ASK DR. RUWART
Dr. Mary Ruwart is a leading expert in libertarian communication. In this column she gives readers "short answers to the tough questions" that libertarians are frequently asked.
Dr. Ruwart's past Liberator Online answers are archived in searchable form at: http://www.TheAdvocates.org/ruwart/categories_list.php
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Are anti-minimum wage arguments obsolete?
Question:
"Some Democratic friends tell me that new studies argue that the idea that the minimum wage creates unemployment is outdated. Among other things, they cite the fact that one hundred and one economists, including three Nobel Prize winners and four other past presidents of the American Economic Association, signed a letter last October supporting an increase in the minimum wage to $5.15. Can you counter this?"
My short answer:
"Dr. David Neumark of the Employment Policies Institute has discovered why some studies find that minimum wages have no impact or even increase teenage employment. Among other things, he found that minimum wage hikes tempt teens to leave high school. The most talented teens are hired, replacing high school dropouts and perhaps even low-skilled adult workers.
(See http://www.epionline.org/study_detail.cfm?sid=57 ).
"Consequently, the most disadvantaged workers go from low wage to no wage -- whether or not they are teens.Teen employment can increase, while that of low-skilled adults decreases. Further, teens who drop out of school to pursue jobs damage their long-term income potential. The net effect is lower overall employment as businesses mechanize or downsize in response to higher costs.
"As Nobel Laureate James Buchanan once remarked, "No self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimum scientific content in economics... Fortunately, only a handful of economists are willing to throw over the teaching of two centuries."
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