How To Teach Economic Fallacies: Be A Poser About Minimum Wage

This video by John Green advocating raising the minimum wage is a case study in sophistry.

First, he dismisses economic logic as “Freshman” and “101” level. Do you see any arguments that this logic is flawed? No. He doesn’t bother. He just invites you to feel too superior to believe such baby stuff.

Second, he appeals to a highly contentious study as if it is an unquestioned authority. David Card and Alan Krueger have been the left’s darling propagandists for quite some time. You can read one response to their claims here. I note the book reviewer’s first remark is that Card and Krueger “exude hubris,” which matches John Green’s method rather closely.

On the differences between what happened in New York and New Jersey, Card and Krueger used telephone interviews that others have criticized as shoddy.

From the above-cited response:

The Pennsylvania-New Jersey data were collected In two waves of telephone Interviews, one before the minimum-wage Increase (in February) and one after (in November). There are serious questions concerning the accuracy of that Information. Studies using the official payroll records of fast-food firms. In the relevant geographic areas had significantly different results and reached opposite conclusions. The major challenge has come from the Employment Policies Institute (EN), which Issued a report titled, “New Evidence on the Minimum Wage: The Crippling Flaws In the New Jersey Fast Food Study,” In AprIl 1996. EPI made its data available to David Neumark and William Wascher, They found that the employment effects of the New Jersey minimum-wage Increase were negative and quite consistent with the prevailing wisdom.

But even if we ignore all that, ask yourself the simple question: If a minimum wage gets raised and employment stays steady or even goes up, does that rule out the possibility that employment might have gotten even better without the minimum wage law? No, it doesn’t. The economy is like the weather. There are thousands of variables changing the economy all the time. Employment goes up and down due to other factors even when there is no change in the minimum wage. So what can a study prove when it finds that employment does not sink after the minimum wage is raised? You don’t have a controlled experiment in the economy. You have to use that “freshman” economic logic to discern what is going on.

If one is considering how biases come into play it is worth considering that Card and Krueger did their studies in the nineties. Federal and State minimum wage laws have been imposed and changed for over half a century by then. So these men knew, going into their “research,” that there was a large political “market” for a justification for governments to do what they had already demonstrated they wanted to do.

After citing the Pennsylvania-New Jersey study, our video teacher admits that, while some studies agreed with their findings, others studies have not. But then he simply discounts the negative studies. The damage, he says, “is… mild.” But why take action that will mildly damage employment?  He then admits that the minimum wage is pretty close to what the market minimum wage would be anyway if there was no law. So he admits that the only reason we don’t see more damage from the minimum wage law is because it usually stays close to the wage that employers and employees would agree to even if there was no law.

Then what is the point of the law? Why help some people make slightly more in pay and leave a few unemployed? Why is that an acceptable or desirable trade-off?

Then come two preposterous claims. The first claim is that people who are paid more buy more stuff and stimulate the economy. But how do they do that? If they start buying more, people start raising their prices. Raising the minimum wage seems like it would do more to increase price inflation than anything else. I know this because Green admits it himself. What is the point of being paid more if the dollars you earn lose value?

The second claim is that higher pay means less turnover. No! Higher pay than the minimum can mean less turnover. Once your raise the minimum wage for everyone, then there will be no reduction in turnover. People will have no reason to stay because they want to keep making better money. Everywhere will have “better money.”

Then we come to the alleged “growing consensus” that “in the medium run,” raising the minimum wage reduces poverty. Since Green has already admitted that the Card Krueger study has been contradicted, it is irrelevant to his argument. Now he is appealing to some new study or studies that he never even names.

How is it even possible for raising the minimum wage to reduce poverty? Most people making minimum wage are already from households above the poverty line. Even Bill Gates makes more sense than John Green. “Even many opponents of the minimum wage acknowledge” that poverty can be reduced by raising the minimum wage? I don’t believe it.

Green warns that if you raise the wage too much then it will damage the economy. But why? Why is raising the minimum wage ten percent good but raising it three hundred percent not thirty times better? It is much more believable that the damage caused a small change in minimum wage is much easier to hide in the economic noise so people think they can get away with it.

Then this: “But it is just as disingenuous to call the minimum wage a job killer as it is to say it is going to fix economic inequality.” I appreciate the admission that people who claim that economic inequality can be fixed by raising the minimum wage law are being disingenuous. But the fact that the minimum wage law is a job killer is confirmed by the vast numbers of minorities and teens who can’t find jobs.

When Green reaches his conclusion that raising the minimum wage will reduce poverty, he hasn’t actually given arguments. He has canceled out the Card/Krueger study and cited a supposed consensus that is never sourced.

When Green switches to “the personal argument” the sophistry gets worse. First he talks about “a living wage”—which would be far higher than the slight raise in the minimum that he has been talking about. It makes no sense. Second, he boasts in his own heroic morality claiming they would even pay this “living wage” if they ran a fast food restaurant. No, Green, you would go out of business and have no employees at any wage or income level. No one will buy fast food at a price that will allow you to pay your employees that high. It isn’t a matter of morality or your feelings for your workers. You can’t pay your workers money you don’t have. You can only pay them from the revenue you generate.

Green appeals to his own companies, as if the pay his employees receive was purely derived from his good will. What boasting! The fact is that Green can’t just hire anyone to produce what he wants to produce. He needs above average workers in character and probably in skills. He also wants to retain these people.  He has to pay his workers a higher rate or he could not operate the kind of business he wants.

But again, if the minimum wage was raised to the level of these employees, he would no longer be able to stay in business. His ability to hire the best would go away unless he raised their pay still further. In other words, the fact that a businesses like Costco pays higher than the minimum wage, does not show that everyone can operate the same way Costco does. Costco’s business model includes getting better, more loyal employees. The moment everyone pays as much as Costco does, Costco’s advantage goes away.

Green keeps pouring it on. The US is a rich country and it doesn’t benefit from having poor workers. Go to West Tanzania, Green. Go to any country like that and you will learn that the United States is a rich country that doesn’t have any poor workers. You are exploiting the human capacity to be unsatisfied with one’s current circumstances to produce the illusion that we are somehow leaving some people in real poverty.

And the final word from Green: He admits that, in fact, minimum wage law won’t fix any of the stuff he was just talking about, but he hopes “we can have a nuanced conversation” about it.

“Nuanced conversation” is hardly encouraged by a speed-talker on video.