How high is too high, for the minimum wage?
Dylan Matthews, in his wrap-up of a Democratic primary debate, says that his “off-the-record conversations with left-leaning Democratic economists” indicate that many of them “express grave concern about the $15-an-hour figure, about the danger that this time we might be going too far.” His Vox colleague Timothy Lee is tagged in to make the same argument in another post.
This despite the fact that Hillary Clinton has now apparently joined Bernie Sanders in endorsing the fifteen-dollar minimum, going back on her previous unwillingness to go above twelve dollars.
And you know what? I think they might be right. It might be the case that a $15-an-hour minimum wage is, as Matthews put in a tweet, “dangerous.” To which my response is: that’s awesome!
The reason that bourgeois economists tend to think a high minimum wage is “dangerous” is because they think it will lead to reduced employment. This is for two reasons.
First, because if it becomes economically infeasible to hire people at fifteen dollars per hour for certain jobs, the employers may just go out of business, reducing the demand for labor.
There is a large body of literature suggesting that this objection is overblown, dating back to David Card and Alan Krueger in the early 1990s. But it’s hard to dispute that there is some level at which higher minimum wages will lead to reduced employment.
The second thing that could reduce employment, even if the minimum wage doesn’t force any businesses to go under, is automation. If it costs fifteen dollars an hour to pay a burger-flipper at McDonalds, perhaps it will become more appealing to turn to a burger-flipping robot, of the sort offered by Momentum Machines.
This is a retort often thrown at living wage advocates by conservative critics: joke’s on you suckers, raise your wage and we’ll just automate your job!
Together, these arguments amount to a radical case for high minimum wages, not against them. Because they both get at the underlying political principle that should motivate any argument for higher wages: people need more money.
That’s completely separate from the question of whether things like low-wage fast food jobs should exist at all, which they probably shouldn’t.
In other words, if fifteen dollars an hour makes it a little easier for a McDonalds worker to survive, that’s great. But if it leads to some of those jobs disappearing entirely, then that forces us to confront an even bigger and more important question.
Namely, how do we separate the idea of providing everyone with a decent standard of living from the idea of getting everyone a “job”? I’ve argued before that job creation is a hole that we should stop digging.