OPINION:
Last Friday, Service Employees International Union chapter President David Rolf came to Washington D.C. to promote his new book, “The Fight for $15.” Predictably, the book makes the claim that more than doubling the federal minimum wage will be all gain and no pain, lifting millions of people out of poverty without costing jobs. To top it off, he claims it would also be a massive boon to the economy.
The book is Exhibit A in the library of junk economics. Like junk science, junk economics turns basic principles on their heads, purposefully confusing and muddying logic in order to achieve a politicized goal.
The claim that minimum wages don’t reduce job opportunities is perhaps the paragon of junk economics. Rather than admitting the rigid economic law that price increases reduce demand (in this case, a price increase of labor reduces the demand for labor), junk economics confuses the issue with mystifying claims about minimum wage’s “stimulative effects.”
Common sense and proper economic research say otherwise. Last December, the Federal Reserve Board of San Francisco released a report concluding that recent minimum wage increases have cost 100,000 to 200,000 jobs nationally. And a new Institute for the Study of Labor paper finds a “consistently negative and statistically significant effect of minimum wages on teenage employment” over the last 60 years.
Proponents’ claim that wage hikes significantly reduce poverty is also junk economics. Putting aside the job loss factor for a moment, the simple fact is that a large majority of poor people don’t work at all and, therefore, aren’t helped by minimum wage increases.
A new analysis of Census Bureau data released last week by the Employment Policies Institute (connected to my work) finds that in some states more than two-thirds of the working-age poor don’t work. In Washington D.C., where Mayor Muriel Bowser recently proposed a $15 minimum wage, 72 percent of the working-age poor don’t work. In New York State and California, which both recently passed $15 minimum wages, 68 and 61 percent of the working age poor, respectively, don’t work.
This is one reason why economists at Cornell University and American University found no associated reduction in poverty in the 28 states that raised their minimum wage between 2003 and 2007. But the basic logic that you must be employed to be affected by a wage hike doesn’t stop activists from claiming that “millions” of people will be “lifted out” of poverty because of them. And that is without acknowledgment of those that are working who will lose their current jobs.
Politicians seize on junk economics because it gives them the intellectual ammunition they need to advance their agenda that puts government intervention above economic principles. If the public were aware of how little ability politicians actually have to improve the economy, or their low level of economic education, they wouldn’t grant them such vast power and mandates.
Hillary Clinton is a prime example of someone who bases her policy proposals on junk economics. Always more of a true believer than her husband Bill “the era of big government is over” Clinton, Hillary is willing to ignore economic laws in her bid to appeal to those who want “free” stuff.
She claims that the special minimum wage tipped employees get is “shameful,” but that is a better definition of her economic knowledge. A quick look at Census Bureau data shows that on average, tipped employees actually earn more than $13 an hour, a rate that has steadily increased over the past decades despite claims by activists that they are “stuck” being paid a “subminimum” wage. And that $13 is what people voluntarily report.
Of course, Hillary’s junk economics are nothing compared to those of her Democratic primary opponent, Bernie Sanders. Despite the fact that socialism has been thoroughly refuted academically and empirically for nearly 100 years, Mr. Sanders wears his socialism as badge of honor. Socialized health care, which he calls for nationwide, couldn’t even work in his native Vermont. In the words of its Democratic governor: “The potential economic disruption and risks would be too great.”
When the practitioners of junk economics can’t even practice what they preach themselves, it’s a sure sign of their illegitimacy. Mr. Rolf, the founding father of the Fight for $15 movement, is the president of an activist group called the Workers Lab, which recently offered a social media job that pays $1,500 a month. That works out to $9 an hour on a full-time schedule. Similarly, most congressional sponsors of a higher federal minimum wage don’t pay their interns any wage at all. Junk economics and hypocrisy go hand in hand.
• Richard Berman is the president of Berman and Company, a public affairs firm in Washington, D.C.
Please read our comment policy before commenting.