MORE ON THE MINIMUM. Will Wilkinson is a bit exercised because my argument against the minimum wage wasn't a bulletproof econometric conclusion to the minimum wage debate -- also, because he appears to not understand that an argument against obvious correlation isn't an argument for positive correlation. Sigh. This isn't an endable debate. But Will's argument against me is one of the more frustrating turns in it, an oversimplified appeal to "economics 101." So let's have a lesson...
First, there is no hard and fast law that "as the price of something goes up, consumers will tend to buy less of it." It's a good guideline, but it's got no end of exceptions. It's well understood, for instance, that many companies overprice luxury goods because consumers use cost as a heuristic for quality, and often purchase greater quantities of products priced expensively to signal their worth. Cost and demand exhibit no clean inverse relationship, and consumers and producers react neither rationally nor predictably to changes.
Think of it this way: The price of oil has been skyrocketing for the better part of the last five years. Here's a graph. And here's domestic oil consumption. Folks playing at home will notice something funny: Both are going up. So as prices have increased -- indeed, shot up -- even the growth in demand has failed to slacken appreciably.
Obviously, were oil a billion dollars a gallon now, that would change. But not all price points are yet at the level where an increase will greatly harm demand. They weren't there in '90s, clearly, when Clinton's minimum wage increase was succeeded by staggering low-income job growth. They weren't there in the '60s, when the minimum wage reached its highest absolute level and unemployment was 3.5 percent. And I'm convinced they're not there now, when the minimum wage is at a 54-year low against the average wage.
Will also deploys the general conservative slippery slope here -- "So what about $8? How about $12? $15.75?" -- but it's pretty weak brew. It requires a belief that this period of record profits, high employment, and paltry wage growth is actually one of the weakest economic moments in the last century, and the first that would prove unable to absorb a minimum wage increase. There's plenty of money flying around this economy, but just about none of it is reaching the bottom. So it's time to raise the bottom.
That said, unlike some others, I want it to be clear that I have the courage of William Niskanen's convictions. I completely agree with his argument that the Republicans should separate out the minimum wage provision and make a statement by publicly and overwhelmingly defeating it. And after they do, I think Dennis Hastert should grind a copy of the legislation beneath his
jackboot heel while the cameras click and flash.