On the minimum wage
Let’s take a deep-dive into the minimum wage in America — its intentions, its effects, and ultimately a better policy.
In this article, I’ll make three points:
- Empirical data shows that minimum wage laws directly harm the most vulnerable workers and cause rebound effects that ultimately harm all workers.
- Increases in the minimum wage harm low-skill workers irrespective of how “quick” or “slow” those increases are implemented.
- Since racial groups are unequally distributed across incomes, minimum wage laws especially worsen African American and Hispanic American workers’ disadvantages.
In the United States, the first minimum wage laws were passed as the Davis-Bacon Act in 1931 and as part of the Fair Labor Standards Act of 1938. Perhaps by extension of that legislation’s language, the minimum wage has since been used as a litmus for income equality and political representation. Increases in the minimum wage are associated with happy feelings of mutual prosperity. In contrast, minimum wage stagnation conjures dystopic images of a working class trampled by the rich.
The stated purpose for the minimum wage is to prevent nefarious employers from exploiting readily available labor by price-gouging their workers’ pay. And it makes sense on the surface: employers are interested in inexpensive labor, and employees are interested in the best compensation for their work.
Without an external regulatory body, an employer may presumably control the hapless worker, forcing him or her to work in conditions not too dissimilar to indentured servitude. All else being equal, such thinking means that one should expect “backward” countries without minimum wage laws to have lower wages and significantly worse working conditions than the United States.
Like Germany.
German workers enjoyed a median hourly wage 50% greater than the American median wage in 2000, adjusted for purchasing power. Their working conditions have been exalted worldwide for their low hours, high benefits and livability. In fact, the German economy as a whole has been rated as the best in the EU, at least by GDP, and is among the richest countries in the world in terms of GDP per capita.
But until 2015, Germany had no minimum wage.
This fact has led some to claim that Germany’s unionized workforce must have collectively negotiated higher wages in lieu of a minimum wage. But only 18% of German workers were part of a union in 2011, compared to 12% in the United States and 55% in Norway. Unionizing 18% of workers nationwide is not enough to negotiate better pay for a majority of workers, let alone significantly better pay than the U.S. and E.U. averages.
Some also claim that German wage growth was artificially depressed before the 2015 minimum wage law. But there’s no evidence that the minimum wage laws have increased wages for the low-skilled workers involved. Instead, it’s been linked to tens of thousands of job losses and decreases in working hours. Though select workers’ wages have increased, Germany’s overall hourly wages have stagnated.
With the exception of public officials who answer to public wrath, economists are in consensus that Germany’s labor market is worse off because of its minimum wage. A simple application of the laws of supply and demand reveals why.
For commercial enterprises, the demand for labor from employers decreases as the cost of that labor increases, and vice versa (red line). The labor supply from workers, on the other hand, increases as their compensation for that labor increases (blue line). We can model this as a supply-demand curve (S is supply, D is demand) where the x-axis is the quantity of labor and the y-axis is the hourly rate for that labor.
E refers to the intersection of supply and demand, or the equilibrium compensation per hour. Without an explicit minimum wage law, this is the stable “minimum wage” that a labor market settles on with close-to-full employment.
Introducing a new minimum wage (in green) is akin to introducing a price floor in the labor market. Notice the disparity in supply and demand at this labor price — there’s clearly a greater quantity of labor supplied by workers than quantity of labor demanded by employers. This separation manifests as unemployment and lessened working hours. The labor supply surplus goes jobless. This untapped human capital is referred to as “deadweight loss.”
In other words, minimum wage laws prohibit employers from hiring low-skilled workers whose productivity cannot justify that minimum wage. Employers do not have infinite budgets, and if wages double, the staff will be cut in half.
Some discussion tries to subvert this model by claiming that market rates are determined by the people who are willing to work that job for the least pay. That’s only true if a significant majority of the labor market will work for extremely low rates. But wages in the illegal underground economy, outside of government oversight and reporting, suggest that a very small minority of workers are willing to work for exorbitantly low rates. Labor market research has also shown that a negligible proportion of workers will accept wages significantly lower than the current equilibrium wage. Not to mention Germany, which for years had a higher compensation rate than the U.S. without a minimum wage law, even though there clearly was an influx of low-skilled workers willing to work for significantly lower wages.
The same discussion also reveals the fallacy that, without a minimum wage law, employers will enter mutual agreements to pay low-skilled workers exorbitantly low wages. Many call this and related topics the “race to the bottom.” But all this does is increase the incentive for an individual employer to break that agreement and increase their wages to attract more and higher quality labor, leading other employers to follow suit to remain competitive. It’s a classic example of game theory — the costs and benefits always normalize to equilibrium. This is why only 4% of non-supervisory production jobs actually pay minimum wage, and the median wage for non-supervisory production workers is not correlated with the minimum wage— employers have no incentive to “race to the bottom.”
Proponents of the minimum wage tend to forget that low-income workers compete against each other for the same set of jobs. Introducing a law that gives higher wages to slightly higher skilled workers does so at the expense of slightly lower-skilled, vulnerable workers.
It’s a bit like requiring all universities to build luxury dorms. Sure, larger schools like Harvard and Yale could, and thusly they’d increase their students’ quality of life. But smaller schools, like Cooper Union or Reed, wouldn’t be able to — and they would have to increase tuition, go online, or risk closures.
Minimum wage laws also have negative rebound effects that hurt all workers in the long-run. Anticipation of minimum wage hikes increases companies’ incentives to rapidly automate their jobs. Human cashiers are being replaced in droves by kiosks at McDonald’s, Panera Bread, and elsewhere; 60% of all U.S. automation is directly the result of state and federal minimum wages making automation more cost-effective. This is why Jeff Bezos, a vocal advocate for a $15 federal minimum wage, is really quite wicked in his motivation. As he voraciously automates Amazon with wage-less robots, he knows that a national minimum wage will hurt his competition and their employees.
That’s not to mention the droves of locally-owned business closures whose profit margins are thinner. They don’t survive labor cost increases.
Despite the unambiguous empirical evidence and economic framework — presented by economists such as Thomas Sowell of Stanford University, Milton Friedman of the University of Chicago, Neumark & Wascher at the National Bureau of Economic Research, and Jeffrey Clemens of UC San Diego, among others — politicians have gone forward with enacting minimum wages as a kind of social experiment. Perhaps this rift between politics and economics maintains the bizarre public fallacies surrounding minimum wage laws.
The Unemployment Fallacy
A perennial claim is that state minimum wage increases do not increase unemployment, or that they do not “significantly” increase unemployment. The claim often comes from blanket comparisons of unemployment with minimum wage gains without controlling for external economic factors.
More recently, the claim evidences Washington’s relatively stable unemployment rate before and after their minimum wage ordinance increasing it from $9 in 2015 to $13 in 2016. But beyond disregarding external factors such as the Seattle-Tacoma’s already robust growth, this narrow analysis has nothing to say about the behavior of low-skilled workers who lose their jobs due to the new minimum wage.
Rather than remaining unemployed in that state, those workers emigrate to states with lower minimum wages conducive to their productivity. A paper published in Economics Letters found that every dollar increase in a state minimum wage corresponded to a migration of 3.1% of the low-skilled workforce to other states with lower minimum wages. The exodus of the newly unemployed after a wage hike artificially depresses that state’s unemployment rate, creating the fallacy that the minimum wage can be increased without substantial gains in joblessness. Accounting for emigration reveals significant job losses proportional to the minimum wage increase, regardless of whether the increase was instant or spread out over time.
Seattle has been lauded for increasing its minimum wage without an “apparent” increase in its unemployment rate. A brief glance at Washington’s emigration data shows exactly why this was the case: workers who lost jobs simply left. To Idaho and Nevada, I might add, whose minimum wages are only $7.25 and $8.25, respectively, less than Seattle’s minimum wage even when adjusted for purchasing power. Examining isolated unemployment numbers in Seattle and Washington state won’t reflect these nuances.
This is precisely why, for any country, national minimum wage increases seem to cause “more” unemployment as a percentage of the overall workforce than state minimum wage increases. Workers can migrate between states based on their income opportunities. Immigration between countries, however, is near impossible, especially when one has just been laid off.
The inequitable effects of this migration are staggering. Consider State A with an increased minimum wage and State B with an unchanged minimum wage. Firstly, simply extracting State A’s least skilled workers and placing them in State B concentrates wealth in the original state at the expense of the other. The exodus of cheap labor from State A increases its overall disposable income, while State B’s increased supply of cheap labor further depresses its own wages. Secondly, since there’s less disposable income among workers, commercial enterprises would see fewer opportunities to open in State B. If supermarkets, bank branches, private clinics, and other businesses do open in State B, they transfer their greater operational costs to their customers. This is the same force that causes items to be more expensive in poorer neighborhoods. Food deserts, or regions prohibitively far from a supermarket, become larger in State B, whose residents are now less equipped to handle a cost increase. State A, however, sees a net increase in commercial activity. Slums get worse, and affluent neighborhoods get more desirable.
Employers also have means other than layoffs to lessen the financial impact of minimum wage increases. Though Seattle is experiencing an economic boom, Washington’s minimum wage increase to $13 caused hours reductions of 9% between 2015 and 2016, reducing the effective annual salaries that workers received without necessarily impacting overall unemployment numbers. Wages do not reflect other compensation measures, such as health insurance, stock options, and retirement benefits. A UC Berkeley study observed that Seattle’s restaurant industry did not see significant job losses after the minimum wage ordinance passed; however, they disregarded the fact that fast-food employers now took a share of waiters’ tips and overall employee benefits had either frozen or been cut. Total employee compensation had fallen in proportion to the wage increase, rendering a net zero result.
Consider the following excerpt by economist Linda Gorman:
A particularly graphic example of benefits reduction occurred in 1990, when the U.S. Department of Labor ordered the Salvation Army to pay the minimum wage to voluntary participants in its work therapy programs. In exchange for processing donated goods, the programs provided participants, many of whom were homeless alcoholics and drug addicts, with a small weekly stipend and up to ninety days of food, shelter, and counseling. The Salvation Army said that the expense of complying with the minimum wage order would force it to close the programs. Ignoring both the fact that the beneficiaries of the program could leave to take higher-paying jobs at any time and the cash value of the food, shelter, and supervision, the Labor Department insisted that it was protecting workers’ rights by enforcing the minimum wage. After a public outcry, the Labor Department backed down. Its Wage and Hour Division Field Operations Handbook now contains a special section on minimum wage enforcement and the Salvation Army.
Some advocate different operational methods to increase worker productivity to justify a wage increase. And no one’s against giving employees ways to be more productive and happy. But beyond technological advances, it’s difficult to translate this idea into practical measures. In practice, there’s no evidence that proposed methods —making Wednesday a day off, for example —increases productivity enough to justify wage increases. A restaurant owner highlights the situation many Seattle companies found themselves in after the minimum wage hike:
“I think as we start to look at future planning, we are definitely looking at restaurant models that take less labor…It’s hard to be handmade without the hands. But we are looking at different ways to leverage those hands.”
The same was true in Germany, when working hours dipped in reaction to the minimum wage ordinance. It’s no wonder that, without a deeper glance into emigration and underemployment, one can subscribe to the fallacy that a minimum wage has “little” or no effect on unemployment.
The Poverty Fallacy
Another common fallacy involves the claim that minimum wage laws decrease poverty, decrease public expenditure on welfare programs, and stimulate the economy.
Minimum wages do decrease poverty rates. In fact, the Congressional Budget Office has an interactive tool discussing it. But we must examine how it accomplishes this. Empirically, the total amount of payment compensated to workers does not change when minimum wage laws are enacted. Some money is “freed up” by unemployment, reduced hours and other cutbacks. That money is transferred to workers who retain their jobs after the minimum wage increase, including those whose incomes are slightly greater than the new minimum wage. Since a greater percentage of retained workers now make more than the poverty threshold, they’re removed from poverty in the eyes of the census.
But since some workers’ incomes drop and others’ increase, the minimum wage is effectively a transfer payment of wages from a lower-skilled group to a slightly higher-skilled group. It’s bringing some people out of poverty by taking wages from others in poverty. Clearly, that does not reduce poverty’s genesis and makes matters significantly worse for a sizeable chunk of the population. And since it’s a binary indicator, the poverty rate gives no hint about the distribution of incomes below or above the poverty threshold.
Another graph appears on the Congressional Budget Office’s minimum wage tool: real family income. And one can see a clear, significant drop in real family income with any minimum wage increase.
Real income is income adjusted for inflation and local living costs. One can accomplish this by dividing the dollar value of one’s nominal income with the Consumer Price Index (CPI), an aggregate market “basket of goods” that reflects how expensive relevant goods and services are in a particular area. So while one’s dollar value income may increase, their “real” income may actually decrease, depending on the CPI-U/W (CPI for urban residents and wage earners). Similarly, if the CPI-U is negative, a stagnant income may actually increase in buying power.
Since a minimum wage increases the effective disposable income of workers who retain those jobs, the overall amount of spending on discretionary goods — not commodities, like housing, food, utilities, etc. — increases. Commodities are generally more resilient to fluctuations in demand, meaning that their equilibrium price is less prone to change. But discretionary goods, like furniture, electronics, apparel, home improvements, and consumer services, are more sensitive to increases in demand mostly since their supply is, for the most part, inelastic and unchanging.
Therefore, the increase in discretionary spending as a ratio of overall spending due to a minimum wage increase drives up the equilibrium price of discretionary goods, driving up the CPI and thusly the cost of living. A “spillover effect” means that commodity prices will also rise. Seattle’s CPI, for example, increased from 2% to 3% per annum after the minimum wage increase. Germany’s CPI likewise increased from 1.5% to 2.5% per annum. These seem small, but over time they can make the cost of living prohibitively expensive, much like ballooning urban housing prices.
Unlike a state minimum wage hike, a national minimum wage hike precludes laid-off workers from migrating to a state with better job opportunities conducive to their productivity. Hence these workers remain unemployed or severely underemployed, and bear the brunt of a CPI increase. If anything, this unemployment (“deadweight loss” from before) offsets the decrease in welfare dependency by workers whose wages improve from a minimum wage increase. In fact, since the welfare difference between low-wage workers and unemployed workers is so great, public welfare expenditure will increase, especially if history is any guide.
There’s an economics concept known as “sticky wages,” describing wages’ general “slowness” to adjust to changes in market conditions. For example, an economic downturn may severely decrease a company’s long-term outlook, but workers are laid off before “sticky” wages will decrease. Similarly, the cost of living in an area may increase due to inflation, supply shocks, or simple income demographics — yet “sticky” wages will “lag” behind these changes, often not performing a cost of living adjustment for years at a time.
The principle works in reverse when wage increases drive up the cost of living. A “sticky CPI,” while not unprecedented, will tend to lag nominal wage growth, implying that CPI increases may soon become significantly larger in countries and states with consistent minimum wage increases. Historically, national minimum wage increases have been followed by year-over-year CPI gains, once factors like oil shocks and government fiscal spending and monetary policy are controlled for.
Many claim that minimum wages don’t increase inflation by simply comparing national inflation rates to minimum wage hikes. But this is an apples to oranges comparison. External factors, like an oil crisis, cold war, and even the political party controlling congress, confound inflation rates. An accurate comparison cannot be made without controlling for these factors, and even after controlling for known factors, previously undiscovered factors can suggest a lack of patterns where they exist and patterns where they do not exist.
Nevertheless, a correlation between inflation and minimum wage becomes stronger as more factors are controlled for in the economics literature. The most rigorous and comprehensive studies of U.S. inflation point to significant CPI increases caused by minimum wage hikes. (Read my article “On income inequality” for more examples of apples-to-oranges comparisons fueling misleading conclusions.)
I’ll conclude this section by addressing the most basic fallacy of the minimum wage — that it puts money in workers’ pockets, and their subsequent spending “boosts” the economy. Through a minimum wage, the total wealth transferred to workers doesn’t change — just its distribution favoring some low-wage workers over others. Those who retain their jobs do increase their spending — but so does their savings rate. The marginal propensity to consume, a measure of how much of one’s income he or she spends, decreases as one’s income rises. Individuals who make more money will likely save more. Hence, a minimum wage decreases net spending and increases net saving, undermining the overall economy by depressing aggregate demand. The effect is masked in state minimum wage hikes since disaffected workers leave — but the net negative result in economic activity can be obtained by combining the economic “prosperity” and economic “downturn” caused by higher wages and unemployment, respectively.
Whether it’s Connecticut, New York, Washington, or any state that has increased their minimum wage in pursuit of “fairer treatment,” it’s important to be critical of subjective language in policy-making and examine their real effects — especially if they have little empirical evidence to back them up.
The Equity Fallacy
An especially contemporary argument claims that minimum wage laws help racial minorities and women gain equity. Since minorities tend to be overrepresented in low-wage jobs, legislating minimum wages and related increases may help minorities’ situations more than white and or male workers.
Even here, the fact is that programs labeled as being “pro-minority” or “for the needy” almost always have the opposite effects to which their well-intentioned sponsors desire. One may want to describe the minimum wage as something that prohibits anybody from getting less than $15 an hour, thereby helping low-income people who need the money. But the accurate description of the minimum wage law is one that directs employers to discriminate against those with low skills. Sure, employing someone at $15 whose skills justify $6 is to engage in charity, and while there’s nothing wrong with charity, most employers aren’t in a position to do so.
The overwhelming majority of workers with skills that do not justify a minimum wage are immigrant and minority workers. The forecasted unemployment caused by a federal minimum wage is almost entirely from young black workers. Minimum wages, both historically and now, literally price minorities out of the labor market.
There are millions of black families whose wages will likely increase due to a federal minimum wage increase. But there are also millions of black families that will lose income as a result of unemployment, and millions more that won’t be hired due to a labor price floor. No matter how you look at it, this will increase inequality between races.
Consider also the troubled and deeply racist history behind the minimum wage. Prior to the adoption of the minimum wage, black workers had higher levels of employment than their white counterparts. In 1910, 71% of blacks were employed compared to 51% for whites. In 1900, the employment to population ratio for whites was 45.5, but for nonwhites it was 57.4.
How could the Jim Crow era produce such a result? The reason is simple economics: it costs real money to exercise racial prejudice. Denying jobs to any racial group means increasing your labor prices. Denying loans to any racial group means increasing your rate of defaults.
The only large economic group that actively discriminated against blacks was unions. In response to cheap, predominantly black labor flooding Northern labor markets in the 1920s, unions lobbied congress to pass the Davis-Bacon Act requiring contractors to pay the “local prevailing wage” on public works project. The “local prevailing wage” is determined by the Department of Labor, meaning that while a carpenter would normally be paid $20 for a job, the Department of Labor could compel him to be paid $40 for a job. Experienced, white (straight, married and Protestant) unions workers were protected from competition by relatively unskilled blacks whose only advantage was the ability to work for less in order to break into a trade and acquire skills. Ralph C. Tomas, director of the National Association of Minority Contractors, has said that the act forced contractors to hire exclusively white workers.
Even today, Economic Policy Institute (EPI), one of the most vocal and ardent proponents of a minimum wage increase, is funded almost exclusively by the American Federation of Teachers; National Education Association; American Federation of State, County, and Municipal Employees (AFSCME); Service Employees International Union (SEIU); the AFL-CIO; the United Auto Workers National Capital Council; and the United Steelworkers. All labor unions whose existence would be undermined by minority competition. There are monied interests on the opposing side as well — but as a proportion of overall funds they’re negligibly small compared to EPI and its interests.
EPI regularly discredits peer-reviewed economics studies — but instead of submitting an article critique for peer review, as is the proper way to alter or discredit journal papers, they post them on their own website — suggesting something slapdash or indefensible about their criticism.
Not to mention that eugenics spawned the first minimum wage law. Minorities were seen as genetically and intellectually inferior to white workers, mirroring the manufactured racism that originally justified slavery in a republic. Thomas C. Leonard of Princeton University retrospectively commented in 2005:
A minimum wage was seen to operate eugenically through two channels: by deterring prospective immigrants and also by removing from employment the “unemployable,” who, thus identified, could be, for example, segregated in rural communities or sterilized…For these progressives, race determined the standard of living, and the standard of living determined the wage. Thus were immigration restriction and labor legislation, especially minimum wages, justified for their eugenic effects.
In 1912, a scathing review of minimum wage-less markets was written in The New Republic:
“Imbecility breeds imbecility as certainly as white hens breed white chickens; and under laissez-faire imbecility is given full chance to breed, and does so in fact at a rate far superior to that of able stocks.”
Honest attempts to raise the pay of black workers also caused more harm than good in almost every instance. As an anti-poverty program under the Lyndon B. Johnson administration, a minimum wage was set at $1 an hour. In the Mississippi Delta, where black workers made $3.50 a day, 25,000 workers went jobless. They, in fact, stayed jobless because those same farms started acquiring previously esoteric chemical weed killers that, through the economics of scale, became 12 times cheaper.
Nobel Laureate economist Milton Friedman of UChicago said:
The people who have been hurt most by the minimum wage laws are the blacks. I have often said that the most anti-black law on the books of this land is the minimum wage law. There is absolutely no positive objective achieved by the minimum wage law. Its real purpose is to reduce competition for the trade unions and make it easier for them to maintain the higher wages of their privileged members.
Walter Williams at George Mason University wrote:
Mandated wages have been one of the most effective tools in the arsenal of racists everywhere.
And former Massachusetts Sen. Jack Kennedy, who campaigned aggressively for minimum wage increases for his union constituents, said:
Of course, having on the market a rather large source of cheap labor depresses wages outside of that group, too — the wages of the white worker who has to compete.
Google “minimum wage,” and you’re bound to find results from EPI supporting the minimum wage, as well as some scattered articles and blogs that endorse its view. But you won’t find any support among mainstream economists that it reduces racial income inequality. Nor, more importantly, will you find evidence refuting the deeply racist and xenophobic origins of minimum wage laws.
Discussion about a minimum wage always returns to the need for a “living wage.” A living wage is the minimum earnings necessary to cover basic food, housing, utilities, childcare, healthcare, clothing, transportation, and locality-dependent costs. Living wage discussions often underestimate the income of low wage earners by not accounting for income other than wages, like benefits and welfare. They also don’t control for the number of wage earners in a household; the situation for a single parent earning minimum wage is significantly different than a college student living with two wage-earning roommates. Finally, the definition of a living wage changes with time —while a microwave may have been considered a high-class luxury in 1972, it’s considered essential today.
Clearly, such discussion reveals the underlying desire to improve wage-earners’ quality of life. And we should try to improve peoples’ lives, especially those down on their luck. That’s something we all agree on. The question is how to do so in a sustainable way without increasing human suffering elsewhere.
Perhaps one may find a solution by examining the same forces that have made the average American better off today than monarchs of the 19th century — the same forces that have also made the quality of life for those in poverty greater than the average American’s a hundred years ago.
The creation of new industries has always preceded a sudden demand for labor. Whether it’s the automotive industry, the service industry, the pharmaceutical industry — the creation of wealth always increases labor demand and thusly the wage rate relative to the prices of goods and services. The slight labor supply shortage — since more employers look for workers in growing industries —positions workers as a scarcer resource as employers negotiate higher prices to attract more workers.
Tight labor markets ease income disparities. Tight labor markets are caused by labor demand shocks.
New industries are created by the invention of new technologies, the discovery of new resources, and novel scientific understandings that increase efficiency. Fundamental research drives all three of these things. It’s estimated that 50% of our gross national product comes purely from the fundamental research two generations ago. Laying transatlantic undersea telegraph cables increased England’s GDP by 7% in only twenty years. And just how many livelihoods would disappear had Turing, Shannon, Moore, and countless others not conspired to invent the entirety of the electronics industry?
We can manifest new industries by increasing fiscal and private spending on fundamental research. I, for one, am trying to do my part by contributing as much as I can to the body of knowledge. Technologies and understandings that generate new wealth will drive up everyone’s quality of life — whether its spintronics, new photovoltaics, metallic hydrogen, or some other industry. The question is not if, but when, these quality of life improvements will manifest.
I really wish the minimum wage worked. Like many things, it seems like a simple and honest policy that furthers the effort to combat poverty. But what is claimed to be “fair,” “for the poor,” or “antiracist” may not actually be so in practice. And the evidence presented thusfar strongly indicates that the minimum wage is no exception.
To abstract this case further, consider that even in a society with fair rules, someone born in a rundown South Bronx neighborhood wouldn’t have the same probability of achieving prosperity as someone born on Park Avenue. To paraphrase Thomas Sowell, being fair in terms of providing equal probabilities of success to those in unequal social circumstances would be very different. All societies are unfair in that manner. But whether redistributing income — such as through minimum wage policies — promotes or undermines the development of human capital is an empirical question that is seldom raised by proponents of minimum wages.
Nicholas Kristof of the New York Times responds to life’s unfairness by accusing those “oblivious of their own advantages” of a “mean-spiritedness in the political world or, at best, a lack of empathy toward those struggling — partly explaining the hostility to state expansion of Medicaid, to long-term unemployment benefits, or to raising the minimum wage to keep up with inflation.”
To assume that the reason for being against minimum wage laws is a bigoted Freudian lack of empathy is to ignore the vast literature on its negative repercussions. There’s a German word for honestly attempting to fix problems but unwittingly making them worse. Kristof’s solution for life’s unfairness — a transfer payment from those more prosperous to those less prosperous — precludes caveats about the further consequences of such policies with no comprehension for whether those consequences will make the less prosperous, or society at large, better off in the net.
Perhaps I have convinced you. Perhaps not. But that’s not my goal. Instead, please treat my article as a cautionary primer on the importance of gathering working knowledge through critical analysis for subjects with immense significance and ramifications on peoples’ lives. It’s easy to believe fallacies without the relevant knowledge and inquiry necessary to notice them.
Economic policies are like most things: complex systems with multiple deciding variables. It takes a decent understanding of economics and policy study to understand their counter-intuitive negative effects. But you wouldn’t trust anyone to fix your car without sufficient knowledge in automotive engineering — so why should the minimum wage be any different?
