Sweden has no minimum wage. Nor does Denmark. Nor Finland. Nor Italy. Nor Austria. Does its absence affect the unemployment rate? Yes, the average unemployment rate is about four percentage points lower in countries with no minimum-wage laws than in neighboring countries, according to data collected by professor Stephen Hanke of Johns Hopkins University.
This fact confirms Economics 101 — Yes, Virginia, there is a downward-sloping labor-demand curve. If you prefer to ignore such realities, indulge the logic of the editorial board of the New York Times, who must believe the prime minister of Sweden to be a callous enemy of the working man. Just Wednesday, the Times published a willfully ignorant editorial that said doubling the federal minimum wage would have no negative impact:
Mrs. Clinton has proposed lifting the federal hourly minimum to $12, from its current level of $7.25 an hour. Bernie Sanders is pushing for $15. . . . There is solid empirical evidence showing that moderate increases in the minimum wage do not harm employment. But there is no similarly rigorous research on the effects of large increases, mainly because there haven’t been very many, either in the United States or internationally.
I haven’t written any scholarly papers on the topic, but I can only imagine how frustrating such editorials must be to Professor Jonathan Meer, a rising star at Texas A&M. Meer’s latest research, published in a top economics journal last November with co-author Jeremy West (a postdoc at the famously non-rigorous MIT), focuses on the long-run impact of the minimum wage, and finds it devastating: “Using three separate state panels of administrative employment data, we find that the minimum wage reduces job growth over a period of several years.” Or consider Jeffrey Clemens, a professor at UC San Diego, whose 2014 paper confirmed “significant, negative effects on the employment and income growth” of low-skilled workers after the 2009 recession in states with higher minimum wages.
A way to make policies look harmless is to assess only instantaneous impacts. Did the Pennsylvania wage controls affect jobs this year? Nope. Nothing to see here, folks.
That’s not rigor. Fortunately, today’s economists have a much better grip on dynamics. We know, for example, that layoffs don’t actually rise much even during recessions; rather, it is hiring that slows dramatically. We know, also, that you won’t find a short-term increase in layoffs even in response to wage-control shocks. Alas, the Times prefers to ignore the march of economic science — and Sweden.
Two of the three countries that Bernie holds up as role models for the working man have no minimum wage. This is one of those extraordinary facts that should give progressives pause. Think about it. Maybe the way to debate the minimum wage is not “raise it a little” versus “raise it a lot” versus “stay the course.” Maybe the right way to win — and, hey, educate voters — is to explain that the minimum wage should be eliminated at the federal level because it hurts workers. Forget about businesses, fight for the poor kid denied his first job because his marginal value of labor is shy of what the central planners say it should be.
There is a canyon between the labor-force participation rates of young workers in America and middle-aged workers. A difference of 15 percentage points. There is another canyon between those who do and do not have a high-school diploma, of 12 percentage points. There is no doubt that these canyons that separate so many young, less-skilled Americans from the workforce are caused at least partly by the federal minimum wage. Those folks are literally not worth employing, according to federal law, and no city council is allowed to disagree by establishing a lower minimum wage for its town’s teenagers.
As an economist, and as a human being, I react a mix of outrage and bemusement to a law that makes work illegal for the poorest among us – and how Bernie Sanders and the Times dress it up as a win for the working man is an impressive bit of marketing. But we have to call them out on their Sweden hypocrisy.
Does anyone want the federal government to set a national price for milk? Come on now, children need milk. How about a national price for gasoline? Is it fair for some states to pay prices at the pump a dollar or two higher? Even the densest lefties understand that national prices are a bad idea, so they might even get that letting mayors and local legislators set their own minimum wages is much wiser than a national minimum, if only a candidate would risk explaining that position.
It’s too bad Scott Walker had to drop out of the Republican primary. He is the only candidate in my memory who had the guts to call the minimum wage what it is: “Lame.” Let’s hope one of the other Republicans has the guts to fight for every single job possible, because the right to a high-paying non-job is no right at all.
— Tim Kane is an economist and research fellow at the Hoover Institution at Stanford University. His is the co-author, with Glenn Hubbard, of Balance: The Economics of Great Powers from Ancient Rome to Modern America.