America's Worst Minimum Wage Pundit

By Adam Ozimek of Forbes.

"Nick Hanauer made billions of dollars as a tech investor, and for this reason he is invited to write his thoughts on the minimum wage in various publications. It’s unfortunate, because he is exceptionally wrong and uninformed.

So where to begin? To start with, despite pontificating confidently about the minimum wage for years, he seems to have no understanding of why many liberal economists are worried about setting the minimum wage too high. In a piece arguing that it’s “nonsense” to think there is any risk to raising the minimum wage to $15 an hour, he writes:

But minimum-wage opponents are not haggling over a number. They are not making a nuanced argument that the minimum wage might be bad for some people if it’s too high or phased in too fast or if the economy is too weak to absorb the change.

This is interesting because a lot of critics are making exactly this argument, and the only way to not know that is to be totally ignorant of the actual debate about the minimum wage. For example, here is Alan Krueger, one of the most influential minimum wage scholars in the world, making a nuanced argument that the minimum wage might be bad for some people if it’s too high or phased in too fast. But I guess you might not be familiar with Alan Krueger if you are profoundly ignorant of the actual debate about the minimum wage. 

Too harsh you are saying? Well in a tweet earlier this year Hanauer said this about Alan Krueger:

@Alan_Krueger carries water for trickle down Econ. If the rich get richer that’s good. If poor get richer, bad.”

If you follow the debate on minimum wages at all, or you have a passing understanding of who Alan Krueger is, this is laughable. How is it that a person who has spent years writing about the minimum wage doesn’t know who Alan Krueger is? It’s true he retracted his tweet, but if I said the earth is flat and then retracted it would I really undo the damage to my reputation? He also went on to say on twitter that “Alan and I are now on the same page….  Nice long convo.  We were both right.” This suggests he hadn’t in fact learned his lesson, because I’m not sure the guy who said “you want poor people to be poor” and the guy who said “no I don’t” can both be right. 

So he doesn’t know who Alan Krueger is, or have a familiarity with the actual debate on minimum wages. That doesn’t mean he’s actually confused about economics. Let me put some clearly confused quotes of his that illustrate a disqualifying lack of understanding of economics. Consider some of the pronouncements made in an article where he thinks he shows that economics is a “scam”.

If economic “theory” were correct, if paying workers more resulted in higher unemployment, we would have no restaurants in Seattle.

Without knowing it at all, Nick is arguing that economic theory implies that the labor demand for restaurant workers is perfectly elastic. They will hire as many workers as they can at a particular wage, and zero if it is a penny above that. Of course, anyone with a passing familiarity with economics would understand that nobody thinks labor demand is perfectly elastic and that the case against minimum wages doesn’t rely on it.

Everywhere you care to look, you can find examples of high-wage places with low unemployment, and low-wage places with high unemployment… In the overwhelming majority of circumstances, the high-wage states and cities enjoy low unemployment while the unemployment rate in low-wage states continues to climb.

Again, you have a total lack of understanding of supply and demand. There are high equilibrium wages in some labor markets, and low equilibrium wages in others. What does this tell you about the effect of a price floor? Nothing. This is like arguing that the existence of Cadillacs proves that a tax on cars won’t reduce demand because people pay a lot of money for some cars.

If you think that’s an ungenerous interpretation of his point, just wait. It gets worse.

Other examples abound. CEO pay, for instance, has skyrocketed from 30 times median to 300 times median over the last three decades, but we have more CEOs than ever before. How can this be, if “theory” predicts that higher wages kill employment? So, too, for tech workers and financial service workers—wages in those sectors have been climbing like crazy, and so has employment. So clearly, wages can rise a lot and so can levels of employment.

He clearly thinks that he is proving that wages going up doesn’t hurt employment, and has no concept of why higher equilibrium market wages driven by growing demand are different from a wage floor. This is a guy who has confused himself with something pretty elementary, and is super proud about it.

The lack of understanding of basic economics and unfamiliarity with why even fans of $12 minimum wages are worried about $15 is perhaps why Hanauer is one of the few advocates to bite the bullet and argue for a $28 minimum wage. He simply, truly just doesn’t understand why not. 

Let me close by saying that I didn’t really want to write this piece, because I am a fan of civility and it’s hard to make my basic point here politely. And of course you could argue, why pick on Hanauer when there are so many wrong pundits out there? What makes Hanauer’s wrongness both annoying and worth addressing is how extremely elemental his errors are. You hear a lot of people complaining about the influence of Econ 101, but the irony is when Hanauer argues economics is a scam he very neatly demonstrates the value of understanding Econ 101 by showing how confused you can get without it. And unlike a lot of cranks whose work is broadly understood to be crankish, I still see people who should know better passing Hanauer’s articles around, suggesting that many don’t really understand what he doesn’t understand. Hopefully this article will help fix that. "