Card and Krueger on Minimum Wage
By David Henderson
How,’ ask Card and Krueger early in the book, ‘can the general public, most governments, and many other social scientists disagree with the negative view of the minimum wage that is so widely held by economists?’ (p. 7). The reader might expect the authors to answer that question by looking at what the public, government officials, and other social scientists have said or written about the minimum wage. But that is not what they do. Instead, Card and Krueger analyze the thought processes of economists. ‘[E]conomists’ views of the minimum wage,’ they write, ‘are based largely on abstract theoretical reasoning, rather than on systematic empirical study’ (p. 7). True, but compare economists to the public, government officials, and other social scientists. Are the latter out there doing a ‘systematic empirical study’ of the minimum wage? Where are these studies published? Have we missed them? The simple fact is that virtually the only people systematically examining evidence on the minimum wage are economists. Moreover, the rest of us economists not doing empirical studies of the minimum wage are at least thinking about it in a systematic logical way–what the authors call ‘abstract theoretical reasoning’. Are the authors saying that it’s better not to reason, or are they saying that it’s better not to reason abstractly? How do you reason non-abstractly?
The second reason economists think the way they do, write Card and Krueger, is that ‘people have a tendency to see patterns that support simple theories and preconceived notions, even where they do not exist’ (p. 8). Again, true. But are Card and Krueger saying that only economists are subject to this? Which is preconceived: the idea that the increased minimum wage will price people out of the market or the idea that when the minimum wage increases, everyone at the old minimum will get a raise and keep a job? If you had asked me, when I was 17 and hadn’t read a smidgen of economics, what the effect of a minimum wage would be, I would have unhesitatingly answered that it would be to raise the wages of people making less than the minimum. That was my preconception. And I remember being stunned when, at age 18, I learned in a lecture by Ben Rogge, an economist from Wabash University, that the minimum wage hurts many of the unskilled black teenagers whom it is alleged to help. I don’t think I’m unusual. Most people who haven’t taken economics share what was my preconception.
This is from “Rush to Judgment,” my 1996 review of David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage. It was published in Managerial and Decision Economics, Vol. 17, No. 3, 1996, pp. 339-344. Unfortunately, the gate opened for me for a while today and now it’s gated.