Sunday, July 26, 2009

Minimum wages

Here is yesterday's NYT editorial on the minimum wage. Yesterday, as in 2009, not 1937.

You might think that a newspaper that poses as the newspaper "of record" would assign someone to write an editorial about the minimum wage who had (a) at some point encountered an economics class, (b) at some point had learned about the policy environment relevant to low-wage workers and (c) at some point actually read the literature around the minimum wage. I guess those folks were busy doing something else yesterday and so someone else was assigned to phone it in.

You would never know from the NYT editorial that:

1) The labor demand curve slopes down. I've posted before on the issues with the evidence on minimum wages, and reasonable people can certainly differ on the size of the short-run and long-run elasticities, but on the sign I think we are pretty clear.

2) The minimum wage is incredibly poorly targeted relative to other policy instruments designed to accomplish the same or similar ends. Put differently, the vast majority of minimum wage workers are not the primary earners in their households.

3) The EITC means that many minimum wage workers (and other low wage workers more generally) have incomes substantially above what one might think by just multiplying some number of hours by the minimum wage. More broadly, it is important to discuss the minimum wage in a broader policy context rather than in isolation.

4) The minimum wage serves to raise the relative price of non-union labor and of labor in low-wage parts of the country (i.e. the south). This fact has much to do with the patterns of political support for minimum wage increases.

5) There is reasonably good evidence that raising the minimum wage increases high school dropout, just as the simplest possible economic model would predict. You do not increase the accumulation of human capital by reducing the return to accumulating it.

6) Wages and product prices may be related through some mysterious mechanism.

So, to sum up, the NYT editorial is ignorant of the relevant literature, ignorant of the relevant policy environment and, as a result, misleading on the facts.

Remind me again why people take the NYT seriously?

Of course, the NYT piece is not quite as a off-planet as this bit from Znet where "the spirit of resistance lives." Apparently today they are resisting reading the relevant literature.

Comradely hat tip: