It’s complicated

May 12, 2014, 12:18 AM | Updated: 12:19 am

I’m a pragmatist. I believe problems should be studied and analyzed before you try to solve them. While I tend toward the progressive side, I am more than happy to surrender any preconceived notions I might have on any issue, if you can prove to me that I’m wrong.

But I understand a lot of people don’t see it that way. They know what they know, and you can’t tell them anything different. Climate scientists are just scare mongers trying to score government money for their studies. Vaccines cause autism. Raising the minimum wage will cost jobs. The current argument over that last one puzzled me, because I assumed we knew what effect raising the minimum wage would have on employment. The minimum wage has been around long enough and been raised enough times that you’d think it would have been studied and analyzed to death, and we would know, one way or the other. Turns out it has and we do. In fact, it is one of the most studied topics in contemporary economics.

Before we go any further, I’ve always been skeptical of how the media filters news and information. It always has, back at least to the days of yellow journalism. Today, you can depend on Fox News for a consistently conservative view and on MSNBC for a consistently liberal view. (Depend on CNN for breaking news ad nauseam.) So I like to find primary sources. I also like to know whether those sources might have an ideological bent and whether I need to put on my skeptic’s hat before I dig in. In this case, I’m looking at a paper summarizing all those studies on the effects of raising the minimum wage from the Center for Economic Policy and Research. The “About Us” page makes it clear this is a progressive group, so I know I’m going to read something that probably could be used as an argument to support a hike in the minimum wage. Because of that, I’m also going to check for conservative responses to the paper.

I agree that common sense dictates that raising the minimum wage should decrease employment. Well, it turns out it doesn’t and the issue among economists is settled. But it’s not entirely clear why it doesn’t, so economists are trying to figure that out. The current thinking, outlined in the paper, is that there are four major “channels of adjustment” as economists call them, when wages are forced up; a decrease in labor turnover, improved efficiency, a reduction in pay to higher wage earners (or a delay in raises) and small price increases. Other negative but less prevalent adjustments include a decrease in hours, less training, and fewer or reduced benefits. On the up side, there’s an overall increase in demand. One study predicted that a raise in the minimum wage in 2012 from $7.25 an hour to $9.80 an hour would have increased low wage earnings by $40 billion through 2014, resulting in an increase in GDP and overall employment.

My search for contrary views turned up very little. A couple of blog posts, but no editorial in the Wall Street Journal or panel of experts trying to refute the conclusion on Fox Business.

Why don’t we all know and accept that raising the minimum wage doesn’t raise the unemployment rate? Because it’s a complicated subject, and much of the media and almost all politicians like to reduce complicated issues to a solution that fits on a bumper sticker. Why are we still arguing about it? Because much of the media and almost all politicians have strong incentives to pander to their bases and parrot back to their viewers and supporters whatever they believe, whether it’s right or wrong.


Jeremy Hudson

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It’s complicated