There is evidently a lively argument about who authored the much-quoted observation “It Ain’t What You Don’t Know That Gets You Into Trouble. It’s What You Know for Sure That Just Ain’t So.”
The quotation has been attributed to Mark Twain and Will Rogers, among others, but whatever the source and however folksy the articulation, it counts as real wisdom.
I thought about that very human tendency to cling to verities that “we know for sure” are so when I came across some recent research into the consequences of raising the minimum wage, because for a long time, I was convinced by the (very logical, very persuasive) argument that raising wages would depress job creation.
It turns out there was a logical fallacy in the formulation of the argument that, if employer had to pay his current employees more, he would have less money available to hire additional workers. That actually would be true–all else being equal. Those of us who accepted the formulation–including your truly–didn’t realize how much else wasn’t equal.
In the real world, putting more money in the pockets of people who don’t have much disposable income actually increases demand and boosts economic growth.
When something they’ve believed turns out to be wrong, reasonable people change their minds. There’s a difference, however, between ideology and a mistaken belief–ideology is stubborn. It rejects contrary evidence, no matter how convincing.
With respect to minimum wage rates, a number of previous, peer-reviewed academic studies have found little to no impact on hiring as states and municipalities have raised the wage, casting doubt on the “wage hikes will kill jobs” mantra, but the number of states that have recently raised their minimum wage allowed these recent researchers to draw broader conclusions.
Eighteen states rang in 2019 with minimum wage increases — some that will ultimately rise as high as $15 an hour — and so far, opponents’ dire predictions of job losses have not come true.
What it means: The data paint a clear picture: Higher minimum wage requirements haven’t reduced hiring in low-wage industries or overall.
State of play: Opponents have long argued that raising the minimum wage will cause workers to lose their jobs and prompt fast food chains (and other stores) to raise prices. But job losses and price hikes haven’t been pronounced in the aftermath of a recent wave of city and state wage-boost laws.
And more economists are arguing that the link between minimum wage hikes and job losses was more hype than science.
What we’re hearing: “The minimum wage increase is not showing the detrimental effects people once would’ve predicted,” Diane Swonk, chief economist at international accounting firm Grant Thornton, tells Axios.
“A lot of what we’re seeing in politics is old economic ideology, not what economics is telling us today.”
The doom-and-gloom that opponents have predicted, “are part of the political policy debate,” Jeffrey Clemens, an economics professor at UC San Diego, tells Axios.
His research for the conservative American Enterprise Institute is often quoted in arguments against minimum wage increases.
But Clemens told Axios: “People will tend to make the most extreme argument that suits their policy preferences, and it’s not surprising if that ends up being out of whack with the way things unfold on the ground.”
As part of the study, researchers used Bureau of Labor Statistics data to compare the rate of job growth in four states with low minimum wages against the rate in eight states with high minimum wages. All 12 states saw growth in restaurant, bar and hotel jobs.
Four states had job growth higher than the U.S. median, and three of them have raised their state’s minimum wage; three of the five states having the slowest job growth kept their wage at the federal minimum of $7.25 an hour.
The bottom line: Opposition to higher minimum wage laws is increasingly based in ideology and orthodoxy rather than real-world evidence, economists say.
The evidence says I used to believe something that just wasn’t so. Given that evidence, I don’t believe it any more.
That isn’t so hard, is it?