concede that the chances of this ‘experiment’ failing are high.  I cannot fathom how a mandated 50 percent increase the price of any good or service, including especially that of low-skilled labor for which there are numerous substitutes, will not in time reduce the quantities of that good or service that are purchased or hired.  Surely if economic theory does not allow us economists, even without data, to predict with confidence that such an enormous forced hike in the price of low-skilled labor will reduce the quantity demanded of such labor, then we economists should pack our briefcases, renounce our degrees, and admit to the world that our theories give us no practical understanding of reality.

Yet I am, as I hope you are, confident that economic theory does indeed give us some practical understanding of reality.  And if so, what aspect of our economic understanding is more fundamental – and as well-grounded not only in theory but also in practical experience – than the law of demand?  Are you really so unsure of the reality of the law of demand that you are prepared to risk the livelihoods of untold numbers of poor people by endorsing an ‘experiment’ that will work only if that law somehow is suspended (by what force I do not know) in California’s market for low-skilled workers?

Finally, economic science tells us also that politicians do not behave apolitically.  Contrary to the implication of your advice that California’s ‘experiment’ be ‘monitored,’ politicians are not disinterested scientists conducting experiments to discover and implement policies that best promote the public interest.  Instead, politicians are unavoidably subject to political pressures that frequently reward them personally for pursuing policies that benefit concentrated interest groups at the larger expense of the general public.

So because the costs of California’s ‘experiment,’ should it fail, will be spread widely and in mostly undetectable ways among countless low-skilled workers – and because politically influential labor unions will nevertheless benefit even if (indeed, especially if) this ‘experiment’ fails – it is unrealistic to suppose that politicians will call the experiment off if and when it casts large numbers of low-skilled workers into the ranks of the unemployed.

I urge you, please, to use your voice and stature to oppose this ‘experiment’ on California’s most vulnerable workers.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center

George Mason University

The above originally appeared at Cafe Hayek.

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