from Cafe Hayek – Quotation of the Day on Minimum Wage
The ‘new’ minimum-wage research that commenced in earnest in the mid-1990s is highly appealing to non-economists, for it supports their economically uninformed understanding of markets in general and of prices in particular. This research is an instance of credentialed economists, in effect, assuring the economically ignorant man-in-the-street that he is indeed correct in his simplistic understanding of the economy, while all those economists who are forever warning about ‘the unseen’ and about unintended consequences are the wrong-headed and unscientific ones.
Because economics – good economics – is very much the science of making that which is unseen seen, economists, of all people, should be keenly aware that much of what occurs in an economy is difficult, and often practically impossible, to detect – difficult or impossible to detect not only with the naked ‘eye’ but also with even the best quantitative data. This fact is why the burden of proof should weigh especially heavily upon those who claim to find in the empirical data evidence that foundational principles of economics do not apply or or suspended in this or that particular market. And the weight of this burden of proof should only further increase if popular and political sentiment runs strongly against the conclusions of foundational economics (as it does in the case of the minimum wage).
Bottom line: the empirical evidence against the standard economic analysis of the minimum wage is relatively scant and questionable, and the theoretical reasons offered in support of this ‘new’ minimum-wage research are even more questionable. The case that minimum wages have no negative employment effects for low-skilled workers is about as plausible as is the case for homeopathy or healing with crystals.