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June 22, 2004
The NYT on Economists on the Minimum-Wage
Don Boudreaux
I don’t know precisely what portion of the empirical studies of the effects of the minimum wage finds that raising this wage increases unemployment. My sense – and that’s all that it is: a sense, re-enforced recently by a quick Google search – is that a sizeable majority of these studies finds that raising the minimum wage does indeed increase unemployment among low-skilled workers.
Of course, the most notable exception to this finding is the Card-Krueger article in the September 1994 issue of the American Economic Review ("Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania.")
Nevertheless, John Kerry’s recent call to raise the minimum wage brought to mind an infuriating little ditty I read years ago in the New York Times. So, I searched the Gray Lady’s archives and, sure enough, found just what I remembered. It’s from the January 15, 1995 edition, in the “Business Diary” section, written by Hubert B. Herring.
Here it is in its entirety. Keep in mind, as you read it, that it appeared within months of the publication of the Card-Krueger article – an article that made news precisely because it reached conclusions so at odds with conventional wisdom and with the bulk of empirical studies of the effects of minimum-wage legislation:
Oh, Yes: The Minimum WageIt’s often hard to tell Democrats from Republicans these days – from the silvery wads of hair atop Bill Clinton and Newt Gingrich to those near-unison tax and welfare cantatas. But one issue survives: the minimum wage. Mr. Clinton, campaigner, vowed to raise it; Mr. Clinton, President, shelved it as he took that messy health care detour. Now it’s back. Al Gore and Richard Gephardt (who calls it “a metaphor for the differences” between the parties) want to raise the wage, whose buying power is slipping mercilessly, while Dick Armey, House Majority leader, wants to scrap the wage floor entirely. The case for keeping it at $4.25: raising it would mean wide job losses, and most low-wage workers are teen-agers, not breadwinners. Economists beg to differ: their studies predict negligible job losses, and show that just a third of four million minimum-wage earners are teen-agers; nearly half provide vital family support. (Emphasis added.)
Card-Krueger is certainly not the only empirical study by economists that failed to find that raising a minimum-wage increased unemployment among low-skilled workers. But to write in the NYT as if economists are in wide agreement that minimum-wage legislation has negligible effects on employment is inappropriate. It would be like finding a biologist who questions the theory of natural selection and then writing that "biologists beg to differ" with Darwinian explanations.
Posted by Don Boudreaux in Regulation | Permalink
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