Tuesday, January 11, 2011

The Flat Earth Society: Economist Version

From Investor's Business Daily last week, an editorial by Rick Berman of the Employment Policies Institute:

"Liberal advocacy groups who argue in favor of a higher minimum wage have a tough job: Faced with mountains of data countering their argument that wage mandates don't cost jobs, they struggle to find their intellectual footing.

They often display a Potemkin village of 665 economists who subscribe to a theory that suggests labor costs don't factor into hiring decisions. First compiled and promoted by the union-backed Economic Policy Institute, this list of 665 economists is the default appeal to authority the pro-hike activist groups rely on. The list was even inserted into the Congressional Record by Congressman George Miller, D-Calif., during the last debate over raising the federal minimum wage.

Most recently, the list was cited in a report released jointly by the Fiscal Policy Institute and the National Employment Law Project arguing in favor of a new wage mandate in New York City.  An examination of the list by the Employment Policies Institute (EPI) reveals that many of the "experts" supporting wage hikes don't specialize in labor economics. Some aren't even economists at all.

Berman concludes:

You can believe decades of consensus. Or you can choose to believe the 665 "experts" who say that the minimum wage has no impact on employment. As the White Queen said to Alice, "Why, sometimes I've believed as many as six impossible things before breakfast."

29 Comments:

At 1/11/2011 10:02 AM, Blogger W.E. Heasley said...

You sure that wasn’t 666 economists?

 
At 1/11/2011 10:14 AM, Blogger Sean said...

Of course the minimum wage costs job opportunities. But if job opportunities were more than the people to fill them, would the minimum wage raise or lower average income?

 
At 1/11/2011 10:39 AM, Blogger bix1951 said...

The Fair Minimum Wage Act of 2007 was signed into law on May 25, 2007.
The "Great Recession" started December 2007.
The number of unemployed increased by 600,000 from the fourth quarter of 2006 to the fourth quarter of 2007.
Just coincidence?

 
At 1/11/2011 11:01 AM, Blogger Buddy R Pacifico said...

Florida has a constitutional amendment that states the minimum wage must keep pace with inflation. The state is now being sued because the minimum wage went down to of keep pace with deflation!

 
At 1/11/2011 11:23 AM, Blogger juandos said...

'The list was even inserted into the Congressional Record by Congressman George Miller, D-Calif., during the last debate over raising the federal minimum wage'...

Well golly! Miller, eh?

Miller has a track record for avarice...

Hmmm, when was the last time we heard about the supposed consensus and how it turned out to be a fraud?

 
At 1/11/2011 12:01 PM, Blogger Evergreen Libertarian said...

I don't have a PhD, but I do study urban economic issues and believe that the minimum wage law hampers low income youths, especially those in minority groups from finding work.

I would hate to have my opinion and research on any issue tossed out because I don't have the degree that someone wants. I am also of the opinion that the nation has too many people with degrees and not enough with an education.

 
At 1/11/2011 12:14 PM, Blogger Hydra said...

Whats the long term difference between having a job that won't support you and not having a job?

Raising the minimum wage may cost jobs, but that is the wrong argument if the jobs aren't worth having.

I pay above minimum and above the local custom. I could hire my guys more often if I paid them less, but I don't think either of us would be better off.

 
At 1/11/2011 1:16 PM, Blogger Benjamin said...

Maybe after we kill the minimum wage, we can wipe out child labor laws too.

After all, with parental consent, what is wrong with children working? They can learn work skills, and bring neededincome into a family.

 
At 1/11/2011 2:07 PM, Blogger Ron H. said...

"Of course the minimum wage costs job opportunities. But if job opportunities were more than the people to fill them, would the minimum wage raise or lower average income?"

It would probably be irrelevant, as demand for workers would likely cause wages offered to rise above the minimum wage.

 
At 1/11/2011 2:17 PM, Blogger Ron H. said...

"After all, with parental consent, what is wrong with children working? They can learn work skills, and bring neededincome into a family."

Benji, that's the first sensible thing you have written in a long time.

As you are aware, 100 years ago it was common for children to work. Only recently have most developed countries been wealthy enough to afford the luxury of keeping children out of the workforce.

 
At 1/11/2011 2:37 PM, Blogger Ron H. said...

"Raising the minimum wage may cost jobs, but that is the wrong argument if the jobs aren't worth having."

Shouldn't those who will lose those jobs be the ones to judge whether or not they were worth having?

 
At 1/11/2011 3:08 PM, Blogger Benjamin said...

Ron H.

Oh brave new world, with no minimum wage, no child labor laws, and an all-powerful WTO and global central bank and world currency.

Free enterprise and capitalistic nirvana!

 
At 1/11/2011 4:36 PM, Blogger Ron H. said...

"Oh brave new world, with no minimum wage, no child labor laws, and an all-powerful WTO and global central bank and world currency."

Oh Benji, just when I thought you had finally come to your senses, you had to ruin it by adding that WTO and central bank nonsense.

I see you haven't read that book I recommended to educate yourself on the nature of money.

 
At 1/11/2011 4:58 PM, Blogger Ron H. said...

"I pay above minimum and above the local custom. I could hire my guys more often if I paid them less, but I don't think either of us would be better off."

Have you thought to ask them what their preference would be?

 
At 1/11/2011 4:58 PM, Blogger Benjamin said...

Ron H-
What is money? A slip of paper, a blip on a computer chip somewhere?

Yes--but ultimately, a claim on the output of an economy. Gold is a koo-koo way to measure that claim.

I am merely pointing out how to get to true nivana, global free trade in labor, services, goods and capital--the ideal as expressed by Dr. Perry, and his analogy to the United States.
The United States uses one currency, and labor, goods, capital goods and services easily cross state lines.

Ergo, an all-powerful WTO and global central bank make perfect sense--sovereign nations only erect trade barriers (lowering everyone's wealth) and multiple currencies create confusion and opportunities for manipulation, by pegging or devaluing, or printing too much to make national currency cheaper.

This is what right-wingers and libertarians want, no?

Toss in no child labor laws and no minimum wage, and you a Right-Wing Nirvana Global State.

 
At 1/11/2011 5:11 PM, Blogger VangelV said...

Whats the long term difference between having a job that won't support you and not having a job?

Imagine you are an inexperienced kid with no record of accomplishment and reliability. You get a very low paying job because you want to show that you can be reliable and because you need to gain some skills. You don't need to 'survive' on your pay because you have parents to support you.

Now if you have a brain and are capable of learning you will learn what you have to in order to get a higher paying job. And that job will teach you even more and you will show enough that you can get an even higher paying job. After a while you will not have to worry about the minimum wage rate because you have skills that are worth a great deal more than that rate.

Now imagine a high minimum rate, which means no chance to learn on the job or gain experience. You keep being unemployed until you are old enough to leave home and have to support yourself. You are now officially a loser even though you were capable of much more.

Raising the minimum wage may cost jobs, but that is the wrong argument if the jobs aren't worth having.

You are not very smart. If jobs are not worth having nobody would take them. If they do then they are worth having.

I pay above minimum and above the local custom. I could hire my guys more often if I paid them less, but I don't think either of us would be better off.

You should be free to pay what you want and your employees should be free to ask for as much as they can get. So should other people.

 
At 1/11/2011 6:34 PM, Blogger Ron H. said...

"What is money? A slip of paper, a blip on a computer chip somewhere?"

You make my point for me. Read the book.

"Gold is a koo-koo way to measure that claim."

Not at all. It is one of the most widely recognized and trusted forms of money in the world, and has been used throughout history more than any other form.

"I am merely pointing out how to get to true nivana, global free trade in labor, services, goods and capital--"

...and money. One more step, Benji, you were almost there.

"...multiple currencies create confusion and opportunities for manipulation, by pegging or devaluing..."

Yes, a single currency would make transactions smoother, but it's not necessary. It's especially not necessary to have a global authority. Don't you think a country such as China could merely use price controls for the same purpose it now uses currency manipulation? Such actions hurt the Chinese people, not us.

"...or printing too much to make national currency cheaper."

Why Benji, I'm shocked! That's something you constantly beg The Bernanke for. Are you being hypocritical, or have you really changed your mind?

 
At 1/11/2011 6:55 PM, Blogger PeakTrader said...

When the millionaire CEO of VF/H.H. Cutler (one of the world's largest apparel companies) was asked if the 28-cent-an-hour wages they paid in Haiti was a subsistence wage, he stated:

“Well, the workers are alive, aren’t they?"

Fortunately, the U.S. isn't Haiti. Nonetheless, there's an inverse relationship between profits and wages. U.S. profits have been soaring, while U.S. real wages have been flat:

S&P 500 May Reach Cheapest Level Since 1980s
Jan 10, 2011

Companies in the S&P 500 are estimated to earn $92.75 a share this year, according to a Bloomberg survey of 11 strategists at Wall Street’s biggest banks. While that would exceed the record profit of $85.32 a share in 2007, the strategists forecast the S&P 500 will end 2011 at 1,384, 12 percent below its all-time high of 1,565 on Oct 9, 2007.

Real Minimum Wage

The period 1997-2007 is the longest period during which the minimum wage was not adjusted. The minimum wage increased in three $0.70 increments--to $5.85 in 2007, $6.55 in 2008, and to $7.25 in 2009.

In real 2010 dollars, the 1968 minimum wage was the highest at $10.10.

 
At 1/11/2011 8:38 PM, Blogger Benjamin said...

Ron H-

If we are really going whole hog into freedom, without national borders, then yes we should have a single and relatively stable world currency, with minor inflation.

One World. We will save tons on parasitic military outlays, and capital, labor, goods and services can flow freely across borders.

A global capitalistic utopia, unfettered by petty, atavistic nationalism.

No minimum wages, no child labor laws, no agriculture subsidies...what?

No ag subs? Dealbreaker!

 
At 1/11/2011 9:27 PM, Blogger VangelV said...

Fortunately, the U.S. isn't Haiti. Nonetheless, there's an inverse relationship between profits and wages. U.S. profits have been soaring, while U.S. real wages have been flat:...

Profits are not really soaring. If the banks have to account for their losses you would be seeing a significant real decline for the S&P 500. If you can't figure that out you have trouble seeing the way things are.

 
At 1/11/2011 9:31 PM, Blogger VangelV said...

If we are really going whole hog into freedom, without national borders, then yes we should have a single and relatively stable world currency, with minor inflation.

It used to be called the Classical Gold Standard, which was humanity's greatest invention. Each currency was backed by a certain weight of gold so there were never any issues about forex premiums or hedges and trade was quite easy.

 
At 1/12/2011 12:23 AM, Blogger Benjamin said...

Vange-

I think about sex all the time.

You think about gold all the time.

 
At 1/12/2011 2:56 AM, OpenID Sprewell said...

Benjie, I vigorously cosign your call to remove child labor laws, glad to hear you talking some sense. ;) As for the world govt idea, it does have the free trade advantages you mention, but unfortunately it would also have the disadvantages of our own federal govt, ie taxing the shit out of us, at twice the rate of state govts, and passing all kinds of dumb regulations that are tougher to avoid. The great thing about local govt is that you can always move if you don't like it, tough to do that with world govt. That's why most of us take the opposite tack, calling either for a panoply of local govts or no govt at all. :) As for a global central bank, the money business is about to be revolutionized by the internet so there will be no central banks in a decade or two, so it hardly matters what they do now.

 
At 1/12/2011 3:36 AM, Blogger PeakTrader said...

VangelV, U.S. corporations had a record 20 consecutive quarters of double-digit earnings growth in the 2000s.

Also, you can see the upward trend in U.S. corporate profits and proprietor's income (payments to owners for their labor), since the 1980s, as a percentage of GDP on page 21 of National Economic Trends by the Federal Reserve Bank of St Louis.

Perhaps, firms should have the option of either paying their taxes on profits to the government or to their employees (e.g. as bonuses), to compensate for depressed market wages.

 
At 1/12/2011 1:20 PM, Blogger Paul said...

"If we are really going whole hog into freedom, without national borders, then yes we should have a single and relatively stable world currency, with minor inflation."

"No ag subs? Dealbreaker!"

Benji loves to win arguments he made up in his disturbed mind. Perhaps that eases his conscience while he hopes for inflation and protectionist policies to bail his ass out

 
At 1/12/2011 6:19 PM, Blogger Ron H. said...

Paul says: - "Benji loves to win arguments he made up in his disturbed mind."

yes, but he sure gets upset when he loses those arguments with himself, doesn't he?

 
At 1/13/2011 3:02 PM, Blogger praxeology said...

"After all, with parental consent, what is wrong with children working? They can learn work skills, and bring neededincome into a family."

Absolutely nothing is wrong with it. As Henry Hazlitt showed in "The Conquest of Poverty", Child Labor Laws had zero effect; children continued to work at their parents' insistence until productivity of the parents increased enough (and hence, their wages increased enough) to make their child's work contribution superfluous. It was capitalism that ended child labor, not laws.

 
At 1/16/2011 8:43 PM, Blogger VangelV said...

I think about sex all the time.

You think about gold all the time.


Not at all. I only think about gold when I hear idiots talking about it even though they have no conception of its use and value.

 
At 1/16/2011 8:47 PM, Blogger VangelV said...

VangelV, U.S. corporations had a record 20 consecutive quarters of double-digit earnings growth in the 2000s.

First, a great deal of the reported earnings growth was an accounting fiction based on FASB rules that allowed manipulation. Second, they did not do very well because they were overvalued.

 

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