John Lott on the Minimum Wage Debate

John Lott turns liberal noting how real wages have stagnated and offers a solution:

Unfortunately, wages for the lowest paid workers have stagnated. But minimum wage increases merely treat the symptoms. Rather than blaming companies for paying workers too little, politicians might focus on the mediocre public schools that leave young workers inadequately prepared for the workforce. The problem is more likely due to the lack of competition faced by public schools than the intense competition between firms.

Oh, I see – he’s just making an argument for privatized education. And his evidence that privatization of education would raise income of workers is – he presents no evidence. But then his op-ed has to address the minimum wage issue at some point:

Even among low skilled workers, it is the least skilled, poorest workers who are the most likely to lose their jobs because of a higher minimum wage. The point of all these examples is simple: if shovels cost more, people buy fewer shovels. Economists call it the “Law of Demand” for a reason. Higher priced shovels mean that some firms will replace them with something else. And there are other consequences. Professors David Newmark at UC Irvine and Olena Nizalova at Michigan State found that a higher minimum wage reduces how much firms invest in training young workers, and results in lower wages for these workers when they get older.

Again a claim – that being minimum wage laws create unemployment – is made sine evidence. Olena Nizalova turns out to be a Ph.D. candidate at Michigan State whose dissertation includes an essay with David Neumark entitled “Minimum Wages in the Longer Run” where the summary reads:

Exposure to minimum wages at young ages may lead to longer-run effects. Among the possible adverse longer-run effects are decreased labor market experience and accumulation of tenure, lower current labor supply because of lower wages, and diminished training and skill acquisition. Beneficial longer-run effects could arise if minimum wages increase skill acquisition, or if short-term wage increases are long-lasting. We estimate the longer-run effects of minimum wages by using information on the minimum wage history that workers have faced since potentially entering the labor market. The evidence indicates that even as individuals reach their late 20’s, they work less and earn less the longer they were exposed to a higher minimum wage, especially as a teenager. The adverse longer-run effects of facing high minimum wages as a teenager are stronger for blacks. From a policy perspective, these longer-run effects of minimum wages are likely more significant than the contemporaneous effects of minimum wages on youths that are the focus of most research and policy debate.

Lott cannot even bother to spell the name of the coauthor correctly. And his characterization of their research seems to differ a bit from Nizalova’s summary. Does anyone have access to this essay so we could review their analysis for ourselves?

Update: Many thanks to AB reader Stormy both for a link to the NBER abstract of their working paper and to a very interesting paper by Amit Friedman.

Update II: The state of Washington has a minimum wage equal to $7.63 per hour. Its reported unemployment rate has hovered between 4.6% and 5.1% this year- roughly consistent with the national unemployment rate.

Today’s story by Charlotte Hsu was offered up by some troll as evidence that higher minimum wages lead to unemployment but here are the key passages of this story:

State workers who help applicants meet potential employers sat idle, typing on laptops or staring out the trailer door. Employers are seeking 3,000 fair workers through the state employment agency WorkSource, which staffed the trailer Thursday. That’s double the number the agency sought last year, reflecting vendors’ inability this year to fill slots on their own, said Karen LaFlamme, fair spokeswoman. The fair’s problems mirror a statewide trend. A Washington Employment Security Department survey of more than 15,000 businesses statewide showed an estimated 81,500 jobs vacant in April. That’s 11,000 more than a year earlier and the largest number of openings in the survey’s four-year history. Evelina Tainer, a chief economist at the department, said few workers are willing to take temporary jobs like those at next month’s fair when higher-paying, permanent positions are open across the state … Still, for many around the state, work is about money. So the fair, where many jobs pay minimum wage, $7.63 an hour, is having trouble competing this year with a strong economy. Beverly Burback, a part owner of Funtastic Games and Rides, says she will need 1,000 employees in Puyallup. Finding them may be difficult.

As AB reader Bruce Webb notes, this story suggests that market wages in this area exceed Washington’s minimum wage.