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Even from Paul Krugman, A Surprising Argument

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Here’s a letter to Business Insider:

Interviewed on September 8th by Joe Wiesenthal, Paul Krugman argues [2] that the “adverse consequences” of raising the minimum wage – even to $15 per hour – “would be much less than people imagine.”  Such an argument from Mr. Krugman isn’t surprising.  What is surprising is his reasoning – in particular, his assertion that most minimum-wage workers are in jobs that are especially difficult to mechanize.

First, mechanization isn’t businesses’ only response to mandated higher costs of employing low-skilled workers.  Other responses include working low-skilled employees harder, substituting a smaller number of higher-skilled workers for a larger number of low-skilled workers, and simply forgoing the performance of some tasks normally done by low-skilled workers.  (Supermarkets don’t have to offer to carry customers’ groceries to their cars.)

Second and more pointedly, most low-skilled workers perform tasks that are especially easy to mechanize.  Just ask Pres. Obama who famously lamented banks’ replacement of tellers with ATMs [3].  Low-skilled jobs are routine, often rote, and require from workers comparatively little creative judgment.

Mr. Krugman would do well to brush up on the history of minimum-wage hikes – for example, by reading the relevant section of economist David Henderson’s 2002 book, The Joy of Freedom.  There, Prof. Henderson recounts that “[i]n the late 1960s, Otis Elevator pushed for an increase in the minimum wage in New York state because it had begun to specialize in converting human-operated elevators to automatic elevators and wanted an increase in demand for its services.”*  Just as low-skilled elevator operators of yesteryear were especially easy to replace with machines, many low-skilled workers today are especially easy to replace with machines.

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

* David R. Henderson, The Joy of Freedom: An Economist’s Odyssey [4] (Upper Saddle River, NJ: Prentice Hall, 2002), pp. 112-114.

For the pointer to the Krugman clip, I thank John Messina.

UPDATE: David Henderson e-mails me to report that he committed a slight error in his 2002 book.  (David said he “blew it.”  I think the error is too small to warrant such a harsh description.  You decide.)  Anyway, it wasn’t the Otis Elevator Co. that lobbied for a hike in New York state’s minimum wage; this lobbying was done instead by the union of Otis Elevator Co. employees.  (So much for the myth that “labor” shares a uniform interest.)  Good to have this correction, although the point of that part of David’s excellent book – and of my letter – still stands unaffected.