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Minimum Accuracy, Maximum Illogic

Here’s a letter to The Guardian; (I thank Rush Olson for the pointer to the Guardian report):

Aghast that many businesses have the gall to lobby against legislation that arbitrarily raises their costs, you assert that “a large body of economic research has discredited” the claim that raising the minimum wage destroys jobs for some low-skilled workers (“How a powerful rightwing lobby is plotting to stop minimum wage hikes,” Feb. 20).

First, your report presents a wholly misleading account of the current state of research.  As economists Jonathan Meer (of Texas A&M) and Jeremy West (of M.I.T.) wrote just last month in a revised version of a well-respected paper, “[t]he voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment.”*  Profs. Meer and West, justly critical of the shortness of the time spans examined by ‘pro’-minimum-wage studies, then present powerful evidence that minimum wages do in fact over several years slow job growth for low-skilled workers.

Second, your claims on behalf of the minimum wage are specious on their face.  If you really believe that “employment expands with wages,” you should also believe, say, that newspaper advertising expands with rates.  The fact that you likely understand that newspaper advertising would fall if government were to force all newspapers to arbitrarily hike the advertising rates they charge makes mysterious your failure to understand that employment falls when government forces workers to arbitrarily hike the wage rates they charge.

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

* “Effects of the Minimum Wage on Employment Dynamics” (January 2015)