My Op-ed Article On The Minimum Wage Didn't Make Into The San Antonio-Express News

John Merrifield, an economics professor at UTSA, and I wrote a response to their editorial. See A better way to address poverty. It has been 9 days since I emailed it to them and it has not made it into the paper. So here it is:

"We disagree with the Express-News editorial that advocates a minimum wage of $11.32 an hour, which would be tied to the poverty rate for a family of four ("A better way to address poverty," Nov. 25).  Not only does such a law mandate that employers pay $11.32 an hour, it requires workers to attain that productivity threshold before they become employable.

Research by David Neumark of UC-Irvine and Jonathan Meer & Jeremy West of Texas A & M University find that minimum wage laws have a negative effect on jobs, and the effect is especially severe for the least skilled.  Indeed, Christina Romer, Obama's first chief economic advisor, said minimum wage increases "may harm the very people whom a minimum wage is supposed to help." This is due to higher prices being passed on to customers of firms like Wal-Mart and McDonalds, and because the least skilled will experience increased difficulty gaining entry-level employment.  No business will hire a worker at $11.32 an hour if they think that worker will generate less than that in revenue (Meer and West found their negative effect because of less business expansion).

She also suggested that the least skilled workers will lose out to people from a more affluent background in their job searches since businesses will cherry-pick the most skilled, most experienced applicants for fewer jobs from an enlarged applicant pool.

Romer also refutes the editorial's contention that the wage increase will lead to an increase in consumption spending. Looking at $9 per hour, she said it would increase spending no more than $20 billion, a very small amount in a $15 trillion dollar economy.  Even at $11.32 an hour, the demand effect will be miniscule.

Now if businesses had some kind of monopoly power over workers, things would be different.  But here again, Romer says that our labor markets are largely competitive. So workers will get paid what they are worth.

Economist Mark Perry of the University of Michigan showed that the gap between the teenage unemployment rate and the overall rate normally rises around the time of an increase in the minimum wage. If those teenagers can't get hired for their first job, they may face a life of poverty, the very problem the editorial wants to fight.

As an anti-poverty policy, the minimum wage also is inequitable because it is paid for by the firms that employ low skill labor (lower profits) and their customers (higher prices). They are the reason the job exists in the first place. If you never shop at such businesses or own its stock, you largely escape having to pay for the policy.  The general public does bear the social costs of increased hard-core unemployment, which is the result of the least skilled having increased difficulty staying competitive with workers that gain experience.

The earned income tax credit is a better way to help the working poor.  The cost gets spread over all citizens, and the least skilled can begin the climb of the experience/productivity ladder on whatever rung they can reach when they first seek gainful employment.  That is something that both Romer and Greg Mankiw, one of George W. Bush's chief advisors, agree on.  We should take them seriously."