Paul Krugman argues that:
- Hiking the minimum wage has little or no adverse effect on employment
- A minimum-wage increase would help low-paid workers, with few adverse side effects
In other words, Krugman, not for the first time, is peddling the sort of claptrap that few of us would accept from a college freshman.
The first point — that hiking the minimum wage has little effect on employment — is an empirical one. Not all smart observers agree with Krugman’s reading of the data, but many do — so for the sake of argument, let’s assume he’s right about that.
The question now is: How the hell do you get from point 1 to point 2? Answer: Only by forgetting the most basic principle of economics, which is that things have to add up. If the minimum wage has no effect on employment, then it’s basically a pure transfer of resources. Which means that the costs and the benefits are equal. The only way there can be “few adverse side effects” —- i.e. few costs — is if there are few benefits. Our job as economists is to make sure people understand such things.
Once you’ve stipulated that the minimum wage is a pure transfer, the next step is to ask: Who does the transfer come from? Another part of our job as economists is to make sure people take that step. In this particular case, it’s going to come largely (through higher prices) from the patrons of the (mostly highly competitive) establishments that employ a lot of minimum wage workers. (That’s because, under competition, price is driven down to marginal cost, but no lower — so if the quantity served remains fixed per Krugman’s point 1, an increase in marginal cost must be fully reflected in the price.)
Now the next step is to ask: Why this particular transfer? Another part of our job as economists is to make sure people take that step too. The minimum wage takes from the (mostly) relatively poor people who buy a lot of fast food and gives to the (mostly) relatively poor people who serve it. When I go into McDonald’s in the morning, most of the customers strike me as less well off than the nice lady who serves me my Egg McMuffin. Why does Krugman want to take money from their pockets and put it into hers? And as for me — if my breakfast is going to cost me an extra dime every morning, then much as I like that nice lady, I’d far prefer that dime be sent to a starving child in Africa.
And if I do want to transfer a dime to the nice lady, I don’t need minimum wage legislation to enable it. That’s what tip jars are for.
It’s easy to say “Look how good it would be if Group A had more income.” But to jump from there to “It would be good to transfer funds from Group B to Group A” — without every asking whether those funds might better come from Group C, D or E, and without ever asking whether they might better be directed toward Group F, G, or H —- that’s a leap I’d expect to see from only two kinds of people, namely the thoughtless and those who are out to bamboozle them.