Mitt Romney's True Colors
By David Henderson
“I … part company with many of the conservatives of my party on the issue of the minimum wage,” he said in an interview on MSNBC’s “Morning Joe.”
“I think we ought to raise it because, frankly, our party is all about more jobs and better pay, and I think communicating that is important to us,” he said.
This is from Jim Puzzanghera, “Romney calls for minimum-wage increase in split with business groups,” Los Angeles Times, May 9, 2014. Not that my vote mattered, but this makes me even gladder about my decision not to vote for Mitt Romney.
Think through the economics of his statement. “Our party is about more jobs and better pay.” Well, which is it, Mitt? If by better pay, you mean higher legislated pay, which, in context, it’s clear you do, then that won’t create more jobs; that will create fewer jobs.
The only situation under which his statement could be correct is if there is widespread monopsony in the market for unskilled labor. Given that it’s unskilled, which means that there are many potential employers, widespread monopsony seems unlikely.
Moreover, it’s not even clear that the minimum wage will make for “better pay” for those workers who are lucky enough to keep their jobs and who get raises because the minimum wage increased. Imagine a worker being paid $9.00 an hour and getting some nice benefits that cost the employer $2 an hour. If the government raises the minimum wage to $10.10 an hour, the employee might keep his job because the employer cuts benefits so that his cost of those benefits is 90 cents an hour. Assuming that the employee valued the previous benefits at more than $2 an hour (Why might this be true? Because benefits aren’t typically taxed), the worker is getting worse pay because of the increase in the minimum wage.
I never had the idea that Mitt was economically illiterate. In fact, at one point, I defended his economic literacy on his statement “corporations are people.” But this statement shows him to be economically illiterate–or worse.
HT to Harry Watson.