Monday, October 24, 2016

Barry Ritholtz 1, Strawman 0

A Don Boudreaux letter to the editor of BloombergView:
Editor, BloombergView
Sir or Madam:
Observing that Seattle’s economy continues to thrive following that city’s recent hike in its minimum wage, Barry Ritholtz dismisses opponents of minimum wages as politically biased purveyors of doom who are ignorant of economics (“Doomsayers Keep Getting it Wrong on Higher Minimum Wages,” October 21).  Alas, Mr. Ritholtz slays a strawman.
Contrary to Mr. Rithholtz’s impression, no serious economist predicts that minimum-wage hikes cause unemployment to “skyrocket,” the economy to “collapse,” and “restaurants and small businesses [to] close en masse.”  Instead, the chief prediction is that raising the minimum wage reduces employment of the least-skilled workers, both by destroying jobs outright for some of them and by reducing the number of hours that others of them work.  Yet because the percentage of workers who are so lacking skills that they are directly affected by minimum wages is, thankfully, small, these negative effects can, and often do, occur even as the larger economy and workforce flourish.
Mr. Ritholtz here is akin to someone who, upon discovering that a modest poll tax does not cause democracy to “collapse,” polling places to “close en masse,” and the number of people who steer clear of polling places on election day to “skyrocket,” concludes that opponents of poll taxes are economically ignorant “doomsayers” whose opposition to poll taxes is politically biased and should be ignored.
By the way, had Mr. Ritholtz consulted a serious study of Seattle’s minimum wage – such as that released in July by the University of Washington’s Seattle Minimum Wage Study Team – he would have discovered evidence that is indeed consistent with the standard economic case against minimum wages.  This team finds that, while of course low-skilled workers who remain employed receive higher wages, “the unintended, negative side effects on hours and employment muted the impact on labor earnings….  The effects of disemployment appear to be roughly offsetting the gain in hourly wage rates.”*
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
Fairfax, VA  22030
* “Report on the Impact of Seattle’s Minimum Wage Ordinance on Wages, Workers, Jobs, and Establishments Through 2015,” Seattle Minimum Wage Study Team, University of Washington (July 2016), p. 33.
(I thank Jeff Jacoby for alerting me to Ritholtz’s essay.)
The above originally appeared at Cafe Hayek.

1 comment:

  1. The statistics I found indicate that those earning minimum wage make up about 1% of the total labor force nation wide. Anyone aware of this would not be predicting doomsday due to minimum wage increase. Anyone not aware of this should not be discussed by Mr Ritholtz unless Ritholtz is politically biased.