All pose and no substance

Kevin Drum crows that the experience of Oregon's indexed yearly minimum wage increases vindicates the pro-minimum-wage-increase position:

Read the whole thing. Deborah Solomon provides both sides of the story, but it's worth noting that virtually all the evidence on the anti-minimum wage side is either anecdotal or theoretical. The evidence on the pro-minimum wage side is concrete and statistical. You can decide for yourself which kind of evidence to believe.

There is a lot that needs to be unpacked here. First, in part of the WSJ article that he quotes, it is not clear what the 8% increase in nonfarm payrolls has to do with the minimum wage in the first place. Is this an 8% increase in minimum wage nonfarm payrolls? If it isn't, then the orthodox position on minimum wages is hardly challenged, as the point is that the margin (the wage floor) will see the bulk of the effect. Further, this growth in higher-than-minimum wage jobs is meaningless to the people who are supposed to be helped by a higher minimum wage, since if they could only command sub- minimum wage jobs before and minimum now, the higher wage jobs were never an option for them. So that statistic is fairly irrelevant.

Job growth in industries that have minimum wage positions is a bit closer to the mark, but still doesn't tell us much. The 5.4% unemployment rate tells us a bit more; its 1 point higher than the national average. I'm not going to be as quick as Kevin to infer causation from correlation here either, but it doesn't seem like much of a positive spin to say that a rate of unemployment that's 25% higher than the national average is good because it happened to be 7.2% back in 2002...

Also, the quote seems seriously confused that there is a meaningful distinction (in this case) between the theoretical and statistical (what else would employment economists use in their theory?). Despite that confusion, David Neumark (mentioned in the WSJ article) does lay out a fairly comprehensive, concrete, statistical study of minimum wage laws and their effects here, among other things showing that for whatever else a minimum wage does, the effect is primarily among the teenaged to those in their early 20s, the sign is negative, and in the long run negative if a minimum wage prevents a teen or young adult from gaining employment and more importantly not gaining the habits of employment.

Further evidence of the this kind is summarized by Alex Tabarrok here, whereby he relates studies showing that 25% of the folk on the mininum wage (nationall) are teenagers, and 50% of all minimum wage earners are aged 25 and younger. These are people, Alex notes, that with age and experience will likely soon earn more than minimum wage anyway, thus as an antipoverty tool it's fairly weak.

Alex's coblogger comes in for a more damning analysis that I shall quote extensively:

If minimum wages go up, I expect some mix of two scenarios:

1. The employer restores the previous net wage by worsening working conditions.

2. The employer upgrades the quality of job and thus marginal products, to meet the new level of minimum wage.

Now #1 is not much of an argument for boosting the minimum wage. But is #2?

It sounds good but the employer had decided in the first place not to create those higher productivity jobs. So those jobs must cost more and we should expect a negative effect on employment, albeit perhaps a slight one.

It is also the case that those jobs will go to the "most easily upgradable" workers among the low-wage working set. I suspect those are the low-wage workers with relatively high human capital and high levels of adaptability. Among the class of low-wage workers, the effects are probably anti-egalitarian. That again does not make the minimum wage sound so great, even though the employment effects could be small or perhaps even zero. I might add this also explains why the most articulate low-wage workers probably, for reasons of self-interest, favor increases in the minimum wage.

Emphasis added. This is indeed what one owner noted, that he had to make the jobs a combination of crappier and more demanding (#1 and #2) to square the circle. Granted this is mere 'anecdote', but still thicker soup than the supposedly concrete examples of benefit to the toiling class that Kevin touts.

The other problem, of course, is the quick slight of hand from "whats good for Oregon" to "its good for Everyone"; costs of living and doing business vary geographically (as does the functional meaning of poverty and being working poor) and it makes little to negative sense to impose a uniform wage floor across a continent's worth of particular circumstances of time and space. On more conspiracist sites, I've heard it said (persuasively) that efforts to raise the Federal minimum wage are efforts to screw lower wage regions (who have concomitant lower costs of living) and reduce competition with high cost of living (and wage) regions.[1] Certainly, if Oregon's experience tells us anything its that these decisions should be made state-by-state; Oregon's agriculture industry will either have to increase its productivity through capital or leave, and other states can look at Oregon and see if the new shift and share of industries is worth it.

But ultimately my biggest problem with all of this is as Alex said in his post- 'Minimum wage hike' is rhetoric that doesn't do much other than make some upper class left-liberals feel happy/smug about themselves. Its a particularly bad antipoverty tool, it has non-trivial effects on the structure of employment within and across industries, and has possible non-trivial long term negative effects on low-skill individuals' abilities to stay employed and to increase their own productivity and standards of living. All of the things it purports to want to do can be done by much more targeted, efficient, and effective policy tools.[2]

'Liberals' of America, please, I beg of you: save your breath for policies that actually help poor Americans, eh? And it you won't do it for me, can you do it for the children...?

(Footnotes below)

fn1. Of course, the regions are New England (high cost) and the Southeast (low cost), so there's a bit of historical baggage in these arguments as well, but I wouldn't put it past those damn Yankees...

fn2. The minimum wage nonsense reminds me of CAFE. Doesn't do what it's supposed to do, and in the case of CAFE led to the explosion of supra-inefficient gas guzzlers in the 1990s, completely thwarting its purpose.

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