Minimum wage: Why do economists care so much?
Minimum wage discussions highlight the contrast between conventional wisdom and the economic way of thinking.
For a Forbes symposium on job creation, I’ve proposed that we Scrap the Minimum Wage. In a supplementary post for the Forbes Booked Blog, I discuss my sources and some of the research on the labor market effects of the minimum wage. I discussed the difference between allowing markets to work and trying to fix market prices through government fiat in this space last week.
One question remains unanswered. Why do economists, and why do I specifically, care so much about the minimum wage? The employment effects aren’t really that big, so why do we spend so much time talking about it?
Lay aside for a second the fact that we should oppose minimum wages if we care about poor people. The data are pretty clear that minimum wages reduce employment and increase poverty. The minimum wage is one of the issues where the contrast between conventional wisdom and the economic way of thinking is sharpest. As I mention in my article, the signal policymakers and activists send when they push for a minimum wage is “we don’t understand how competitive markets work.” Support for price-gouging statutes and rent control send the same signal. As long as people support these policies, we will have work to do.
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