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Hall of Shame

Six hundred and fifty economists, many of them illustrious and at illustrious institutions, believe that demand curves are vertical:

We believe that a modest increase in the minimum wage would improve the well-being of low-wage workers and would not have the adverse effects that critics have claimed. In particular, we share the view the Council of Economic Advisors expressed in the 1999 Economic Report of the President that "the weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment." While controversy about the precise employment effects of the minimum wage continues, research has shown that most of the beneficiaries are adults, most are female, and the vast majority are members of low-income working families. 

The full text of the petition endorsing an increase in the minimum wage, along with the economists who signed it, is here.

What were they thinking? Little or no effect on employment? How can you sign your name to something like that and call yourself an economist? I guess you could argue that there’s little effect on TOTAL employment. That effect is very hard to find empirically because so few workers are affected by the minimum wage and its impact gets swamped by other factors. But among low-skilled workers, the ones we want to help? Maybe the people who signed believe that "modest" increases in the federal minimum wage (to $7.25) would effect so few people (many of whom are already covered by state minimum wage laws), that the effect is mainly symbolic. So signing a petition is more of a political statement than a statement about economic reality.

It wouldn’t bother me if they petitioned for social programs that would help workers who lose their jobs due to an increase in the minimum wage. You can be in favor of that and still be a first-rate economist—you believe that the benefits of increasing the minimum outweigh the harm and you’d like to mitigate the harm. But to argue that there’s no harm, that there’s a free lunch because the demand curve for low-skilled labor is vertical? How do you defend that?

(HT: Chris Meisenzahl)