Rumor has it that Democrats will include, at their up-coming convention, a proposal to increase the minimum wage. As documented in a recent Cato study, such a policy is likely to increase unemployment, especially as I noted elsewhere among teenagers. One would think that given how a weak economy is undermining Democrats’ chance to keep the White House, they’d actually make proposals to reduce, rather than increase unemployment.
Perhaps the most bizarre, but honest, claim was made by Julie Vogtman, a lawyer at the National Women’s Law Center, “It can be very good for the economy because you are putting money in the pockets of the lowest wage workers who are likely to spend that money quickly.”
Perhaps because she’s a lawyer, what Ms. Vogtman misses is that money comes from someone else, who will lower their spending (or investment). At best the distributional effects are close to zero, if not outright negative. If you want to claim that minimum wage workers have a higher marginal propensity to consumer, then provide the data and make that argument. It has been Washington’s continued confusion between wealth creation and re-distribution that has contributed to the weak recovery.
Now my friends on the left continue to dismiss the unemployment effects, citing a study by economists David Card and Alan Krueger. Setting aside the oddity of rejecting much of economics on the basis of one study, even one of the authors, David Card, states that proponents of increasing the minimum wage are mis-representing his work. In an interview with The Region, Card states:
“I think my research is mischaracterized both by people who propose raising the minimum wage and by people who are opposed to it.” Professor Card also goes onto say that, “nowhere in the book or in other writing did I ever propose raising the minimum wage.”