Deep Underground with Raul Groom

Wednesday, August 18, 2004

There are several interesting points in Vampire Elf’s opening critique of the Federal Minimum Wage. Unfortunately, the main point – that the Minimum Wage causes unemployment – is not particularly interesting. It’s the same old game plan that the opponents of the Minimum Wage have been using for decades, with a 1990’s-era twist thrown in.

Here’s how the game plan works. Step One is to call the minimum wage an artificially created price floor. Notice the insidious-looking italics. The implication is that anything artificially created is a heinous constraint on the glorious free market. Since no logical reason for believing this is presented, we don’t need to deal with Step One except to point it out so that we can inoculate ourselves against it.

Step Two is to set up the Card-Krueger study as the key turning point in the history of thinking about the minimum wage, and then set about annihilating the study. This works well for two reasons – one, the Card-Kreuger study was an important turning point in economic thought about the minimum wage (though the ideas it supported actually began gaining traction in the 1980’s), and two, primary employment data is pretty hard to collect, and it is therefore pretty easy for an organization that has an interest in discrediting a given set of employment data to do just that.

Of course, a reputable-sounding establishment like the “Employment Policies Institute in Washington,” is presumably a pretty objective, nonpartisan source on the subject, no? We have here a very important lesson about propaganda. Indeed, I am certain (ahem) that Vampire Elf was slyly looking to teach you just this lesson, and not to hamhandedly mislead you.

You see, when you read about the “Washington-based Employment Policies Institute” you are supposed to assume that this is some sort of government agency, or at least a fair-minded private organization. Maybe you might even confuse the group with the Economic Policy Institute, a pro-worker group with offices down the street from EmPI. Actually, you could be forgiven for that, since EmPI has always actively sought out such confusion, even going so far as to use a virtually identical logo to EPI. But chances are you won’t assume (though if you did, you’d be right) that the Employment Policies Institute is an advocacy organization funded by the restaurant industry whose main goal is the abolition of the minimum wage.

Which brings up an issue that is actually an interesting philosophical question about the minimum wage, and which we’ll hopefully come back to after we dispose of Vampire Elf’s weird attempt to deny the fact that, all together now, no serious economist now believes that modest increases in the minimum wage result in increases in unemployment.

But to return for a moment to the EmPI criticisms of Card-Krueger, it is humorous to note that upon closer analysis the data that EmPI provided David Neumark, which was supposed to totally refute Card-Krueger, actually wound up supporting it to a large degree. (Another, perhaps unintentional, misleading aspect of Vampire Elf’s critique is that he presents the Neumark study and the EmPI study as being separate entities – Neumark was actually relying on EmPI’s data.)

The EmPI campaign to muddy the waters with regard to the minimum wage eventually failed, and serious economists moved on. I’ll spare Vampire Elf the indignity of having it pointed out that his description of the Card-Krueger study is completely ridiculous, and that anyone who thinks that a study that poor could gain widespread traction, even among “liberal-minded economists,” is substantially deluded. Suffice it to say that while the primary research in Card-Krueger had its soft spots (as does ALL primary data) it is widely recognized as sound, and has been substantially confirmed by subsequent studies.

One question that’s also worth dealing with, which Vampire Elf does not mention, is the question of why it was assumed for years that increases in the minimum wage led to unemployment, or to be more precise why the 10:2 ratio was considered a “well-established law of modern economic theory.” Card-Krueger actually asked this question, and answered it – for years studies that called into question the relationship between minimum-wage increases and increases in unemployment were impossible to get published.

Two factors led to a shift in this condition, neither of them having anything to do with the emergence of Vampire Elf’s humorously imaginary liberal economics establishment. The most significant was the fact that analysis of the available body of data on the subject revealed that the data did not show the expected statistical shift in certainty from study to study (larger sample sizes yielding more precise results), indicating that the available body of data was significantly different from the actual body of data. The second factor was deliciously ironic – organizations like the Employment Policies Institute were so prolific in their pro-GOP boobery while trying to prevent the demise of the first Bush administration that they called attention to the fact that there existed a substantial right-wing nexus of policy analysis and media that was shouting down substantial amounts of perfectly valid primary research unfavorable to their supporters' positions. This paved the way for the commissioning of studies like Card-Krueger which, predictably enough, EmPI then attempted to shout down.

Of course, even after he’s digested all of this information, Vampire Elf is still going to oppose the minimum wage. Why? Because he’s philosophically opposed to it, for reasons that have nothing to do with unemployment. Which is fine, and that philosophy is what we ought to be debating. So let’s set aside this smokescreen where Vampire Elf attempts to use blarings from the Mighty Wurlitzer to pretend that economists still think that the minimum wage contributes substantially to unemployment. They don’t, and there never was any evidence supporting that idea, even though it appeared that there was.

So let’s frame the debate a different way – IF the minimum wage could be set at such a level that a person making the minimum wage were living above the poverty line, without creating substantial unemployment, should we do that? Indeed, there is a historical precedent for just such a condition, in the late 1960’s, depending on how one sets the poverty level. So if that condition can be brought about – the question is, should we seek to bring it about? I await Vampire Elf’s examination of this question, now that we have dispensed with all the poppy… er, balderdash.

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