Feb 19, 2013 at 12:54 pm
Charles Lane of the WaPo oped page often makes pretty muscular arguments in favor of conservative causes. But alas, not today.
Today he’s got a bit of a mash-up on why he’s against the minimum wage increase, a dog’s breakfast of arguments that failed to make his case.
Lane argues that even if the weight of the research is correct and few workers lose their jobs (or work fewer hours) because the increase, it’s got to come out somewhere and therefore someone gets hurt. But that, of course, would be a reason for never doing anything at all: the economy is nothing else if not a bunch of moving parts and every intervention shows up somewhere. This, btw, holds for an increase in the Earned Income Tax Credit as well, Lane’s (and others’) favored solution to boost the pay of low-wage workers, though for some reason, these moving parts don’t interest him.
So, since every action has a reaction, when considering something like a minimum wage increase, the questions policymakers must ask are: a) is the intervention truly necessary, b) what’s our best guess re the impact, and c) will the benefits outweigh the costs?
My answers, which will be different than Lane’s, who has a long—and, as I said, often well-argued—track record of opposing most of what anyone proposes, are: a) yes, because low-wage workers clearly have failed to receive their fair share of the economy’s rising productivity, b) there’s reams of research that suggests the job-loss effects hover around zero, and c) even if we take Lane’s guesstimates on job losses, the vast majority will be better off (Lane argues that 300,000 low-wage workers could lose their jobs if there’s an increase; estimates are that between 15-20 million workers will benefit from the increase)
Lane’s main argument, however, is that the minimum wage will “impose costs on other vulnerable members of society.” That’s way too vague to be helpful. He cites price increases by employers pushing costs forward and “wage compression” (workers above the new minimum getting fewer raises). But again, where are the magnitudes? If your doctor prescribes medicine that will make you better but will have some side effects, do you not take it? Lane’s argument would be to throw the medicine away, because any side effects, regardless of their magnitudes, vitiate the medicine.
Both of these effects have been found to be small enough by far such that the benefits of minimum wage increases of the magnitude outweigh the costs. One reason, and Lane pays too short shrift to this, is that some of the increase in absorbed through lower profits, which doesn’t hurt low-wage workers and in fact, rebalances a bit of the income inequality that just keeps growing.
Finally, if Lane and others want to expand the EITC, go for it. But make this a real campaign—not just a defensive gesture when someone mentions a minimum wage increase. I spoke to Lane about this piece and he sincerely believes that increasing the EITC is a better way to go but I couldn’t find any of his writings in support of it (I apologize to him in advance if I missed past writings in favor of expanding it–if you point them out to me, Chuck, I will highlight them).
So explain to us how we’re going to raise the revenue needed to do this—I assume Chuck (and the WSJ oped page and others suddenly in love with the EITC) doesn’t want to add the increase to the deficit. Please don’t wave hands, proffer vague warnings, and solve the problem of low-wage work by suggesting a higher EITC without applying that solution to the same analytic and political scrutiny as the minimum wage increase.
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