Tuesday, October 25, 2011

The Post-Dispatch and the minimum wage

It's getting pretty tiresome, but the Post-Dispatch has written another editorial claiming that the minimum wage does not have all of the negative effects that economists tend to think they have.  Now that I'm not a Fed economist and can actually speak my mind in public, I will take on the quixotic quest of trying to get the editors to at least admit that they are taking a position that is at odds with the expert evidence.  Here is a letter to the editor that I submitted today:
The editorial board continues to be willfully ignorant of the state of the evidence on the effects of the minimum wage ("Business leaders pad pay while cheering plight of low-wage earners," Oct. 25). There are very few things that economists are in general agreement about, but the minimum wage is one of them. Based on hundreds of studies there is a broad consensus that the minimum wage has a negative effect on the economy in general and on low-skilled workers in particular. The editors, however, find it convenient to prefer the “numerous studies” that find that the minimum wage has “no statistically significant effect.” The number of studies showing this are not all that numerous, and a finding of “no statistically significant effect” is not the same as “no effect” or even “no large effect.” It simply means that the researchers were unable to find statistical support for an effect, which, among other things, could be because they weren’t trying all that hard.

The editors’ only other evidence in support of their view is that “Nobel laureate Robert Solow, an economist from the Massachusetts Institute of Technology, has reached that conclusion; so has Harvard economist Richard Freeman.” Well, I can cancel out the editors’ name dropping with some of my own by pointing out that Nobel laureate Milton Friedman and Chicago economist Casey Mulligan agree with the consensus. That leaves us with the weight of the evidence.

It may well be that the hundreds of studies finding negative effects for the minimum wage are wrong and that the relative handful of studies finding no effect are right. It’s impossible to know that today, but many smart and honest economists believe this. But it’s pretty clear that the editors don’t really care about actual evidence when snark, cherry picking, and name dropping are already available to make their argument.

Howard J. Wall
Director, Institute for the Study of Economics and the Environment
Lindenwood University