Krugman decided to write about the minimum wage today.
As one would expect, he is all for raising it. He provides non-controversial assertions that:
- It’s low by historical standards.
- Foreign competition is not a relevant factor.
- He likes the E.I.T.C. and it compliments the minimum wage nicely.
- The public favors it.
- A higher minimum wage raises earnings.
So far so good, but unfortunately as an economist it’s hard for him not to escape talking about the economics of it all. That’s where he gets a little lazy. He begins by providing some decent rhetorical cover:
Doesn’t that violate the law of supply and demand? Won’t the market gods smite us with their invisible hand? The answer is that we have a lot of evidence on what happens when you raise the minimum wage. And the evidence is overwhelmingly positive: hiking the minimum wage has little or no adverse effect on employment, while significantly increasing workers’ earnings.
“A lot of evidence?” Okay! Nice. Finally. Krugman the Nobel winning economist will no doubt provide us with more than that ONE STUDY that all minimum wage advocates throw out incessantly. There have to be scores of them, right?
While there are indeed more wage studies that back up the notion that traditional supply and demand curves don’t exist in the labor market, he provides none. For those who are after data and peer-reviewed research, He links us to a page that cites two (2) studies as evidence. One is (you guessed it) that tired old Card and Krueger research. The other takes us to a 404 page.
What does Krugman’s “a lot of evidence” page link to that’s not a 404? How about a meta-analysis of scores of research papers that concludes: Based on their comprehensive reading of the evidence, Neumark and Wascher argue that minimum wages do not achieve the main goals set forth by their supporters. They reduce employment opportunities for less-skilled workers and tend to reduce their earnings; they are not an effective means of reducing poverty; and they appear to have adverse longer-term effects on wages and earnings, in part by reducing the acquisition of human capital.
In the field of scientific criticism, Krugman and his acolytes are invoking something called the Fallacy of The Crucial Experiment. This is where one claims an idea has been proven by a single pivotal discovery.
Following the theme of The Crucial Experiment, two can play. For some time, I’ve wanted to challenge the folks who lean so heavily/exclusively on Card and Krueger to a little game. For every study you invoke that apparently invalidates the law of supply and demand (where the minimum wage has no negative effect on employment), I’ll match it. Below is my counter to Card Krueger, plus an extra. Now I’m one ahead of Krugman. Happy to keep playing in the comments.
“We confirm our earlier findings that business assistance living wage laws boost wages of the lowest-wage workers, at the cost of some disemployment…” Here.
These disemployment effects in turn imply `minimum wage’ elasticities of about -0.4 (ranging from -0.3 to -0.5). Here.