“Living Wage” follow-up

Wishful thinkers advocating the minimum wage refuse to acknowledge that the empirical evidence does not support their claims. Here is the follow-up statement I sent to Albuquerque City Council today:
“Living Wage” Hurts the Poor
Subsequent to my statement of May 20, 2005 I have seen several more empirical claims that the living wage will not hurt the poor. These claims constitute voodoo economics in the extreme.
Many factors (such as tax climate, regulatory climate, education, local entrepreneurial opportunities, what is happening in other states and localities, what is happening in other countries, business cycles and so forth) in addition to the “living wage” determine whether a local economy expands or contracts. In order to tease out an economically sound estimate of the effect of the “living wage,” the empirical economist must account for all the factors. Empirical studies that purport to show that the “living wage” does not hurt the poor and perhaps even expands employment and helps the poor do not account for all factors.
Studies that do account for all factors show overwhelmingly that wage floors hurt the poor. And those hurt are the least effective interest group in society (minorities, low skilled, relatively uneducated). They have no voice in the matter. All many of them know is that there is no job available when they go looking. For them the legal living wage becomes ZERO.
An excellent summary of the history and all the empirical evidence of wage floors may be found in: David Neumark in his research summary “Raising Incomes by Mandating Wages.” It may be found online here.
There are lots of things we can do to help the poor. The “living wage” idea is not only ineffective; it is counterproductive.

Print Friendly, PDF & Email

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.