Economists Ignore Laws Of Economics

It would appear that a set of economists are willing to ignore reality:

As the three-year mark since the federal minimum wage was last raised approaches, we urge you to once again raise the federal minimum wage. A three-step raise of 85 cents a year for three years—which would mean a minimum wage of $9.80 by 2014—and then indexing to protect against inflation (corresponding to the legislation proposed by Senator Tom Harkin and Representative George Miller) would be a reasonable approach. The increase to $9.80 would mean that minimum wage workers who work full-time, full-year would see a raise from their current salary of roughly $15,000 to roughly $20,000. These proposals also usefully raise the tipped minimum wage to 70% of the regular minimum.

This policy would directly provide higher wages for close to 20 million workers by 2014. Furthermore, another nearly 9 million workers whose wages are just above the new minimum would likely see a wage increase through “spillover” effects, as employers adjust their internal wage ladders. The vast majority of employees who would benefit are adults in working families, disproportionately women, who work at least 20 hours a week and depend on these earnings to make ends meet. At a time when persistent high unemployment is putting enormous downward pressure on wages, such a minimum wage increase would provide a much-needed boost to the earnings of low-wage workers.

These esteemed economists must have forgotten the negative repercussions of raising the minimum wage:

  1. Reduced employment for marginal workers
  2. Reduced hours for minimum wage earners
  3. Restriction of new job market entrants reducing valuable work place skills

The laws of economics are incontrovertible.  You may no more pass legislation that says gravity is discretionary.

5 responses to “Economists Ignore Laws Of Economics

  1. No, your claims about the impact of minimum wage are NOT considered at all laws of economics and are in fact extremely controversial. Economists have very diverse views and theories, and the claim that there are “incontrovertible laws” is simply false. For instance, I’ll note that countries with strong unions, higher taxes, guaranteed health care coverage for all, and higher minimum wages are currently out performing the US!

    • No, your claims about the impact of minimum wage are NOT considered at all laws of economics and are in fact extremely controversial.

      The laws of supply and demand are just that. If you raise the cost of labor, you will see less labor purchased.

      For instance, I’ll note that countries with strong unions, higher taxes, guaranteed health care coverage for all, and higher minimum wages are currently out performing the US!

      What do you mean by outperforming? If you mean GDP growth, most countries in the EU zone are performing below the United States. Further, from a historical perspective, the United States has been a steamroller of growth compared to those nations. It’s hasn’t even been close.

  2. Scott ,

    You said currently . That does not say a lot for President Obama’s leadership of the economy . And what countries are you referring to ?

  3. An economy is immensely complex, with is why there is no universally agreed upon theory and why economists argue so much. The reason is that in order to have a clear use of the laws of supply and demand you have to: a) old everything else equal; b) assume preferences; c) make assumptions on elasticity; and d) assume groups have quality information. “A” is the biggest. You can raise minimum raise and increase employment at minimum raise if other factors come into play. Only if all other things are held equal (and they never are in reality) can anything like that be said to be law like.

  4. President Obama is about to freeze mandated increases in minimum wages in American Samoa.

    Interesting data point about the efficacy of minimum wages. See here for a brief summary….

    http://bluecravat.blogspot.com/2012/07/obama-to-repeal-minimum-wage-law-its.html

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