Sunday, June 25, 2006

Trying to Make Everyone Richer by Raising the Minimum Wage

This blog post is the result of some followup that I did on a previous blog post wherein I proposed taxing campaign contributions. That idea was inspired by David Sirota when he appeared on The Colbert Report championing the idea of public financing of political campaigns. During my followup to my original blog post, I left comments on various sections of David Sirota's Working for Change website, and I soon found myself acting as an uninvited apologist for libertarian John Stossel in re his comments regarding the problems with using a raise in the minimum wage to help the working poor.

While I intend to continue making comments on Sirota's blog, I also intend to recapitulate my thoughts here rather than letting them get buried there. To wit:

One of the most basic tenets of modern economic theory is the law of supply and demand. Pursuant to the law of supply and demand, any economist will tell you that the "correct" price for a good or service is the one that is determined by buyers and sellers in a free market rather than one that is set by government mandate, ceteris paribus -- i.e., other things being equal. From this basic precept, however, most economists will then argue and/or agree that government should play some role in regulating the marketplace.

While David Sirota is not an economist, he is no doubt familiar with the basic tenets of modern economic theory by virtue of his undergraduate studies in political science. [Note: A cursory review of Sirota's bona fides does not indicate whether he ever graduated from college, only that he attended Northwestern University and double-majored in journalism and political science.] In any event, Sirota never seems to address the inherent conflict between minimum wage laws and the economic law of supply and demand. Instead, he points to empirical studies which indicate that states and localities that have raised the minimum wage have not suffered any adverse economic impact on the working poor.

Sirota has apparently set his sights on discrediting Emmy Award wining libertarian journalist John Stossel, characterizing Stossel as a "pathological liar." And in a televised appearance on NBC's Kudlow and Company that seems to be their first personal encounter, Stossel narrated his position that minimum wage laws hurt the working poor, and responded to Sirota's factual claims to the contrary by asking, "Well, if those are the facts, why stop at $7. We should pay everybody 20 bucks, 40 bucks an hour."

I looked up the interview on the Internet, and I think Sirota did nowhere near as well as he thinks he did. However, he had one very good talking point: According to Sirota, when the minimum wage was raised in the state of Oregon, the number of welfare recipients declined. That's all well and good, but if your objective is to help the working poor, and you find that people on welfare are inclined to opt out of minimum wage jobs, why not simply increase the Earned Income Tax Credit? I suggested this option in one of my comments on Sirota's Working for Change site, and no one has yet responded. Similarly, no one on Sirota's website has yet responded to my suggestion that we tax campaign contributions rather than create a system of publicly financed political campaigns.


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