Saturday, December 24, 2011

The Poverty of "Economics"

An article in this morning's NYTimes by Catherine Rampell outlines the minimum wage increases that are coming on the 1st of January in eight states. As if lower income employees don't have enough problems this Christmas season, leave it to politicians (and economists) to make their lives worse.

The minimum wage increases will take place in Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont and Washington. Note that some of these states are controlled by Republicans, some by Democrats. This is bi-partisan mischief.

Imagine that these same states passed a law saying that a gallon of milk can't be sold for less than $ 10 per gallon. Would dozens of economists step forward with studies showing that milk consumption would be unaffected by this kind of law? Would there be a bi-partisan consensus that a minimum price of milk is a good idea and would promote milk drinking? But, precisely this kind of absurd reasoning is brought forward to defend minimum wage laws (and their increases). Economists are notorious for putting forward their partisan political views as if they were science.

Minimum wage laws are an infringement on the freedom of contract and they deny job opportunities to people who need them. Those who might wish to work free as a way of gaining skills are legally prohibited from doing so. Those with skill sets below the minimum wage level would like to have a job at a lower wage (rather than no job at all), but are forbidden by law to have that first step up the ladder.

Why not just pass a law saying that poor people should be required to stay poor by law? That would have an effect similar to that of minimum wage laws. Economists and politicians who support minimum wage legislation should be ashamed of themselves. Perhaps we should pass a law saying that economists should be paid $ 10,000 per hour or otherwise be forbidden to work. Then, perhaps, economists would begin to understand the pernicious effects of minimum wage laws.