Thursday, February 20, 2014

My Minimum Wage Skepticism

I'm not an economist. My preference for free markets is based on a lot of reading, but I'm not a quant guy and I'm not going to pretend I can predict what exactly will happen if the minimum wage is increased to $10.10 per hour.

But if we go on the CBO projection, these things should happen (via Josh Barro):

CBO estimates the proposal (raising the minimum wage from $7.25 to $10.10) would:
  1. Raise wages for 16 million workers making under $10.10 and millions more making slightly above that,
  2. Increase family income by $2 billion overall and $17 billion for people earning less than three times the poverty line (about $72,000 for a family of four),
  3. Lift 900,000 people out of poverty, and
  4. Reduce employment by 500,000.
So of course our discussion is focusing around the employment number.
Another reason I like free markets is that I'm generally uneasy with directing policy to create winners and losers, so yes, I'm going to focus on the employment number.

The reason I think this is important is because certain segments of our population already suffer disproportionate unemployment. The Bureau of Labor Statistics says that in January 2014, the white unemployment rate was 5.7 percent; the Hispanic rate was 8.4 percent; and black unemployment was 12.1 percent. Blacks have had double digit unemployment every month since July 2008, and Hispanics had double digit unemployment for 45 out of the 46 months between January 2009 and October 2012.  White people, on the other hand, haven't been in double-digit unemployment during any point in or since the Great Recession.

This isn't to say there should be more whites unemployed or that we should enact policies to even this out--just that, when economic crunches happen, they hurt blacks and Latinos more. So when we're talking about a net loss of half a million jobs, and those losses can predictably (but not certainly) fall disproportionately on minorities already suffering from higher unemployment, I think it's OK to ask whether it's fair to help a lot of people at their expense thereby widening the gap in inequality.

It's a value judgment, and my value system favors more employment rather than less and not implementing policies that further punish the already disadvantaged, when at all possible. Good people can think the gain for the people who will benefit outweighs the suffering of others, if only because it helps more people than it hurts, but I'm not one of them. Whether it is race or gender or whatever, manipulating free exchange of labor destroys economic opportunities, most likely for those whom society has already marginalized.

 There are a lot of things we can do to half a million people that would make lives better for many others, but that doesn't make it right or fair to do them.

 bellum medicamenti delenda est

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