Bernie Sanders And Economics

Bernie Sanders

There is no doubt that Bernie Sanders is not alone when it comes to inconsistencies in his world view.  But he’s such an interesting character, at least he honestly identifies as socialist, that it’s impossible not to find humor in his policies.

Bernie feels that certain economic laws apply to conditions while believing, seemingly randomly, that others don’t.

For example, Sanders feels that open trade agreements move work over seas; the idea being that corporations will flow where the less expensive labor exists.  A concept that I whole heatedly agree with – YEAH Bernie!  On the other hand Mr. Sanders does NOT feel that raising the minimum wage will have much the same impact on marginally skilled workers – BOO Bernie!

All this came to mind when I discovered Mr. Sanders’ objection to open borders:

“What they are talking about is completely opening up the border,” Sanders responded. “That was the question. Should we have a completely open border so that anyone can come in the United States of America? If that were to happen, which I strongly disagree with, there is no question in my mind that that would substantially lower wages in this country.”

Good for Bernie.  He’s right, of course, that allowing unskilled workers in from our neighbors to the south to bid on and compete for jobs will reduce the rate at which employers will need to pay.  Further, it will erode the most marginal, the less educated and least skilled, workers.  So yeah, he’s right – and I’m surprised.

Further, Mr. Sanders continues and is able to point out exactly who those folks might be:

“When you have 36-percent of Hispanic kids in this country who can’t find jobs and you bring a lot of unskilled workers in the country what do you think happens to that 36-percent of kids of today who are unemployed? 51% of African-American kids [are unemployed],” Sanders said.

“I frankly do not believe we should be bringing in significant numbers of unskilled workers to compete with those kids,” Sanders made clear.

In addition to pointing out that Bernie is right, I would also like to point out two other facts.  One – Bernie is supporting an unpopular position because he cares about the folks most in need.  He gets the fact that it won’t be high tech jobs impacted.  Two – Bernie is supporting a position because he CARES about the people most likely to be impacted.  This is a very similar situation that conservatives find themselves in when we offer support for lower taxes, reduced government dependency programs and oppose the minimum wage.

5 responses to “Bernie Sanders And Economics

  1. If you get past intro level economics the concepts and “laws” (used in quotations because they are not like physical laws) become very context dependent and malleable. That’s why there is so much disagreement between professional economists – there is no simple set of economic principles that one can just apply. So it’s certainly a very plausible argument that the impact on a domestic policy like minimum wage might be different than on open borders. Simple minded economics (the 100 level basic supply and demand model) rely on a massive number of assumptions and “all other things equal” condition that, when you add complexity become untenable. Or as one economics professor once told me, “only a fool really thinks he understands economics.”

    • If you get past intro level economics the concepts and “laws” (used in quotations because they are not like physical laws) become very context dependent and malleable.

      Let’s not pretend that Bernie brings even 100 level understanding here.

      Or as one economics professor once told me, “only a fool really thinks he understands economics.”

      And yet, there is undeniable truth in the statement, “Minimum wages drives unemployment higher than it otherwise would have been.” when discussing trade agreements, minimum wages and open borders.

      In the end, I’m less interested in what you might call ‘400 level economics’ and Bernie’s simple incompatible policy positions.

  2. Not really – only if all other things are equal. But usually they are not equal. That’s why sometimes increases in minimum wage impact executive pay more than price or worker’s jobs. It depends on a variety of factors, including the nature of the market. There are so many different variables in play a simple statement like that is often but not always correct. The thing about open borders is that there are DRAMATIC wage differentials – sweat shops and the like – that alter the very nature of the market calculation. For an increase in minimum wage, if a large number of the profits go to share holders or executive salaries and the market is vibrant and competitive, it may lead to a decrease in profit and stagnant executive salaries rather than fewer jobs. In fact, that seems to happen quite often.

  3. To explain the above a bit more clearly: if labor costs are low, and demand relatively inelastic, one can pay workers low and still make good money, turning that into profits or increased income for shareholders or executives. If the minimum wage is increased, then it still may be the equilibrium outcome to have a decrease in wages for executives, or a decrease to shareholders, without a loss of jobs.

  4. Argh, I don’t mean inelastic, I mean elastic! I tend to do that too often, even in class. More concrete: fast food. The demand for fast food is pretty high, with considerable competition in most markets. If the demand is elastic, price increases will decrease demand. Now, if the minimum wage goes up AND these restaurants are profitable and earning management (even corporate) decent money, they have a choice. They can raise prices to reflect higher labor costs, and then risk losing business to those who do not, and potentially lower profits more. Or they could cut executive salaries and eat up lower profits for shareholders to keep prices down. This is because the labor market is separate from the market for the product. IF however, profits are near zero due to competition, then the companies must increase prices. The argument for minimum wage assumes that profits are reasonably high (competition has not yielded minimal profits) and that there is money now going to executive and shareholders that could/should go to workers.

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