Scientocracy

Why psychological science is relevant to policy debates—and what policies might look like if they were better aligned with human nature

Is the Minimum Wage Bad for Teenagers?

Fast food fights and political partisanship.

Things were flush in New Jersey. The Reagan presidency had ended, with national unemployment dropping from a high of almost 11 percent in the President’s first term to just about 5 percent as he left office. And thanks to Paul Volcker’s work at the Fed, inflation was under control. Given these fortunate economic circumstances, the New Jersey legislature felt that the time was right to raise the state minimum wage from $4.25 per hour to $5.05 per hour. While this almost 20 percent hike may sound large, even at the higher wage, a full time employee working 50 weeks per year would make only $10,100 before taxes—hardly an excessive fortune.

Still, New Jersey’s attempt to help out low wage workers was met with stiff resistance. Then, shortly after passing its new minimum wage law, the state of New Jersey, like most of the country, slipped into a recession. The combination of a rising minimum wage and an economic downturn was the making of a disaster, according to most pundits. Even in good times, according to common wisdom, raising the minimum wage will reduce employment; but in bad times, in a recession, the higher minimum wage should be especially harmful, leading employers to shed employees in even greater numbers.

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Minimum wage laws invariably arouse strong passions in the political world. On the right side of the political spectrum, the minimum wage is abhorred as a harmful intrusion on the workings of the free market. Raise the minimum wage, said Rush Limbaugh, and “jobs are bound to be eliminated.” Conservative columnist Elizabeth Chapman wrote in her Texas newspaper column that minimum wage laws have “a soft spot for the untalented.” Ouch!

The left is often no less dogmatic. Liberal gadfly Michael Moore, for example, in his film Bowling for Columbine, blamed a paltry minimum wage for the death of a child left home alone because his mother had to work multiple jobs to make ends meet. With no adult supervision, the child accidentally shot himself with his uncle’s gun. Case closed, in Moore’s view: If the government doesn’t make the minimum wage a true living wage, families are going to suffer.

Political debates about minimum wage laws, then, are often discouragingly fact-deficient and unscientific. Politicians and pundits argue about these matters, but seem less interested in the truth than in scoring points, less concerned with looking for nuance than in selling books. Fame, fortune and power are the ends that many of these people seek, and if they need to distort the truth to achieve these ends, so be it. Pretty depressing, isn’t it?

Many scientists, of course, seek fame fortune and power too. However, at least within the world of science, they rarely achieve fame by distorting or bypassing the truth. It is true that some notable scientists have been caught committing fraud, but, very much to the detriment of their scientific careers. By contrast, the political pundits on TV seem only to gain money and influence as their views become more outrageous. People have exposed the lies and half truths disseminated by the likes of Rush Limbaugh and Michael Moore, after all, but that hasn’t stopped these men from amassing fame, fortune and power.

So what do the scientific experts think about the minimum wage? I am referring of course to economists, those social scientists who have done the most to understand how exactly wages influence employment. Economists have developed very rigorous scientific theories that predict the effects of minimum wage hikes. The dominant such theory holds that raising the minimum wage will reduce employment, particularly among unskilled workers: if it costs more money for employers to pay these workers, they will hire fewer of them—adhering to the basic law of supply and demand. So committed are many economists to this theory, that many have become prominent opponents of the minimum wage. When Michael Dukakis announced his support for a minimum wage increase during the 1988 presidential campaign, for instance, Nobel Laureate George Stigler went public, calling Dukakis’ idea “despicable.” Texas A&M economist, Finis Welch, went even further, calling the minimum wage “one of the cruelest constructs of an often cruel society.”

But if this theory is the dominant one held by economists, it is hardly embraced by all the experts. David Card and Alan Krueger, for example, a pair of economists at Princeton (Krueger is on leave now, working for the Obama administration), were not convinced that New Jersey’s minimum wage hike would be as harmful to unskilled workers as the doomsayers were predicting. Card and Krueger decided to collect the kind of data that could test whether the accepted theory captured the way the economic world actually behaves. Their story reveals some important ways in which the scientific community differs from political communities—in its reliance on testable theories for example, in its acceptance of falsifiability and, most critically, in the heavy emphasis scientists place on community consensus. For as we will see, science depends as much on consensus as it does on debate. Whereas political pundits often view argument as an end in itself, scientists view arguments as a means toward developing a better understanding of a given question.

How does this work in practice? In my next post, I will return to New Jersey, and see what happened when all those teenagers at Burger King suddenly found themselves with bigger paychecks.

Peter Ubel, M.D., author of Critical Decisions and Free Market Madness, is a physician, behavioral scientist, and Professor of Business and Public Policy at Duke University.

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