Beat the Press

Dean Baker's commentary on economic reporting


Reporting Nonsense on the Minimum Wage

Suppose that the senators who support a quick withdrawal from Iraq got in the habit of saying that the United States should get out of Iraq because losing 100 U.S. soldiers a day is an unacceptable price for the occupation. Would the media simple report this claim without comment? Or, would they point out that these senators apparently don’t realize that the fatality rate is approximately 2 per day?

My guess is that every story that noted the claim that 100 soldiers a day are being killed would correct this assertion based on an authoritative source on the causality count. The media would probably also run numerous stories that reported on the fact that the proponents of a hasty withdrawal have no idea what they are talking about. This would be good journalism.

The question is why it is not applied to the debate over the minimum wage. Reporters routinely quote claims from politicians opposed to raising the minimum to the effect that it would lead to a large loss of jobs and will slow economic growth. Well, we have evidence on this one. Economists have done numerous studies of the impact of modest increases of the minimum wage, like the one currently being debated. Berkeley economist David Card and Princeton economist Alan Krueger have done some of the most famous studies, but many other economists have approached the topic from different angles (including my colleague at CEPR John Schmitt [sorry, not available on-line]), and nearly all of them have found that the minimum wage has little or no effect on employment.

If talking to experts in the economics profession is too difficult for the country’s top reporters, perhaps some simple arithmetic would be sufficient. The minimum wage bill currently being pushed by Senator Kennedy would raise the minimum wage to $7.25 by 2009. By comparison, the minimum wage was almost $8.00 an hour (in 2006 dollars) in the late sixties. This means that if Kennedy’s bill were approved, the real value of the minimum wage in 2009 would still be more than 10 percent lower than it was in the late sixties, even though productivity will have increased by more than 120 percent over this period.

For those not old enough to remember, the late sixties was one of the most prosperous economic periods in U.S. history. The economy grew rapidly, wages grew rapidly, and the unemployment rate eventually fell to 3.0 percent. Clearly, the minimum wage could not have done too much damage.

The idea that the minimum wage hike being debated would have a substantial impact on employment and growth is absurd on its face. The media has the obligation to point this out – if they don’t, maybe opponents of the Iraq war should start saying that the fatality rate of 100 a day is unacceptable.


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