by Larry Elder | January 9, 2014 12:04 am
CNN’s Candy Crowley seems absolutely, positively astonished that Republicans could oppose raising the minimum wage and extending unemployment benefits.
To her Republican guest, Crowley asked this “question”: “If I am an unemployed American … or if I am a minimum wage worker and I see Republicans who say, ‘You know what? It’s artificial, it messes with the marketplace, it might mean some teens can’t get into the job market,’ why would I become a Republican?”
Crowley’s “question” implies that raising minimum wages and extending unemployment benefits for the out-of-work are clearly positive no-brainers. After all, a recent Gallup poll found 76 percent of Americans support an increase, as do 58 percent of Republicans.
First, the minimum wage. Economist and Princeton professor Alan Krueger served as the chair of President Obama’s Council of Economic Advisers. His famous Card-Krueger study is by far the most widely cited study in the last 20 years on the effect of minimum wage increases. Krueger and colleague David Card concluded that — surprise, surprise — an increase in minimum wage in New Jersey resulted in an: increase: in employment, not a decline as anti-minimum wage foes predicted. Excited minimum wage advocates channeled Dr. Frankenstein: “It’s alive! It’s alive!”
But while the Card-Krueger study is the most widely cited; it is also one of the most widely restudied. Upon examination by peers, the study fails to hold up. In fact, it has been so broadly and credibly attacked, one wonders why so many still cite it.
The conservative think tank Heritage Foundation wrote “Liberals Laud Alan Krueger’s Fatally Flawed Minimum Wage Study.” Heritage said: “Subsequent reviews of the study showed fatal flaws that undermined its findings. In 1996, a review of the study by the Employment Policies Institute found that the data sets Krueger and Card used were so badly flawed that ‘no credible conclusions can be drawn from the report.’ Specifically, the study found, ‘the data set used in the New Jersey study bears no relation to numbers drawn from payroll records of the restaurants the New Jersey study claims to cover. …
“When David Neumark and William Wascher re-evaluated the study, they found that data collected using (actual payroll) records lead to the opposite conclusion. …: ‘Estimates based on the payroll data … suggest that the New Jersey minimum wage increase led to a 4.6 percent decrease in employment in New Jersey relative to the Pennsylvania control group.’ In other words, the New Jersey/Pennsylvania case study supports the basic economic notion that increasing the cost of hiring a worker will generally lead to fewer workers hired.”
Economist Neumark, whom I recently interviewed on my radio show, examined the last 20 years of minimum wage research, over 100 papers. He said that “two-thirds” of the studies “show actual harm.”
Second, unemployment benefits. Is it cruel not to extend them? Well, what if research shows that extending benefits simply prolongs the job search? What if studies show most unemployed people wait until their benefits are about to run out before they intensify their job search?
Recall professor and Obama economist Alan Krueger. Wrong on the minimum wage, he got it right on unemployment benefits. In 2008, he co-authored a study on unemployment benefits. Does extending them affect the initiative of those who are out of work?
Krueger said yes: “We find that time allocated to job search is inversely related to the maximum weekly benefit amount for (unemployment insurance) eligible workers. … We also find that job search increases sharply in the weeks prior to benefit exhaustion.” In short, Krueger found that the more generous the benefit, the longer the out-of-work remain out of work.
How about Lawrence Summers, former Treasury secretary under Bill Clinton and former Obama economics adviser? In 1999 he said: “(One) way government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work. … Unemployment insurance and other social assistance programs (cause) an unemployed person to remain unemployed longer.”
How about Larry Katz, the chief economist at the Labor Department during the Clinton administration? He argued that extending unemployment compensation benefits decreases the incentive to get out and look for a job. Workers, he insisted, are almost three times more successful in finding jobs when benefits are just about to run out.
Crowley wonders why an unemployed or minimum-wage worker would vote Republican. Well, jobs, for starters. The worst economic recovery in 80 years has given us millions of discouraged, dropped-out workers. The labor force participation rate — the percent of American civilians 16 years and older, either working or actively looking for work — has fallen from 66 percent in 2008 to 63 percent today, the lowest in more than 35 years. Add in the workers who simply gave up, and the current 7 percent unemployment rate rises to nearly 10 percent.
This explains why an unemployed or underemployed worker might, just might, think GOP. Jobs, jobs, jobs.
Larry Elder is a best-selling author and radio talk-show host. To find out more about Larry Elder, or become an “Elderado,” visit: www.LarryElder.com.
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