Wednesday, January 10, 2007

 

Seriously, Bonzo should be the WaPo Business columnist

Washington Post Business columnist Steve Pearlstein once claimed to not have any economic training and he has seemed hell-bent since to back that statement up ( ...and Bonzo probably knew more about economics than Steven Pearlstein).

Anyway, he is at it again with a column today about the minimum wage that is so filled with irrelevancy that is comes across as just an (another) audition for him to move to the Op-Ed pages:

“With Wall Street hot shots and corporate chiefs raking in obscene amounts of money, and with pay in the bottom half of the workforce barely keeping up with inflation, you'd think raising the minimum wage for the first time in a decade would be a political and economic no-brainer for the new Democratic Congress.”

“But you'd be forgetting about Max Baucus” Steven Pearlstein - Minimum Wage, Maximum Myth

Seems Senator Max Baucus, a Democrat from Montana, wants to hold hearings BEFORE voting in a minimum wage hike. Steven Pearlstein is aghast at the idea that everyone isn’t already vested in the idea that a minimum wage hike is a self-evident truth. After all:

Real Democrats know that raising the minimum wage is the right thing to do -- economically, politically, morally.”

His argument is basically that raising the minimum wage is no big deal because (a) small business will eventually pass on the costs to us and besides (b) small business sucks.

He does concede, grudgingly it seems, that maybe, just maybe such legislation can have an impact on business but:

“The worst that can be said is that a higher minimum wage will add, very modestly, to overall inflation.

“There is also general agreement among economists that a higher minimum wage, at the levels we are talking about, will have a minimal impact on adult employment. Slightly higher prices might reduce, slightly, the demand for Wendy's hamburgers, cheap hotel rooms and dog-walking services. But largely offsetting those effects will be the increased demand for goods and services by tens of millions of Americans who will finally be getting a raise. A higher minimum wage doesn't lower economic activity so much as rearrange it slightly.”

Of course, Steven Pearlstein isn’t in the Wendy’s hamburgers business. Nor does he operate a hotel or dog-walking business. For him then this is all just faux-academics and guess-work. More importantly, such pontifications probably allow him to continue to hobnob with other like-minded liberals who can continue to tsk-tsk the less-anointed of us who haven’t yet seen the light. What he doesn’t address is just why most of us don’t work at the minimum wage. What is it about the market that it is so inept about valuing the labor of a particular stratum of workers that the federal government is forced to step in and make it right?

Despite Mr. Pearlstein’s claims, there is no ethical or moral justification for an increase in the minimum wage. That is sheer demagoguery and today's column is just another long-winded version of the liberal mantra: Trust us; we know what’s best for you!

Comments:
Essentially what minimum wage proponents are advocating is that it is better for a marginal worker not to earn at all than to earn below a certain wage rate. Arguments for this position range from the wage necessary to sustain a family of four (most minimum wage earners being young, single and childless) to the "immorality" of their plight.

The causes of low wages are rarely discussed (inexperience, criminal records, low education, bad work histories, illegality, regional economic downturns.) I would take the Milton Friedman approach of negative income taxes to assist honest, responsible people in such plights.

Unlike many conservatives, I don't think that most enforceable minimum wages will do much harm; they just won't help much either.

One thing I have wondered is whether minimum wage laws have one positive, unintended and subversive side-effect, namely encouraging some low-wage workers to consider self-employment. If necessity is the mother of invention, and minimum wage laws press out (or stagnate, or even merely retard) low-wage job growth a lot of low-wage jobs, I wonder if the risk aversion of such workers to the hazards of self-employment gets reduced, yielding other positive externalities down the line from new micro-enterprises, even if it's just delivering newspapers as a 1099 Sch. C-EZ.

This is entirely speculative and I would love to know whether there is an economics thesis out there along these lines.
 
Back in the day, we used to call this Limousine Liberalism.

Nice job.
 
thanks all - minimum wage laws, like campaign finance laws, are touchstone issues for me. I honesty don't care if the effect of a MW can be painted as a positive - setting wages is simply not a proper function of our federal government (and shouldn't be of our state either) which is enough for me to oppose it. That it is also moronic merely heightens my enthusiasm for opposing such rules.
 
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