[I]f Democrats want to continue to push for higher minimum wages, with the resulting higher unemployment, they should stop claiming to have any scientific backing for the position and just admit that they want to redistribute from one group of Americans to another group of Americans (mostly those in organized labor), and leave it at that.

 

by Mark A. Calabria at CATO @ Liberty

 

Rumor has it that Democrats will include, at their up-coming convention, a proposal to increase the minimum wage.  As documented in a recent Cato study, such a policy is likely to increase unemployment, especially as I noted elsewhere among teenagers.   One would think that given how a weak economy is undermining Democrats’ chance to keep the White House, they’d actually make proposals to reduce, rather than increase unemployment.

Perhaps the most bizarre, but honest, claim was made by Julie Vogtman, a lawyer at the National Women’s Law Center, “It can be very good for the economy because you are putting money in the pockets of the lowest wage workers who are likely to spend that money quickly.”  Perhaps because she’s a lawyer, what Ms. Vogtman misses is that money comes from someone else, who will lower their spending (or investment).  At best the distributional effects are close to zero, if not outright negative.  If you want to claim that minimum wage workers have a higher marginal propensity to consumer, then provide the data and make that argument.  It has been Washington’s continued confusion between wealth creation and re-distribution that has contributed to the weak recovery.

Now my friends on the left continue to dismiss the unemployment effects, citing a study by economists David Card and Alan Krueger.  Setting aside the oddity of rejecting much of economics on the basis of one study, even one of the authors, David Card, states that proponents of increasing the minimum wage are mis-representing his work.  In an interview with The Region, Card states:

“I think my research is mischaracterized both by people who propose raising the minimum wage and by people who are opposed to it.”  Professor Card also goes onto say that, “nowhere in the book or in other writing did I ever propose raising the minimum wage.”    So if Democrats want to continue to push for higher minimum wages, with the resulting higher unemployment, they should stop claiming to have any scientific backing for the position and just admit that they want to redistribute from one group of Americans to another group of Americans (mostly those in organized labor), and leave it at that.

Of course all of this ignores the basic fact that the minimum wage is an infringement on the freedom of consenting adults to make contracts.  If party A agrees to work for party B at rate X, what right does the State or anyone else have to stop that agreement?  In my book, none.

 

Mark A. Calabria, is director of financial regulation studies at the Cato Institute. Before joining Cato in 2009, he spent six years as a member of the senior professional staff of the U.S. Senate Committee on Banking, Housing and Urban Affairs. In that position, Calabria handled issues related to housing, mortgage finance, economics, banking and insurance for Ranking Member Richard Shelby (R-AL). Prior to his service on Capitol Hill, Calabria served as Deputy Assistant Secretary for Regulatory Affairs at the U.S. Department of Housing and Urban Development, and also held a variety of positions at Harvard University’s Joint Center for Housing Studies, the National Association of Home Builders and the National Association of Realtors. Calabria has also been a Research Associate with the U.S. Census Bureau’s Center for Economic Studies. He has extensive experience evaluating the impacts of legislative and regulatory proposals on financial and real estate markets, with particular emphasis on how policy changes in Washington affect low and moderate income households. He holds a doctorate in economics from George Mason University.

 

And consider:

Walter Williams: How min. wage & welfare affect blacks

 

 

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