Minimum-wage advocates parrot the claim that this is a win for fast-food workers. They cite a few studies to argue that those workers will earn more and suffer no job loss, and that poverty will fall. But a growing body of research demonstrates that the small number of studies advocates rely on are flawed.
The favorite study of minimum-wage advocates, which is also most germane to California’s situation, is David Card and Alan Krueger’s 1994 study of the fast-food industry in New Jersey and Pennsylvania. This study claimed not only that there was no job loss when New Jersey raised its minimum wage, but also that New Jersey fast-food employment rose substantially. On its own, this baffling conclusion should have been enough to arouse suspicion. Subsequent research I did with William Wascher established that data flaws from a poorly designed telephone survey were responsible for the dubious findings. Fast-food franchisees’ payroll records showed that fast-food employment fell, with each 10% increase in the minimum wage reducing employment by nearly 2%.
The second paper advocates often cite is a 2010 study of restaurant workers that also claims higher minimum wages don’t cost jobs. This study argues that you can get the “right” answer on the employment effects of minimum wages only by comparing areas where the minimum wage went up with nearby areas (counties on either side of state borders) where the minimum wage didn’t change. Doing this, the authors concluded, demonstrates that there’s no evidence that higher minimum wages reduce restaurant employment. This study has been touted as “one of the best and most convincing minimum wage papers.” Yet paralleling the unraveling of the New Jersey fast-food study, in recent work we find that the cross-border strategy this paper uses biases the results against finding that minimum wages cost jobs. Once corrected, we again find that each 10% increase in the minimum wage reduces employment by about 2%—and perhaps more over time.
Many human choices appear irrational relative to a formal model of rationality used for modelling purposes in the social sciences. But more holistic concepts of rationality more faithful to the human experience indicate that behavioural inconsistencies can sometimes be reasonable.
My book, New Paternalism Meets Older Wisdom published by the Institute of Economic Affairs, offers some reflections on the issues just summarised through the lens of two giants in the history of philosophy and economics, Adam Smith and David Hume. I come alongside recent engagements with the new paternalism, bolstering criticisms with formulations from intellectual history.
Any enforcement action by this new investigatory body will necessarily be arbitrary, as all characterizations of pricing as excessive or predatory (or reasonable, for that matter) are subjective. Historically, official attempts to define gouging have pursued different approaches, but primarily refer to prices rising to a degree that generates politically actionable complaints. At times a “price increase threshold” has been cited, defining some dollar amount or percentage increase as excessive. Elsewhere, the designation of goods and services as “essential” has been used to justify interfering in the function of markets. Emergency circumstances have also been invoked — ironically, precisely when unfettered prices are at their most critical — to justify invalidating the decentralized workings of the price system.
Arnold Kling wonders what’s in store for Israel (and the Jews) over the long run.
The Environmental Protection Agency chose Good Friday to roll out its burdensome electric truck mandate, no doubt so fewer people notice. Biden officials well know the damage they are doing, but the damage in the name of climate change is the point.
EPA’s new emissions standards for heavy-duty trucks will effectively require that electric semi-trucks make up an increasing share of manufacturer sales from 2027 through 2032, similar to its recent rule for passenger cars. The difference is that the truck mandate is even more costly and fanciful.
