Nothing gets Sumner going more than this issue-other things get him as much maybe, like UI. After the President's SOTU speech the other night with it's surprise call for a raise in the minimum wage to $9-he also calls crucially for it to be indexed to inflation which would make give it the most purchasing power it's had since 1981, which, coincidentally is the year Reagan came in to office; coincidence? you be the judge but it seems to add gist to Obama's mill of being the liberal Reagan as if he were successful here he would undo one of Reagan's not so pleasant legacies-I knew it was just a matter of time before he had a snarky comment about it. So I predicted the next morning.
http://diaryofarepublicanhater.blogspot.com/2013/02/boehners-new-gop-populism-opposition-to.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29
His kvetching came even quicker than I anticipated devoting an entire post to it. Since then he hasn't posted again, so maybe this has him stewing in his juices.
http://www.themoneyillusion.com/?p=19392
I left him this helpful comment:
"I was waiting for this post. I did see it coming."
http://diaryofarepublicanhater.blogspot.com/2013/02/the-state-of-union-is-good-as-president.html
"Sorry. Elections have consequences. If people wanted a low minimum wage or no minimum wage they would have voted for Romney."
"I actually do think it may happen. The GOP may hate it-as you do-but most people like it-it polls very well across party lines. Bush signed the hike in 2007 so the GOP can be shoved."
"Speaking of monetary offset-you aren’t suggesting Bernanke could tighten monetary policy if it happened are you? Why would it have any impact on it?"
To this he harrumphed:
"There are times when your logic leaves me speechless. I presume you also used this logic in defending any and all Bush administration policies. And didn’t the Germans vote for Hitler in 1932?"
Yeah. Who's king of false equivalences? You are! As usual Sumner takes my good natured remarks with ill humor. I do take that gloss about me leaving him "speechless" as a compliment. He also didn't answer my more substantive question about just how monetary policy might offset any benefit from the hike.
See, that's him moving the goal posts again. The minimum wage won't have any benefits. However, even if it does, the Fed will neutralize them.
My point about elections having consequences was not only gloating. Once in awhile I think it's fair to remind Sumner that we live in a democracy and that while he may think that only the opinion of him and his fellow Monetarist mandarins count, their votes are worth no more than anyone else's at the ballot box.
On the one hand, minimum wage hikes are very popular with the public and this goes beyond party lines-most voters who prefer Republican candidates also want a higher minimum wage-I always wonder how many votes the GOP would get if it's own constituents actually understood it's own positions.
Indeed, the Dems are already planning to use this issue against the GOP in 2014. If we don't get the hike we at least have a political issue.
"President Barack Obama’s push for a $9-an-hour minimum wage in his State of the Union address this week has already been rejected by Speaker John A. Boehner, but that’s not necessarily a bad thing for Democrats."
"As the president and his fellow Democrats look for popular wedge issues in their effort to hold on to the Senate and their long-shot bid to retake the House in 2014, the debate could prove a useful cudgel regardless of whether the policy becomes law."
"The White House is clearly eager for the fight; the administration put out extensive documentation on the minimum wage proposal and contends that it will not harm job creation and will boost the take-home pay for nearly 15 million people."
http://www.rollcall.com/news/minimum_wage_battle_may_wound_republicans-222434-1.html?pos=htmbtxt
That it's very popular politically may explain why you had a Republican Congress in the late 90s sign on to Clinton's proposed hike and George W. Bush signed a hike in 2008.
However among Sumner's people who matters-economists-it's at best 50-50 on its virtues. That's why he likes to say there's no such thing as public opinion in economics-because presumably those of us without advanced degrees in economics aren't smart enough or well trained enough at least to have a meaningful opinion about it.
Another economist, Evan Soltas, dropped in on the comments to agree with Sumner that raising the wage isn't a good thing. )Actually, I don't even know if Evan's officially an economist; he is a darn smart kid and his work appears in Bloomberg News for God's Sake.)
Though if you look at his piece, his argument is not identical to Sumner's. He doesn't believe that raising the minimum wage is optimum for it's goal of helping low income workers and proving for more social mobility. However, he does not agree with Sumner's deeply held belief that the hike would raise the unemployment rate.
He does give two reasons not to raise the minimum wage but the argument that it raises unemployment is not one of the two.
"A higher minimum wage, Democrats argue, would support low-wage workers by reducing income inequality and stimulating the economy."
"The evidence for their first claim is reasonably strong. An increase in the minimum wage would reduce inequality by pushing up the incomes of the poor, a report from the Organization for Economic Co-operation and Development found this year. A 2008 paper by economists Robert J. Gordon and Ian Dew-Becker also found that minimum wages have significant empirical impacts on income inequality."
"It is less clear, though, that a higher minimum wage would do anything to boost economic activity. A study by the Federal Reserve Bank of Chicago did find that it would increase consumption: For every $1 increase in the minimum wage, households with minimum-wage workers increased spending by $800 per year. Almost all of these gains, however, come from the interaction of income redistribution with savings rates. Since high-income households save more of their income than low-income households, income redistribution tends to shift savings into consumption. That has ambiguous effects on economic growth."
http://www.bloomberg.com/news/2013-01-03/two-reasons-not-to-raise-the-minimum-wage.html
However, Evan totally repudiates the raising unemployment argument:
"Republicans, to their discredit, have done a poor job rebutting Democratic arguments. Their main counterargument is that increasing the minimum wage would increase unemployment. A higher binding price floor on labor, Republicans reason from the economic basics, will increase the amount of labor that goes unused."
"The problem with this argument is that it proceeds in almost complete ignorance of empirical analyses that find small, if any, impacts of the minimum wage on employment. The most important work on this topic comes from two pairs of economists: David Card with Alan Krueger, and David Neumark with William Wascher. Card and Krueger find no employment impacts, whereas Neumark and Wascher find significant but limited effects."
"How can that be? It's because labor is a complex market. It doesn't neatly behave according to the supply-and-demand models you'd find in an introductory economics textbook. There is not a single market for labor, nor is "labor" a single, undifferentiated commodity. Most employers have significant market power for the goods or services they produce, and so they mostly pass on the increased labor costs in the prices of their products instead of cutting production and jobs. All of this means that the "labor market" does not quite respond to the minimum wage in the way Republicans have argued it does."
What he does argue is that Republicans should argue for substituting a higher EITC for a higher minimum wage, I admit that would give us Democrats something of a quandary as it would give us a choice of two things we like: higher minimum wage vs. a higher EITC which is the most significant government subsidy for the poor today, and, yes, was a conservative brainchild-Friedman's baby.
"Democrats who want to address income inequality would be much better served by increasing the EITC rather than the minimum wage. Alternatively, if Republicans shifted strategy and suggested an increase in the EITC as a counteroffer to Democratic minimum-wage proposals, they would have the clearly stronger argument on merits. They have the opportunity to do so now, with the "fiscal cliff" deal only temporarily extending the 2001 and 2009 expansions of the credit."
"Republicans could correctly argue that compared to the EITC, the minimum wage is a flawed and frankly out-of-date policy tool. First, the minimum wage is inefficient: The same income support could be provided at a quarter of the cost with the EITC, according to Forbes's Adam Ozimek. Second, its benefits are poorly targeted, with little going to the neediest families, according to Employment Policies Institute fellow Michael Saltsman. This is in part because, as Bureau of Labor Statistics data show, many minimum-wage workers are actually teenagers entering the workforce who come from middle-class families."
"Although supporting the EITC in opposition to the minimum wage may seem like a change of argument for the Republicans, it would actually be a return to the case that conservatives and free-marketers once argued. George J. Stigler, the Nobel laureate and torchbearer of the Chicago school of economics, once made the outlines of this argument by recommending a negative income tax. Milton Friedman also endorsed the idea as the best way to provide for the social welfare of the poor."
Yet I doubt Republicans will use this strategy anyway. They don't seem to care much for the EITC these days. Sumner replies to Evan's post with this comment-I probably should have referred to him as Soltas not Evan throughout this post but can't be bothered to change each and every instance.
"Evan, Very good post. My research on the 1930s has convinced me that a higher minimum wage would cost jobs."
See, it might seem to some people that I'm not fair to Sumner but this is the kind of stuff he does that you got to have a problem with. He just seems to argue very evasively on questions like this. His research on the 30s that he doesn't mention. So you;re stuck having to take his word on that or asking him and getting back a whole lot of snark and sniffing that if you don't know what it is he has no time to explain the literature, you go find it on your own time. He ignores the fact that Evan totally criticizes this claim-saying that the GOP use of this same method is very ineffective and wrong.
My guess is it's the Ohanian/Cole paper he's thinking about when he talks about "my research" which of course, isn't actually his research but theirs.
I suspect this is what he has in mind:
http://www.themoneyillusion.com/?p=48
Then he admits that there is some work that shows that it doesn't cost jobs. So he falls back on the response of monetary policy.
"Yes, I know that there are a few studies that claim higher minimum wages don’t cost jobs. But as far as I know none consider the monetary offset mechanism."
A). It costs jobs.
B). Even if it doesn't cost jobs the monetary authorities will do stuff in response that will cost jobs.
And he claimed Krugman uses the zero bound argument as a get out of jail free card.
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