The Minimum Wage: Some Aircover for Gene Sperling...
Gene Sperling could use some aircover. Greg Mankiw writes:
Greg Mankiw's Blog: Sperling on the Minimum Wage: Gene Sperling, former economic adviser to Bill Clinton, tries to get President Bush to endorse a minimum-wage increase. Gene dismisses worries about adverse effects on employment. He writes:
No one has yet rebutted convincingly David Card and Alan Krueger's study that compared fast-food jobs on the border of New Jersey and Pennsylvania, and found no decrease in lower-wage jobs after New Jersey raised its state minimum wage.
The key word here is "convincingly." Gene is, apparently, not convinced by the Neumark-Wascher study that reevaluated the Card-Krueger work.... To me, Gene looks like a doctor prescribing a drug relying on a single controversial study that finds no adverse side effects, while ignoring the many reports of debilitating results.
Some air cover is provided by two non-big-fans of the minimum wage whose take on the evidence on employment effects coincides with Gene's:
- Tyler Cowen
- Stephen Landsburg, no big fans of the minimum wage, read the employment evidence the same way Gene does.
Some more air cover if provided by Card and Krueger. I, at least, thought the issue was settled in Card and Krueger's favor by their rebuttal of Neumark and Wascher.
And Jason Furman tells me to go read Daron Acemoglu and Jörn-Steffen Pischke on the minimum-wage-and-training issue:
Daron Acemoglu and Jörn-Steffen Pischke (2001), "Minimum Wages and on-the-Job Training (Bonn: IZA Working Paper 384):
Becker’s theory of human capital predicts that minimum wages should reduce training investments for affected workers because they prevent these workers from taking wage cuts necessary to finance training. In contrast, in noncompetitive labor markets, minimum wages tend to increase training of affected workers because they induce firms to train their unskilled employees. We provide new estimates on the impact of the state and federal increases in the minimum wage between 1987 and 1992 on the training of low wage workers. We find no evidence that minimum wages reduce training, and little evidence that they tend to increase training. We therefore develop a hybrid model where minimum wages reduce the training investments of workers who were taking wage cuts to finance their training, while increasing the training of other workers. Finally, we provide some evidence consistent with this hybrid model.
And also Daron Acemoglu, “Good Jobs vs. Bad Jobs”:
Daron Acemoglu (2001), "Good Jobs versus Bad Jobs," Journal of Labor Economics 19:1, pp. 1-21:
This article develops a model of noncompetitive labor markets in which high-wage (good) and low-wage (bad) jobs coexist. Minimum wages and unemployment benefits shift the composition of employment toward high-wage jobs. Because the composition of jobs in the laissez-faire equilibrium is inefficiently biased toward low-wage jobs, these labor market regulations increase average labor productivity and may improve welfare.