Their Job Losses Are Hypothetical; Our Minimum Wage Gains Are Real

Jobless men keep going

I can’t actually bring myself to read all the way through Tim Worstall’s latest word jumble at Forbes, because I already have a slight headache, and Jesus, folks, it’s Friday afternoon, so gimme a break. But I would like to comment briefly on his disclaimer at the top:

Before we go any further, as with other minimum wage rises that have been discussed here, no, I am not claiming that the rise is about to destroy the economy of that fair state, nor that all that will be left is a howling wasteland as the unemployed desperately search for scraps. I also agree entirely that the macroeconomic issues of what happens to the whole national economy are going to have far more to do with the employment and unemployment rates in Oregon than this change to the minimum wage will bring about.

… The claim is this and only this: That a higher minimum wage will lead to fewer jobs than the absence of that higher minimum wage would have led to.

Good on Tim for being up front about what he is claiming; not all trickle-downers are so forthright. But let’s be clear about what the core neoclassical claim is: it’s not that raising the minimum wage will destroy existing jobs, but rather that it will lead to fewer jobs in the future than there otherwise might have been.

In other words, it is a claim that, no matter the empirical evidence, has the inherent advantage of being impossible to ever disprove!

How convenient.

Of course, the neoclassical models back Tim up. Run the models, and they’ll always project at least some theoretical job losses (in the future!) associated with minimum wage hikes large and small — despite the fact that the actual data from hundreds of local, state, and federal minimum wage hikes over the past 75 years show zero correlation between the minimum wage and jobs.

No, I can’t actually prove that there wouldn’t have been more jobs created (in the future!) had the minimum wage not been raised, because it’s entirely impossible to prove or disprove. It’s an alternate history. But what I can prove (and even Tim apparently agrees with this) is that a minimum wage hike has never destroyed the economy in the past.

Oh, also: that it always results in higher wages!

To be clear: Tim’s job losses are hypothetical. But our wage gains are real.

But even if Tim is right that a modest hike in the minimum wage would almost certainly lead to fewer jobs (in the future!) — and I’m not saying that he is — that still may be a tradeoff that’s well worth making. This isn’t a video game. The purpose of economics isn’t to score the highest GDP or the lowest unemployment rate. The purpose of economics is to broadly improve the lives of actual people. I’m more than willing to admit that there is a limit to how high we can reasonably raise the minimum wage — that there is a point beyond which the risk of theoretical job losses exceeds the benefits of actual wage gains.

If trickle-downers like Tim can likewise admit that there’s a point where the benefits of raising the minimum wage exceed the theoretical costs, perhaps we can have a rational and productive policy debate about how high the minimum wage should actually be.


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