Sunday, July 27, 2014

Steven Hayward of Powerline Fails Econ 101 (Again)

I know, I know  -- saying that one of the "experts" over at Powerline fails in econ is a foregone conclusion.  But sometimes it's amazing just how inept they are.

In his latest salvo, Hayward writes:

Anyway, most economists will tell you that your attitude about the minimum wage is a test as to whether you paid attention to the first day of Econ 101 (and even the NY Times editorial page said as recently as 1987 that the right minimum wage should be zero).  But Common Core liberalism requires a higher minimum wage now as an article of faith.

Well, actually, no there's a lot more to this than drawing simple lines on a supply and demand graph.  As noted by the CEA:

Finally, as one recent review of minimum wage research published since 2000 concluded, “The weight of that evidence points to little or no employment response to modest increases in the minimum wage.” Many economists now believe that a substantial portion of the cost to employers of minimum wage increases is offset by savings from reduced employee turnover and higher worker productivity. Moreover, in the short-run in an economy that is still demand-constrained, raising the minimum wage will increase the purchasing power of a vital segment of workers and contribute to stronger overall economic activity.

Mr. Hayward might want to actually click on the link listed above -- unless Hayward's Nobel Prize in econ informs him differently.

But more importantly, he might want to look at the actual evidence that's occurred since 13 states raised their respective minimum wage:

Beginning in January of this year, 13 states individually increased their own minimum wages, creating a sort of natural experiment in which the remaining states could serve as a control group. All that was left was for someone to do the math, and the Center for Economic and Policy Research, building on research conducted earlier in the year by Goldman Sachs, delivered that in a report last week.

Of the 13 states that raised their minimum wages, all but one saw job growth in the first five months of 2014. To be sure, that’s a small achievement in an environment where the national economy is adding something on the order of 250,000 jobs per month.

The really interesting finding is that the states that raised the minimum wage saw job growth that was, on average, higher than states that did not. The 37 states that did not raise the minimum wage at the beginning of this year saw employment increase by .68 percent. Those that did raise the wage saw employment increase by .99 percent.

In other words, states that have raised their minimum wage have seen an increase in their employment -- which runs counter to Hayward's argument.  Not that reality means much to him, however.

All Hayward had to do was search "minimum wage" in the news over the last month to find that article.  In fact, practically everyone who reads economic news on a regular basis saw that piece of news over that time period.