Spurred, presumably, by the prospect of progressives in Joe Biden’s cabinet, James Pethokoukis posts in The Week to provide a scientific explanation of why one of the keystones of the progressive program, the $15/hour minimum wage, is not a good idea:
There is nothing obscene, morally or otherwise, about all aspects of society coming together to bear the burden of making sure lower-skill workers don’t live in poverty. I know it seems like a simple and smart critique here in the supposed age of “late capitalism.” If only McDonald’s and Wal-Mart would pay workers a “decent wage,” then the fast food and retailing giants could get off the government dole. Or as socialists like to put it: Capitalists offer socialism for companies and wealthy investors — capitalism for the rest of us. But while activists and left-wing politicians might choose to ignore economics, economics won’t be ignored. If workers at a big profitable company only generate $10 an hour of revenue, then the company won’t pay them $15 an hour. A company should not be expected to lose money on a worker, especially to hit a wage number pulled out of thin air by politicians.
The left gets the economics exactly backward. Instead of attacking these companies for employing workers at wages that require them to avail themselves of some government aid, the left should recognize that if these folks weren’t working at a company for a low wage, their entire subsistence would come from the government — and at a much bigger cost. Then there’s this: If Sanders is worried about government subsidizing business, how come he doesn’t view nationalized health-care plans such as “Medicare for all” as one massive subsidy for business by totally relieving them of that responsibility toward nearly 160 million Americans? Why are wages the problem of business alone, but health care a societal problem?
It’s actually counter-productive if your objective helping people but it’s very productive indeed if your object is to make more people clients of the state. It’s the sort of policy that makes people wonder about motives.
Economics is, indeed, a science but it operates under some handicaps. While it can tell you the general contours of the effects of a policy, it can’t tell you when the effects will appear or how great they will be. Still, everyone is apparently a science denier when it’s their ox being gored.
Mr. Pethokoukis himself doesn’t take the rather obvious next step. The problem we’re facing is not just that jobs don’t pay enough but that the jobs that are being created are preponderantly low wage jobs. For decades my critique has been that for at least the last 30 years we have had a policy mismatch. Educational policy has favored college educations but, seeing a nearly unlimited supply of workers with limited English and few marketable skills, businesses have exploited that supply to focus on niches they would not otherwise and to substitute low wage manual labor for more skilled, educated labor, possibly using machines. I fight this battle with libertarians and progressives alike.
