The award of this year’s Nobel Prize in economics has further exploded a decades-old myth that increasing minimum wages costs jobs.
I.e., the
Nobel Prize for Political Correctness
----- or for pandering to the mindless mob
The award of this year's Nobel Prize in economics has further exploded a decades-old myth that increasing minimum wages costs jobs. The prize was awarded to David Card, Joshua Angrist and Guido Imbens for real-world research in the 1990s that demonstrated, empirically, that the idea touted by...
www.ituc-csi.org
The prize was awarded to David Card, Joshua Angrist and Guido Imbens for real-world research in the 1990s that demonstrated, empirically, that the idea touted by conservative economists that higher minimum wages mean fewer jobs is not based on fact.
What all that research really demonstrated is that it's not possible to calculate precisely how much damage minimum wage does, in each case. It can't be measured, just as it's impossible to measure how much damage is inflicted when a storm damages crops, or how much damage is inflicted when a pile-up accident on the freeway destroys trucks shipping products to market. The higher prices imposed onto consumers whenever the supply is adversely affected can never be precisely measured.
That pileup which destroyed a certain amount of product caused a certain loss to capitalist suppliers or retailers and inevitably drives up price/cost, by 1% or or .1% or .01% somewhere, here or there, but there's no way to really calculate this exact amount of damage. We know the damage takes place because of the law of supply and demand. And in some cases, where the cause is something major and losses huge, there are ways an economist can make good guesses how much is the damage, and it becomes more empirically- and data-based. But even when the cause is a small accident somewhere there is a cost imposed onto someone because of the reduced supply, even if it's impossible to measure.
That's all any minimum-wage research has ever proved: that we can't really measure the exact damage done by the MW increase, and we can't even prove that there is any damage at all if it can't be measured. Not even the damage due to that pileup accident on the freeway can be proved, by any empirical data. You could claim there is no damage, like MW promoters claim there's no damage from a MW increase, because the empirical cause/accident/MW-increase data is too indirect and minor compared to all the other factors in the economy which drive prices up or down, or drive demand/supply up or down.
ITUC General Secretary Sharan Burrow said: “These Nobel Prize winners have demolished the unproven, yet influential, theory that ensuring that workers have a decent minimum wage somehow means job losses.
Just as they demolished the unproven theory that the freeway accident caused higher prices somewhere for the products destroyed in the accident, because 2 or 3 truckloads of product got lost. That loss of product itself does not give us the empirical data for how much higher prices are at a WalMart 20 miles away which now will have (small) shortages. No economist has ever proved how much the prices went up at this or that retailer because of such an accident, and yet it's assumed that when product is destroyed, somewhere it causes reduced supply and higher price =
ideologically-based "unproven, yet influential, theory" that supply-and-demand applies even in small cases of reduced supply or higher cost. In major damage cases they can make good guesses, but there's no empirical data to prove it, and any Nobel Prize economist could have fun poking holes in claims that supply or price was adversely affected, for lack of hard data.
This study is nothing new. Minimum-wage fanatics have been cranking out these "studies" for decades, proving that the law of supply-and-demand does not apply (to wage-earners) because there's no empirical data to prove how much exact damage is done to which particular employers and which job-seekers still unemployed or which workers laid off due to cutbacks.
“Those who have peddled that mythical theory for decades, and the governments and institutions that have imposed the same theory, without proper evidence or against evidence to the contrary, are responsible for millions . . .
Just as there's no "proper evidence" of higher prices due to accidents when truckloads are lost in a freeway pileup. Whereas the "evidence to the contrary," for minimum wage increase, is that you can see a few employees who get a wage increase, so you can say with glee that here is a particular person who now has a higher income than before = increase in living standard for that one person, or that one group of employees, without being able to see the cost to someone else, in job loss or reduced production by a company due to the higher cost, just as there is higher cost to a producer whose cargo got lost in an accident and yet the empirical consequence cannot be measured.
. . . for millions upon millions of people living in poverty.
If this could make any sense, it means we could impose a minimum-wage increase in any 3rd-world country having substandard wage level, increase that wage to a "decent" level, and it would bring all those millions out of poverty. And yet exactly the opposite is what happens if the minimum wage is increased to a "decent" level in any 3rd-world country. This was proved in American Samoa, where the minimum wage was increased by Congress in 2007-2009, and the result was a severe recession/depression of the Samoan economy, and President Obama in 2010 had to sign the bill to RESCIND that minimum wage increase, which he had voted for 3 years earlier as a Senator. That Democrats in Congress were forced to reverse their own minimum-wage increase 3 years later is virtual PROOF that minimum wage does more harm than good, putting MORE into poverty than it brings out of poverty. Though you can always prove that some employees do benefit from the wage increase, while ignoring those damaged by it (and pretending they don't exist).
“This prize is a serious indictment of many economists in that it has taken some thirty years for the facts to be given prominence over a damaging and groundless idea.
There is nothing new in this "research" which only proves the same as all the earlier research, which is that we cannot accurately measure the damage done by minimum wage. And so therefore the conclusion is that there is no damage. As long as the empirical data cannot give us the exact breakdown of the job losses, the lost production, the reduced supply, etc., then the Nobel Prize winner assumes there is no loss, no reduction, no damage. Just as we could assume there is no loss, no damage when a truck accidently goes off the road and the cargo is lost. Because there's no way to calculate how much prices went up at a WalMart store 20 miles away. So therefore there's no damage to the economy as a result of truck accidents? That's all this research is saying. It's the same as such research promoting minimum wage has always concluded, in decades of research in dozens of university studies, by minimum-wage economist ideologues who score cheap points telling millions of wage-earners what they want to hear.
At a time when the world needs evidence-based and scientific research to tackle a global pandemic, economics too needs to be based on factual analysis rather than ill-informed and ideological speculation dressed up as legitimate policy advice.
But this means we have to assume that accidents in transportation or production of goods have no negative effect on the economy, because we cannot prove where the price went up somewhere, to which consumers, to which retailers 100 or 1000 miles away from the accident location. Likewise damage due to weather disasters, which in small cases cannot be measured in terms of losses and layoffs and supply reduction and costs to consumers harmed somewhere nearby or far away.
There is no scientific factual analysis to prove how much consumers were hurt -- by an accident, by weather damage, by a criminal act -- which consumers, which retailers, which producers dependent on deliveries, what the exact damage is to each consumer at the end of the line experiencing those losses of that particular production. There are often "empty shelves" as a result of lost production, such as in the current pandemic, but generally it's not possible to scientifically document exactly which loss at a production plant 1000 miles away caused which consumer to have to pay how much higher price or end up unable to make that anticipated purchase.
“Ensuring minimum living wages through statutory processes or collective bargaining is crucial to . . .
Remember that in Samoa the decent "minimum living wage" was provided through statutory processes, "ensuring minimum living wages" to Samoan workers, and yet in the real world the end result was severe job loss and reduced production and economic disaster in Samoa, leading to President Obama having to rescind that "minimum living wage" which had been provided by the statutory processes.
. . . is crucial to ending poverty;
But in Samoa that "minimum living wage" through statutory processes CAUSED POVERTY, did not end it, and so it had to be rescinded in order to prevent any further damage and poverty it was causing.
. . . reversing the long-term trend of declining labour income shares; increasing demand;
The cliché of "increasing demand" has never made any sense, as some kind of need to be met, as though higher demand is something which produces further wealth or economic gain. No economist has ever shown that there's a need to "increase demand" in order to produce an economic benefit. This phrase is just a slogan, mostly of uncompetitive producers who imagine that the problem is the lack of consumers for their product, when the real problem is that their product is inferior, and the need is not to find consumers for their inferior product, but for them to improve their production. When you see this cliché about a need to "increase demand" you know you're getting Snake Oil Economics, from someone on a crusade to promote some special interest at the expense of everyone else. If it's a politician, he's pandering to a certain constituency who might gain from some form of corporate welfare, claiming that a higher demand for their product will benefit the whole society, when in reality it only promotes that particular special interest at someone else's expense, i.e., the expense of taxpayers or consumers generally who will have to pay higher prices as a result. You cannot artificially INCREASE someone's demand at point A without causing a DECREASE in someone else's demand at point B.
. . . and building the basis for recovery – with jobs, decent work and resilience – in an increasingly unequal world.”
In Samoa it made the world MORE unequal, driving those in poverty even deeper into it, or putting someone into poverty when before they were surviving just above poverty.
No matter what benefit you expect for some, as a result of driving up their wage, you are only driving others deeper down into a lower living standard as a result -- e.g., through higher prices consumers must pay as a result of the higher production cost -- because artificially boosting the income of the select ones favored by your scheme can happen only by imposing damage onto others, ignored in your calculation. It's always so simple to ignore the total damage or cost you're imposing onto everyone else when you obsess on the few who benefit from it. As is demonstrated by the Samoa example, which is an easy one to recognize because the total change was great enough for us to be able to see the damage and measure it enough so everyone had to admit that it really caused more harm than benefit.
When the minimum-wage increase is significant enough to be recognized for its total consequences, everyone has to admit that it did more harm than good. This is why they almost never do a significant increase in the minimum wage. Those who crusade for it have learned that it has to be done very gradually, slowly, phased in over a period of years, in order to conceal the net damage that it always causes. If this were not the case, you'd be able to name at least one case where it was increased by a large percent, affecting a large percent of the population, and producing net benefit. There is no such case.
Every case you can name where you think the result was a net benefit is a case where it had to be phased in gradually, and where the percent increase was small, or in small doses, so it was impossible to do any precise measurement of the results taking account of the total harm and benefit.
And of course you can name cases of wage increase which was market-driven, producing net benefit to all, and where no law was necessary because that kind of change happens automatically in the free market where producers sometimes increase the wage in order to attract the needed workers.
