Minimum expertise

It’s a Chick Tract in the making: “Catholic Church supports law that harms blacks and unskilled workers.”

Crazy? Well, a letter to the US Senate on USCCB letterhead suggests that “We must return the human person to the center of economic life; one way Congress can do that is by ensuring workers receive just wages.” We can pause here for a second and ask how exactly members of Congress, isolated politicians living in DC, are able to ensure that a worker living in Dubuque is receiving “a dignified livelihood for himself and his family on the material, social, cultural, and spiritual level.” I shudder at putting politicians in charge of determining whether my spiritual life is dignified. But, let’s assume that the Bishops want to keep things at the level of abstract principle.

Oh wait, they don’t. One of the five paragraphs of the letter is devoted to the federal minimum wage. Omar did a great job of addressing the minimum wage recently, so I’ll mostly keep mum and just add a few other minor but relevant points.

Why stop there?

Why stop there?

1) The letter includes the line “We write not as economists or labor market experts,” and then proceed to discuss issues of economics and the labor market. I presume people who say this sort of thing would walk into an ER and say “I’m not a doctor, but I think that incision is too high.” There is no evidence in the letter, other than an unsubstantiated “research suggests,” that the Bishops have or even seem interested in consulting economists or labor market experts. While it is clear that Church leaders are well-versed in, and obviously consult experts in, fields like fetology, embryology, and other medical disciplines in discussing bioethical issues like cloning, stem cells, and contraception, the published statements on economic issues almost without fail contain laughable errors or myths that most Econ 101 students could refute. Continuing in what appears to be willful economic ignorance does not help solve the many problems facing workers today.

2) The biggest laughable error is the belief that a law will always do what it says it will do. Social Security will provide retirement benefits to old folks. Obamacare will ensure that everyone can get medical treatment (which the Bishops seem gung-ho to support, if only for the contraception mandate). Raising the minimum wage will ensure that the poor get paid more. Even putting aside the unintended side effects of these laws (e.g., Social Security is an immoral transfer of income from current workers to current retirees and tends to benefit white women at the expense of black men; “universal health care” as socialized medicine with zero prices will create shortages, long queues, and less access to care; a higher minimum wage will artificially raise wages of all workers and thus production costs and product prices), many times such laws do not even succeed at what they are said to do. A higher minimum wage will mean more money for some workers, but certainly not all. The worker whose labor is worth $8 to an employer is happily employed now but will not be if the minimum is raised above $8. Artificially controlling prices never causes unambiguous good to all parties, though there certainly are very visible (but usually small in number) groups who are helped. The key, though, is identifying who is hurt by such legislation; this group is usually larger in number but harder to see. Is it easy to spot the worker who is unemployed because companies don’t offer job openings?

3) Two significant pieces of research that should cause pause for the “raise the minimum wage” bandwagon: Neumark and Wascher concede to some unsettled questions related to minimum wage, but

the oft-stated assertion that recent research fails to support the conclusion that the minimum wage reduces employment of low-skilled workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries. Two other important conclusions emerge from our review. First, we see very few – if any – studies that provide convincing evidence of
positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model generally predicts disemployment effects. Second, the studies that focus on the least-skilled groups that are likely most directly affected by minimum wage increases provide relatively overwhelming evidence of stronger disemployment effects for these groups.

Given the unambiguous association between raising the minimum wage and higher unemployment, it is curious why the Bishops continually express support for both low-skilled workers and raising the minimum. A second paper from Even and Macpherson (full disclosure: Macpherson was one of my professors in grad school) demonstrates the disparate impact that raising the minimum wage has on black unemployment:

Drs. Even and Macpherson focus on 16-to-24 year-old males without a high school diploma, a group that previous studies suggest are particularly susceptible to wage mandates. Among white males in this group, the authors find that each 10 percent increase in a federal or state minimum wage decreased employment by 2.5 percent; for Hispanic males, the figure is 1.2 percent. But among black males in this group, each 10 percent increase in the minimum wage decreased employment by 6.5 percent…

But the picture grows even more troubling when the authors focus just on the 21 states fully affected by the federal minimum wage increases in 2007, 2008, and 2009. Approximately 13,200 black young adults in these states lost their job as a direct result of the recession; 18,500 lost their job as a result of the federal wage mandate — nearly 40 percent more than the recession. In other words, the consequences of the minimum wage for this subgroup were more harmful than the consequences of the recession.

So, even though it is supported by most every major Church leader, the minimum wage is associated with higher unemployment among less-skilled and young black workers.

It is one thing to express support for poor workers in general; it is quite another to express support for particular legislation which demonstrably has effects that harm poor workers. Wanting wages to be high is praiseworthy; presuming that wages can be set without any reference to economic or financial/accounting realities is ignorant; demanding that an artificial price floor be raised even higher, to the detriment of thousands of workers and millions of consumers, is shameful when no apparent effort is made to consult experts in the field.

But, be aware that I write not as a theologian.

2 thoughts on “Minimum expertise

  1. Tom P says:

    I find it ironic that the US Bishops always lead the charge for “livable wages” when lay Catholic employees of parishes, schools, and dioceses are so often underpaid and overworked. I’ll take financial advice from the USCCB when they manage to get their own financial house in order.

  2. Steve Skojec says:

    Tim,

    Thank you, thank you, thank you for this. It seems increasingly the case that Catholics who understand the relationship between economics and common sense are little more than heretics who hate the poor.

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