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City Pages declares its ignorance on economics

City Pages is great if you want to know where to hear live bluegrass or buy a vegan burger. But if you want any understanding of economic policy, look elsewhere.

The latest example came this week, with a story titled ‘Republicans are trying to kill minimum wage hikes in Minneapolis, St. Paul‘. This is true, the Republicans in Saint Paul are trying to pass a ‘preemption’ measure which would stop local governments, like those in Minneapolis at Saint Paul, from setting minimum wages at rates above the level set by the state government. And, as I wrote on Monday, they are wrong to be doing so.

But once you get beyond the headline the article is a hopeless muddle. City Pages write that

The bill’s main sponsor, Sen. Eric Pratt (R-Prior Lake), worries about keeping state laws uniform. He could achieve this, of course, by pushing the Senate to create a $15 minimum statewide. 

He could indeed. But they go on to say

So if you’re among the many Minnesotans barely getting by, know that Eric Pratt is doing his best to add to your burden. 

But that is wrong. It is City Pages which is seeking to add to the burden of the low paid by making it illegal to hire them. That is all minimum wage laws amount to.

Minimum wages are bad policy

Empirical evidence shows that minimum wage hikes are bad public policy. In 2008, economists David Neumark and William L. Wascher surveyed two decades of research into the effects of minimum-wage laws. They found that

…minimum wages reduce employment opportunities for less-skilled workers … (that) a higher minimum wage tends to reduce rather than to increase the earnings of the lowest-skilled individuals … (that) minimum wages do not, on net, reduce poverty … (and that) minimum wages appear to have adverse longer-run effects on wages and earnings.

In 2014, along with economist J.M. Ian Salas, they examined the subsequent literature and concluded

…that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.

In December 2018, Neumark updated his review of the research again, asking When minimum wages are introduced or raised, are there fewer jobs? He writes

The potential benefits of higher minimum wages come from the higher wages for affected workers, some of whom are in poor or low-income families. The potential downside is that a higher minimum wage may discourage firms from employing the low-wage, low-skill workers that minimum wages are intended to help. If minimum wages reduce employment of low-skill workers, then minimum wages are not a “free lunch” with which to help poor and low-income families, but instead pose a trade-off of benefits for some versus costs for others. Research findings are not unanimous, but especially for the US, evidence suggests that minimum wages reduce the jobs available to low-skill workers.

This is why a 2015 survey of 166 US based economists by the Employment Policies Institute found that

• Nearly three-quarters of these US-based economists oppose a federal minimum wage of $15.00 per hour.

• The majority of surveyed economists believe a $15.00 per hour minimum wage will have negative effects on youth employment levels (83%), adult employment levels (52%), and the number of jobs available (76%).

• When economists were asked what effect a $15.00 per hour minimum wage will have on the skill level of entry-level positions, 8 out of 10 economists (80%) believe employers will hire entry-level positions with greater skills.

• When economists were asked what effect a $15.00 per hour minimum wage will have on small businesses with fewer than 50 employees, nearly 7 out of 10 economists (67%) believe it would make it harder for them to stay in business.

• A majority of surveyed economists (71%) believe that the Earned Income Tax Credit (EITC) is a very efficient way to address the income needs of poor families; only five percent believe a $15.00 per hour minimum wage would be very efficient.

• The economists surveyed are divided on the impact of a $15.00 per hour minimum wage will have on poverty rates, as well as the impact it would have on the spending level for public programs such as the EITC, TANF, or others.

• At lower levels (under $11.00 per hour) of proposed federal minimum wages, economists are divided largely by self-identified party identification as to an acceptable rate with a majority of Republicans and Independents who responded favoring lower minimum wages ($7.50 per hour or less) and a plurality of Democrats who responded preferring a minimum wage between $10.00 and $10.50 per hour.

It is why even Paul Krugman writes

So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. 

‘Believe science’

City Pages recently ran an article titled ‘50 Minnesota Republicans vote to declare their ignorance on climate change‘. You don’t get to play the ‘Believe science’ card if you deny the findings or research and the consensus of economists on the issue of a $15 ph minimum wage. That, too, is ignorant.

But, again, their listings are very good.

John Phelan is an economist at the Center of the American Experiment.