Krugman Concludes That the Evidence for Minimum-Wage Legislation Is Strong If the Evidence Against Minimum-Wage Legislalation Is Ignored

by Don Boudreaux on December 2, 2013

in Myths and Fallacies, Reality Is Not Optional, Work

Here’s a letter to the New York Times:

Arguing for a higher minimum wage, Paul Krugman misleadingly suggests that the empirical case for raising that wage is far stronger than it really is (“Better Pay Now,” Dec. 2).

He asserts, for example, that “If there were anything to the notion that minimum wage increases have big negative effects on employment, that result should show up in state-to-state comparisons.  It doesn’t.”

Yet it does – at least in many studies that Mr. Krugman would have your readers believe do not exist.  The most well known of these state-by-state comparison studies that find negative consequences of minimum-wage legislation are by economists David Neumark and William Wascher.*

The empirical record simply does not support Mr. Krugman’s confident claim that “a minimum-wage increase would help low-paid workers, with few adverse side effects.”  Much closer to the truth is the former chairwoman of Pres. Obama’s Council of Economic Advisers, Christina Romer, who, although she nevertheless supports raising the minimum wage, concedes that “[t]he economics of the minimum wage are complicated, and it’s far from obvious what an increase would accomplish.”**

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* For example: David Neumark, J.M. Ian Salas, and William Wascher, ”Revisiting the Minimum Wage Employment Debate: Throwing Out the Baby with the Bathwater?” NBER Working Paper 18681 (January 2013),
and
David Neumark and J.M. Ian Salas, “Minimum Wages: Evaluating New Evidence on Employment Effects” (January 2013).

** Christina D. Romer, “The Business of the Minimum Wage,” New York Times, March 2, 2013.

See also this recent paper published by GMU’s Mercatus Center and written by economist Antony Davies.

And I still am awaiting good answers from minimum-wage proponents to these questions.

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