I hadn’t yet read this Ben Powell HuffPo piece on the minimum wage issue. A lot of it we have already seen before, but he gave some interesting facts I didn’t know.
Yet here’s something that is really bothering me in our discussions. Ben writes:
Informed apologists for minimum wage laws often cite David Card and Alan Krueger’s 1997 book, Myth and Measurement, which argued that the negative employment aspects of the minimum wage are minimal to non-existent. Of course, one reason they found little evidence of negative effects is precisely because the minimum wage has been kept low enough that it is not binding for the vast majority of workers.
More importantly, nearly 20 years of research since that study has pointed in the other direction. Economists David Neumark and William Wascher surveyed the vast literature studying the effect of the minimum wage in their recent book, Minimum Wages. They find that the bulk of the evidence accumulated over the last 20 years indicates that the minimum wage reduces employment for the least skilled workers and lowers their earnings. Card and Kruger’s study is an outlier, not the norm.
So what is the story? I know Ben is not misrepresenting Neumark and Wascher; even the literature reviews done by the people Krugman likes, say that that is what Neumark and Wascher report.
So what’s the deal? We’ve got “our guys” saying the literature is on our side, while “their guys” say the literature is on their side.
As much as I am surprised that economists disagree on which way employment moves after a minimum wage hike, I am absolutely astonished that economists disagree on which way economists think employment moves after a minimum wage hike.
(That’s not a typo; you may need to re-read that last sentence to fully appreciate the masterful prose here at Free Advice.)