Bryan Caplan  

A Curiously Uncurious Interview: The Nation, Unz, the Minimum Wage, and Immigration

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My debate opponent Ron Unz says he's abandoning his California minimum wage initiative for lack of funds.  The Nation's Sasha Abramsky responds with a soft-hitting interview.  The low point:

You just mentioned undocumented migrants in the context of your minimum wage proposal. You've been accused of being anti-immigrant in the past--you successfully pushed a California initiative to roll back bilingual education, attracting a lot of ire in the process--and you've certainly framed your minimum wage proposal as being something that could deter illegal immigration by creating more of an incentive for legal residents to take low-end jobs. Are you anti-immigrant?

The immigration issue destroyed the Republican Party in California; it wasn't a good thing to be the anti-immigrant party in a state where half of the population is made up of immigrants and their children. I have a very pro-immigrant orientation, but I do think it's important that America shift back to the ideology of the melting pot and away from ethno-separatist policies that we pursued over the last ten or twenty years.

Abramsky's follow-up question:

Beyond the impact on illegal immigration, talk about what else raising the minimum wage would achieve.

The minimum wage is a much more effective means of solving many of these economic problems in our society than many of the proposals that have been more popular on the liberal and progressive side in the last few years. Take social spending: a lot of social welfare programs tend to be leaky buckets. One reason people don't want their taxes to be increased is they have a sense a lot of the money will be burned up in the system and will never really go to the beneficiaries. Well, with the minimum wage the money goes straight to the person who has a paycheck. At a stroke, so many workers are no longer so poor they no longer qualify for anti-poverty programs--which makes conservatives much happier. The minimum wage is basically people working at their jobs. We're talking about raising income by $5,000 for an individual and $10,000 for a couple.

The follow-up questions I would have been itching to ask Unz:

1. You favor a higher minimum wage in order to increase unemployment for illegal immigrants, leading them to self-deport or stay home in the first place.  Isn't this a reason for cosmopolitan progressives to oppose raising the minimum wage?

2. If raising the minimum wage is bad for illegal immigrants, wouldn't abolishing the minimum wage be good for them?

3. If raising the minimum wage will sharply increase unemployment of illegal immigrants, why won't it at least noticeably increase unemployment of natives?

4. If raising the minimum wage will noticeably increase unemployment of natives, why on earth are you so confident that raising the minimum wage will reduce social welfare spending?  Sure, raising the minimum wage modestly reduces social welfare spending on the folks who keep their jobs.  But it sharply increases social welfare spending on the folks who lose their jobs.  No?!

Returning to the actual interview:

Why did you, a self-proclaimed conservative libertarian, end up championing what would be the nation's highest state-level minimum wage?

My background is in the sciences. I'm a physicist by training. I tend to look at issues on a case-by-case basis.
If I'd been the interviewer, this would have been my "gotcha" moment.  What I would have said:
I've got a copy of your Intelligence Squared debate transcript right here.  In it, you say:
Now, you know, I'm laboring under a disadvantage in this debate because not only am I not a trained economist, I've never even taken a class in economics.

I've never even opened an economics textbook. I personally don't claim to really understand most economics. I'm not convinced everybody else understands economics that well either.
Ron Unz, is that what you learn in physics?  To pontificate on subjects before you even open the textbook?!
I'm pleased to hear that Unz is abandoning his initiative for lack of funds.  I would have been overjoyed, however, if Unz abandoned his initiative because he finally got around to reading an econ textbook.



COMMENTS (7 to date)
Jacob A. Geller writes:

His opening statement was literally the worst I've ever heard in am IQ2 debate, and I've heard them all. He would have convinced me of more if he'd said nothing.

Side note, somebody not on their cell phone should post a link to Richard Burkhauser's paper showing that ~80% of a ~$10 minimum wage would go to people in households that are in fact above the federal poverty level.

michael pettengill writes:

Just out of curiosity, does anyone thing it is good for the economy for tens of millions of workers to not be able to support themselves on their wage income?

And how does it work if 20% of workers get 50% of all the income which is 50% of GDP, and the 80% get 50%. Will the 20% buy with their wages 50% of GDP?

Stocks and bonds are not part of GDP.

While 10-20% of the people have so little income they can't afford a car and thus can't live in the suburbs and have very little opportunity, will the 20% buy 1 or 2 cars every year to keep the factories employing workers who can't afford a car more than once every 10-20 years? Will they have a house built every few years to keep construction workers employed who can't afford their own?

Unz in his multiple essays on the top is recognizing the fact that government is paying many millions of working poor's living costs because their wages are not high enough for the workers to live on.

I know that conservatives see marriage as the path to economic stability, but lots of 20 somethings are living at home because they don't earn enough, even with a college degree, to live with a roommate and share the rent, whether that roommate is a spouse or not. It is hard to get married if each will need to keep living with their parents who pay their room and board.

Milton Friedman called for a negative income tax which leads to "47% pay no (income) taxes" with the EITC, higher deductions, and low rates, down from the percentage who paid no income taxes in the 60s when income inequality was lower.

You can't defend wages so low its impossible to be anything but homeless and then condemn the negative income taxes and such that helps pay for housing.

Unz just thinks it would be more economically more efficient if workers were paid by their employer instead of wages paid by their employer and by taxes on higher income workers who get lower prices and taxes on employers who have higher profits from the low wages.

MikeP writes:

At the behest of Jacob and in direct response to michael, here is the gist of that paper:

...they calculated the effects of a proposed increase in the federal minimum wage to $9.50 on workers then earning $5.70 (or 15 cents less than the minimum in March 2008) to $9.49. They found that if the federal minimum wage were increased to $9.50 per hour:

. Only 11.3 percent of workers who would gain from the increase live in households officially defined as poor.
. A whopping 63.2 percent of workers who would gain were second or even third earners living in households with incomes equal to twice the poverty line or more.
. Some 42.3 percent of workers who would gain were second or even third earners who live in households that have incomes equal to three times the poverty line or more.

Daublin writes:

So he thinks of minimum wage as chemotherapy. It's bad for all of us, but it's especially bad for those terrible foreigners. A higher dose of minimum wage, over a protracted period of time, might make our hair fall out and our vigor diminish. It's a miserable treatment, but it's worth it if we can drive out the invaders.

Jonathan writes:

michael pettengill wrote, "While 10-20% of the people have so little income they can't afford a car and thus can't live in the suburbs and have very little opportunity, will the 20% buy 1 or 2 cars every year to keep the factories employing workers who can't afford a car more than once every 10-20 years? Will they have a house built every few years to keep construction workers employed who can't afford their own?"

This is a rephrasing of the idea that if employers don't pay workers enough, workers will not be able to buy enough of the product to keep the employers in business.

This is a simple (though common) mistake. Consider a man who walks into a hotel. He approaches the desk attendant, who informs the man that the price of a room for the night is $50. The man says that he does not have fifty dollars.

He goes on to say that it would be a shame if the hotel failed to rent the room that night. If the hotel could just give him fifty dollars, the man promises to spend it on the room. That way he gets the room, and they still get the revenue!

This applies in the minimum wage case because if, in order to pay workers enough to buy the product, employers pay wages that exceed the productivity of the labor, the employers are already losing revenue.

Jeff writes:

Thoughts:
Singapore does not have a minimum wage, unemployment rate is 1.8%.
Australia has a minimum wage of approximately USD$16.50, and an unemployment rate of 6.0%.

I don't think this is enough information to determine the relation between welfare spent and minimum wage, but there is likely much more detailed data.

I do suspect the average non-skilled non-English speaking immigrant from the developing world's labor is not worth $16.50 an hour.

John B. in NE writes:

I wish the interviewer had asked him "why do you think that illegal immigrants will get the minimum wage? Wouldn't a higher minimum just increase the incentive for employers to hire illegals for less?"

His model assumes that this off-the-books hiring won't happen. Yet it already does and a higher minimum wage makes it likely to happen more.

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