Ozimek on Hanauer
By David Henderson
A few days ago, a regular reader of Econlog wrote me to suggest that I do a critique of a long piece written by Nick Hanauer, the person who made a few billion dollars as a tech investor. Hanauer has become a persistent advocate of a minimum wage of $15 an hour. So I looked at the piece and wrote this reader the following:
I started to read it and didn’t want to finish. If he [Hanauer] were to draw a simple demand curve for low-skilled labor, he would see the problem with his argument. I don’t know if it’s worth responding to on my blog.
In one part, Ozimek quotes Hanauer’s statement, where he tries to make the point that there is little connection between high wages of low-skilled workers and high unemployment:
Everywhere you care to look, you can find examples of high-wage places with low unemployment, and low-wage places with high unemployment… In the overwhelming majority of circumstances, the high-wage states and cities enjoy low unemployment while the unemployment rate in low-wage states continues to climb.
Again, you [Hanauer] have a total lack of understanding of supply and demand. There are high equilibrium wages in some labor markets, and low equilibrium wages in others. What does this tell you about the effect of a price floor? Nothing. This is like arguing that the existence of Cadillacs proves that a tax on cars won’t reduce demand because people pay a lot of money for some cars.
Ozimek points out that Hanauer has argued that a minimum wage of $28 an hour would make the economy boom.
The whole Ozimek piece, which is not long, is worth reading.