Six years after the beginning of the Fight for $15 movement, conventional wisdom is finally waking up to economic reality. How do we know? Because the New York Times recently published an editorial titled ‘Let’s Talk About Higher Wages’ calling on the incoming Biden administration to focus on higher wages for everyone. They couldn’t be more right on. Binyamin Appelbaum, the lead writer on business and economics for the Editorial Board, helps us understand the change in consensus on wages.
Binyamin Appelbaum is the lead writer on business and economics for the Editorial Board of The New York Times. From 2010 to 2019, he was a Washington correspondent for the Times, covering economic policy. His book, ‘The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society’ is a Wall Street Journal Business Bestseller.
Twitter: @BCAppelbaum
Nick on Marketplace: https://www.marketplace.org/2020/12/08/new-rand-study-quantifies-cost-of-rising-us-inequality/
Binyamin has been a guest on our show before! Here’s our episode with him and George Monbiot, ‘How neoliberalism happened’, from October 2019: https://pitchforkeconomics.com/episode/how-neoliberalism-happened-with-george-monbiot-and-binyamin-appelbaum/
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Further reading/listening:
Let’s talk about higher wages: https://www.nytimes.com/2020/11/28/opinion/wages-economic-growth.html
Do higher wages kill jobs? (with Mayor Eric Garcetti and Alan Krueger): https://pitchforkeconomics.com/episode/do-higher-wages-kill-jobs/
The top 1% of Americans have taken $50 trillion from the bottom 90% – and that’s made the U.S. less secure: https://time.com/5888024/50-trillion-income-inequality-america/
And as promised by Annie and Ashley, here’s the last 100+ years of New York Times Editorial Board pieces on the minimum wage:
1912, The minimum wage dispute: https://timesmachine.nytimes.com/timesmachine/1912/03/26/100357095.html?pageNumber=12
1913, Minimum wage — and after: https://timesmachine.nytimes.com/timesmachine/1913/03/31/100259599.html?pageNumber=12
1937, Minimum wage laws: https://timesmachine.nytimes.com/timesmachine/1937/04/01/96738287.html?pageNumber=22
1950, New minimum wage: https://timesmachine.nytimes.com/timesmachine/1950/01/26/87008590.html?pageNumber=26
1955, Raising the minimum wage: https://timesmachine.nytimes.com/timesmachine/1955/06/14/81914824.html?pageNumber=28
1973, Minimum wage fiasco: https://www.nytimes.com/1973/09/20/archives/minimum-wage-fiasco.html
1977, The minimally useful minimum wage: https://www.nytimes.com/1977/03/21/archives/the-minimally-useful-minimum-wage.html
1987, The right minimum wage: $0.00: https://www.nytimes.com/1987/01/14/opinion/the-right-minimum-wage-0.00.html
1987, Don’t raise the minimum wage: https://www.nytimes.com/1987/04/15/opinion/don-t-raise-the-minimum-wage.html
1988, The minimum wage illusion: https://www.nytimes.com/1988/02/23/opinion/the-minimum-wage-illusion.html
1988, Better than $3.35, $4.25 or even $5.05: https://www.nytimes.com/1988/07/11/opinion/better-than-3.35-4.25-or-even-5.05.html
1988, The minimum wage: A better way: https://www.nytimes.com/1988/09/21/opinion/the-minimum-wage-a-better-way.html
1995, A proposal worth fighting for: https://www.nytimes.com/1995/01/26/opinion/a-proposal-worth-fighting-for.html
1996, Boost the minimum wage: https://www.nytimes.com/1996/04/05/opinion/boost-the-minimum-wage.html
1999, A higher minimum wage: https://www.nytimes.com/1999/09/15/opinion/a-higher-minimum-wage.html
2004, A working minimum wage: https://www.nytimes.com/2004/12/05/opinion/nyregion/a-working-minimum-wage.html
2011, A minimum wage increase: https://www.nytimes.com/2011/03/27/opinion/27sun2.html
2012, Raise New York’s minimum wage: https://www.nytimes.com/2012/02/13/opinion/raise-new-yorks-minimum-wage.html
2014, The case for a higher minimum wage: https://www.nytimes.com/2014/02/09/opinion/sunday/the-case-for-a-higher-minimum-wage.html
2014, The clear benefits of a higher wage: https://www.nytimes.com/2014/02/20/opinion/the-clear-benefits-of-a-higher-wage.html
2014, Business and the minimum wage: https://www.nytimes.com/2014/02/28/opinion/business-and-the-minimum-wage.html
2015, McDonald’s minimum raise: https://www.nytimes.com/2015/04/04/opinion/mcdonalds-minimum-raise.html
2015, Picking up the tab for low wages: https://www.nytimes.com/2015/05/01/opinion/picking-up-the-tab-for-low-wages.html
2015, New minimum wages in the new year: https://www.nytimes.com/2015/12/27/opinion/sunday/new-minimum-wages-in-the-new-year.html
2017, What Donald Trump doesn’t get about the minimum wage: https://www.nytimes.com/2017/01/02/opinion/what-donald-trump-doesnt-get-about-the-minimum-wage.html
2019, Double the federal minimum wage: https://www.nytimes.com/2019/12/30/opinion/federal-minimum-wage.html
2020, Let’s talk about higher wages: https://www.nytimes.com/2020/11/28/opinion/wages-economic-growth.html
Website: https://pitchforkeconomics.com/
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Nick Hanauer:
The New York Times published this new, fantastic piece on wages. And I think it’s a really huge deal.
David Goldstein:
In the piece, it emphasizes the importance of rewriting our story.
Binyamin Applebaum:
And I think the beginning of that story, is that a strong economy requires a strong distribution of income, that means that many people are in a position to consume and to spend. And strong economy begins with wage growth. It begins with workers having more money in their pockets.
Annie:
From the home offices of Civic Ventures in Downtown Seattle. This is Pitchfork Economics with Nick Hanauer. The best place to get the truth about who gets what and why?
Nick Hanauer:
I’m Nick Hanauer founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow at Civic Ventures.
David Goldstein:
So Nick Today, we’re going to talk about a New York Times editorial titled, Let’s Talk About Higher Wages, which, as folks know is one of our favorite subjects. But before we get into that, on the topic of wages, you actually talked to another podcast slash radio show recently?
Nick Hanauer:
Yeah, that’s right. I was on Marketplace with David Brancaccio talking about the RAND report and the 45 years of wage suppression that we just lived through, with the economist Carter price from RAND who actually did the analysis. David is a very good interviewer and I think it went super well. And if people are interested, they should just check out Marketplace.
David Goldstein:
And we’ll provide a link to that episode in the show notes.
Nick Hanauer:
Yeah. Awesome. But today we get to talk to one of our heroes, Binyamin Appelbaum, who is a member of The New York Times editorial board. He’s the economy and business writer for the editorial board and the author of, I think a really important recent book called, The Economists’ Hour. And Binyamin is not an economist, but he is an expert on economists, which is incredibly useful for our purposes because it really has a great perspective on what the profession has done over time. And the reason we’re having him on is that, The New York Times published this new, fantastic piece on wages called, Let’s Talk About Higher Wages, a couple of weeks ago. And I think it’s a really huge deal.
David Goldstein:
We could really just shut down the podcast here and just read that editorial out loud every week. Because it’s a great summary of a lot of what we’ve been talking about over the past couple of years, not just in terms of economics and policy, but also the importance of telling a better story.
Nick Hanauer:
That’s right. And, I mean, there’s a couple of reasons why it’s a big deal. The first is, it’s a very well-written I think technically accurate argument about the economy and the need for a story. But I think the other thing, is that The New York Times continues to be a very important part of the sort of intellectual and cultural landscape and they are for better or worse, kind of the place… They do reflect kind of orthodoxy and for them to move from the position that they had 1987, which was, the best level for the minimum wage is 0, where they argued in 1987, that the best thing to do would be to eliminate the minimum wage. To move this far is really, quite a remarkable thing. And it absolutely reflects the changing consensus of the economics profession.
David Goldstein:
I think the important thing here, Nick and contrasting what The New York Times is writing about the minimum wage 30 years ago, to what they’re writing about it now, is how this story has changed from the old orthodox consensus that the minimum wage is necessarily a job killer that ends up hurting the people it’s trying to help, to this new consensus, which by the way, is based on empirical reality, our experience over the past couple of decades, that in fact, the minimum wage is a driver of economic growth. That as you say, when workers have more money, businesses have more customers and hire more workers. That is the virtuous cycle of market capitalism that we talk about.
Nick Hanauer:
Exactly.
David Goldstein:
We see it now as a driver of growth rather than as an impediment.
Nick Hanauer:
A hindrance. Yeah, that’s right. Absolutely. Absolutely. And the language in this editorial, and I suppose our listeners will hear us patting ourselves on the back is totally reflective of this 21st century theory of economic growth that we have been proponents of. That in fact, they say right here, workers who are paid more, can spend more, this is the fundamental law of capitalism. That’s how the system works. And the idea that a set of policies designed to suppress wages will somehow end up more robust with higher demand, it’s just obviously ridiculous.
David Goldstein:
And what’s amazing, it’s that smart, reasonable people believed it for decades.
Nick Hanauer:
It’s just astonishing. But I mean, what’s really, really cool again about this is that this piece reflects a new kind of consensus that I think can reshape our laws, our policies, and our norms in a really positive way. So, let’s talk to Binyamin Appelbaum.
Binyamin Applebaum:
I’m Binyamin Appelbaum, I’m the lead writer on business and economics for The New York Times editorial board and the author of, The Economists’ Hour.
Nick Hanauer:
Well Binyamin, we really were struck by the recent New York Times opinion piece called, let’s talk about wages. It wasn’t that long ago in fact, in 1987, the editorial board of The New York Times wrote, that the right minimum wage was $0, and argued that the consensus was that the minimum wage was an idea whose time has passed. And the distance between these two positions is huge and sort of shocking. And we’re very interested in hearing from you, how the consensus changed and why the position evolved?
Binyamin Applebaum:
Yeah, absolutely. So obviously no one person made that intellectual journey. The people who wrote that piece in 1987 are no longer on the board and probably no longer on this earth. But it does mark a really interesting evolution. And the transition at the times really tracks in evolution in the economics profession among liberal thinkers. What you heard in the 1980s was really a conventional wisdom in mainstream economics, that wages basically reflected a form of market justice, basically that the market figured out how much a person was worth and that’s how much you got paid. And if you started messing around with that, by imposing a minimum wage standard, or by allowing unions to negotiate on behalf of workers or any of these horrifying ideas, any of these horrifying attempts to give power to workers, were distortions that would end up hurting workers. Because you were taking money out of someone else’s pocket in order to put it into the pocket of the worker who was the beneficiary of these negotiating techniques or these laws.
Binyamin Applebaum:
And that was not just something that republican economists thought, it was conventional among liberal economists too, to believe that minimum wages didn’t succeed in raising the welfare of workers. And this was based on a theoretical model, on an understanding of the world that was abstracted, and that looked really great on a Blackboard. And then something remarkable happened, by the early 1990s people were beginning to have doubts about how well that model captured the real world, but a pair of economists did something truly shocking. They went out and looked for a real-world example of a higher minimum wage and how it had worked out. The state of New Jersey had modestly raised its minimum wage, and they went and they compared restaurant wages and restaurant employment on both sides of the New Jersey Pennsylvania line.
Binyamin Applebaum:
And they wrote what is now a very famous paper in which they reported the startling, finding that in the real world, raising the minimum wage had not in fact caused all of these disastrous consequences, and they kicked off a huge uproar in the economics community. People accused them of basically being terrible people, terrible economists. But over time, this finding has been replicated again, and again, and again, I wouldn’t go so far. I mean, obviously you can raise the minimum wage to a level that would be problematic. If, you imposed a $100 dollar minimum wage tomorrow, it would put some companies out of business. But, within reasonable tolerance is the idea that any increase in the minimum wage or even a fairly significant increase in the minimum wage is going to put people out of work, has just turned out not to be true in practice.
Binyamin Applebaum:
And so the theoretical models of the economics profession have evolved at least among some economists. Our understanding has evolved. And, just as I presume my predecessors in the 1980s, went and talked to all the experts and heard the same thing from all of the experts, and reached the conclusion that was wrong, but validated by essentially, everyone who they might’ve talked to. We now look around and we have a lot more evidence. We have a much better understanding of how minimum wage laws work and, we’ve taken the measure of the evidence again, and we’ve reached a different conclusion than they did.
Nick Hanauer:
And the thing that I simply cannot get over, is that the economics profession has been around for a very long time. And this issue of what happens when you require companies to pay people a little bit more, has to be literally the simplest proposition in economics. And, as I reflect on just the profound failure of the profession to get this right, it’s just astounding that the profession with full confidence, full confidence, unambiguously believed that helping working people would harm working people for decades.
Binyamin Applebaum:
I do think it was a terrible mistake and an embarrassment for the profession and that is still hurting us. Right? Because workers are… The federal minimum wage, remains at a very low level by historical standards, gets lower with every passing year because it’s a fixed amount and the purchasing power of that wage declines with each passing year. And so we’re still living with the consequences of this convenient conviction. Right? I mean, economists were basically telling rich people exactly what they wanted to hear. And the consequences of that is basically that, workers have lost out for a very long time and continue to lose out in many States across much of the country, right up to this moment.
David Goldstein:
I’m wondering Binya you say, your sense that the consensus amongst academic economists has flipped to the side that The New York times is on now?
Binyamin Applebaum:
So I think that there’s still a lot of… I don’t think there are any economists left who think that there’s this precise, mechanical connection where if you raise the minimum wage, any amount you get negative consequences. There’s still a lot of debate about how exactly the relationship works. Right? How far you can raise the wage without, and there’s a balance here. Right? Some people are making more money. Others may be losing their jobs. You can be in a situation in which, you still think the net benefits are positive even if, you think there’s some negative effects associated with the change in policy. There’s a short term long-term issue. Right? People who lose their jobs immediately may be able to find new, better jobs at higher wages in a world in which you’ve raised the minimum wage standard.
Binyamin Applebaum:
And you’re essentially forcing employers to only use workers who they can get a certain amount of value out of. The workers who are pushed out in that model may end up in better jobs elsewhere in the economy. And so there’s a lot of variables in it, but everyone understands that it’s a lot more complicated than they used to think. And some people remain, I think, unduly skeptical about the benefits of minimum wage increases and others have embraced them. But it’s important to say that this is just a piece of a larger picture here. Right? Like this piece is not just about minimum wages, and the same fight has repeated in each of these spaces, it’s about the broader spectrum of policies that might drive wages up for workers. And minimum wage is maybe one of the less controversial pieces of that spectrum. There’s other areas in which economists, I think are more resistant than they are around minimum wages.
Nick Hanauer:
Right. And what’s fascinating of course, and what we devote most of the podcast to is the magical way in which all of these conclusions somehow consistently benefit wealthy people in capital. Right? All of these little heuristics, if taken seriously from whatever corner of the economy, you may obstruct them, magically tend to be to the benefit of the rich and the powerful and to the detriment of those who are not. Whether you’re talking about marginal productivity or the economy being in a parade of optimal equilibrium or whatever it is, tax policy, it’s always the same thing. So very consistently, and that consensus I think is giving way at a minimum to more skepticism. If not out right revolt.
Binyamin Applebaum:
Yeah I mean, there’s a great quote from John Kenneth Galbraith that actually I have in my book, what is called sound economics is very often what mirrors the needs of the respectably affluent.
Nick Hanauer:
Yes.
Binyamin Applebaum:
And that’s undoubtedly true. Right?
Nick Hanauer:
Yeah. Right. Again, one of the reasons we were so excited to have this conversation with you, and the reason that the editorial, I think saying for us is that, it’s so explicitly shows the way in which economics as a field of study is so different from the physical sciences, which it seeks to represent itself as, or to mimic. Because economics is mostly social norms and preferences instantiated into these kind of rules, they are always being litigated. And this editorial is just another great example of it.
Binyamin Applebaum:
Yeah. I mean, I wrote another piece recently about sort of, the limitations of economics that Nick, I think, described on Twitter, as too nice to economist. And I mean, maybe I was, I don’t know, but yeah, listen, I mean, it’s not physics, and when it’s presented as physics, it’s misleading in ways that are harmful. So I think economics offers great insights into the world. It’s a really useful and powerful way of thinking about a lot of public policy problems and about a lot of, sort of human interaction. But, you need to understand the limits of the tools that you’re using and when economists treat economics as the only lens or as a universal lens, or as an all powerful lens. It’s not just the economists who tend to get into trouble precisely because they’re so influential in policy making, the rest of us end up in trouble too.
Nick Hanauer:
That’s right. These mistakes are insanely consequential for the lives of individuals, as well as the political and economic health of the country. It’s a really, really big deal.
Binyamin Applebaum:
Yeah. Now it’s important to say that, it’s not just one policy and the reason that’s important is, imagine a world in which just the minimum wage had been increased. Well, one of the other things that’s been going on in recent decades is that, employers have learned to exclude a growing share of their workforce from the standard set of protections that apply to ordinary workers. And so the gig economy is essentially, a scheme to subvert minimum wage laws among other things. Right? Contract relationships, part-time labor. There’s a lot of ways in which employers get around these requirements. And so, I think it’s important to keep a sort of broad view of all of the ways in which the economy is tilted against workers, because just changing the minimum wage it’s not a complete solution.
David Goldstein:
So I’m curious, Binya about what went into The New York Times, that our paper of record their editorial board taking on this issue in the piece it emphasizes the importance of rewriting our stories. What is the role of an editorial board in… I mean, are you out in front of this flip of consensus? Or are you somewhere in the middle? What’s the role of the board in all this?
Binyamin Applebaum:
That’s a really interesting question. I think that we try to speak clearly about the things that we believe in. And I don’t know that we are as concerned about other words in front of it or in the middle of it, or where exactly we sit in the parade. The ideas expressed in this piece are not entirely original. Right? These are ideas that many people have held for a while. And in that sense, we’re agreeing with existing opinion. But at the same time, I think that, the point of this piece is basically to say, listen, there’s a problem, and there’s a solution. The problem in part is not just that the democratic party, I think to some extent hasn’t framed its economic agenda properly, but the democratic party in general is losing a communications battle over economic policy.
Nick Hanauer:
Correct.
Binyamin Applebaum:
Conservatives have been much more effective and much more successful in telling a simple, untrue, but simple story about how the economy works, and convincing voters to rally around it. And so Democrats need to both think about what is our story and also how do we communicate that story? And this is an argument on both fronts, because I think a lot of liberal politicians when you ask them to explain… When you ask them to talk about the economy, two things happen. The first is, a lot of the rhetoric is about how we help people who have been hurt by the economy, or how we sort of work around the economy, or how we compensate for the shortcomings of the economy. There’s not a lot of focus, not enough focus in my view on sort of how do we actually improve the performance of the economy and make sure that people are… And when I say improve the performance, I don’t mean GDP.
Binyamin Applebaum:
I mean, make sure that everyone is benefiting from economic growth. Democrats sometimes don’t get around to that quickly enough as an issue, I think. And when they do, the story that they tell is awfully confused and involved, and that’s in part because of the truth isn’t simple, I don’t want to understate that. Part of what’s wrong with the republican recipe is that it is a simple recipe and these are complicated questions. But even granting that point, I think that Democrats can do a much better job of articulating a story about how the economy works. And I think the beginning of that story is that a strong economy requires a strong… It requires a distribution of income. That means that many people are in a position to consume and to spend. And if you have the type of inequality that we have now that’s bad. So a strong economy begins with wage growth. It begins with workers having more money in their pockets.
Nick Hanauer:
That’s right. That’s right.
David Goldstein:
So, Democrats clearly deserve a lot of the blame for what happened. I’m curious, Binya when you publish an editorial like this, in your mind, are you aiming this at lawmakers?
Binyamin Applebaum:
Yeah. I mean, I think not just at lawmakers, but my hope with a piece like this is that, people in the incoming administration read it, Democratic politicians read it. People who care about, the party’s prospects and it’s purpose read it and engage with these ideas, because, yeah. I mean, in the piece we described, a lot of what the Democratic party has been in recent decades is basically, the party of kinder, better tax cuts, and that’s not good enough. That’s not good for the country, and it’s not a winning strategy for the party. And I’m not the first person making this case, but my hope is that we’re at a moment where people may be able to hear it and to engage it. Because, I just absolutely agree that the history of the last half century.
Binyamin Applebaum:
And my book is basically the story of this, consensus among the two parties on economic policy, and its harmful consequences. And we really need him to say… I mean, the health of our democracy really requires conflicting ideas. Right? You want to have a battle of ideas. You want to have two parties disagreeing about what we need, making their best case. And you see who moves forward. And I would like a stronger opposition to the party of tax cuts.
Nick Hanauer:
So what advice should we be giving our listeners? What should people do?
Binyamin Applebaum:
I think that the answer is that people need to understand their self-interest and vote in their self-interest. Right? Like you have this phenomenon, the what’s the matter with Kansas phenomenon where people struggled to understand why it is that conservatives keep voting for these policies, but what’s the matter with California? Why is it that liberal voters in California keep on electing candidates who do not support economic policies that are ultimately in the interest of the vast majority of Californians? Well, it’s in part because people don’t know what those policies are, and in part because they’re not holding politicians accountable for them. And I think, I really do mean this. It is perplexing to me that, state like California or like Massachusetts, or other States where, Democrats have super majorities in the legislature and inability to push through the types of policies that might really help people. That’s not happening to the extent that we needed to. And so I think, the challenge for voters is to identify and elect the types of candidates who are genuinely committed to producing better economic policy.
David Goldstein:
So Binya are you going to… Is this a one-off or is the board going to be addressing this issue in the future?
Binyamin Applebaum:
Yeah, so we take seriously, the idea that the institutional voice has continuity, that it has an awareness of what it said before, and this is important to us. And I think you’ll see us continue to speak in these terms about what we want from public policy and what we want… This is the measuring stick in the economy that we think is the right measuring stick for the Biden administration and for Congress. And I think we will continue to hold them to it.
Nick Hanauer:
Yeah and I think that you’re… That the basic framework that raising median wages is the yardstick by which we should measure much economic policy is dead on.
Binyamin Applebaum:
I absolutely would like to see, median income treated in the way that GDP is now treated. I think it’s just a much healthier thing for us to focus on as a society.
Nick Hanauer:
Yeah. We always ask our guests, why do you do this work?
Binyamin Applebaum:
I think it’s important. I believe that a better understanding of economics and better economic policy is really important to improve the life of Americans and the opportunities of Americans. And so my hope is that you write clearly and you speak loudly and hopefully you get some people to listen.
Nick Hanauer:
Well, thank you again for joining us. It’s always great to talk to you.
Binyamin Applebaum:
Likewise.
Nick Hanauer:
And we’ll talk soon.
David Goldstein:
So if you want more from Binyamin Appelbaum and a little bit more about his book, The Economists’ Hour, also in our show notes, we will provide a link to a previous episode where we interviewed Binyamin about his book.
Binyamin Applebaum:
Yeah. And so I think if there was any addendum I could make to that New York Times editorial, it would have been to fold in the RAND study data to characterize the distance we must go to get working in middle-class people caught back up. Because it’s one thing to say, we should focus on wages that when people earn more, that the economy is strengthened by that not weakened, but it’s entirely different to say, and we should raise the median full-time earners’ salary, or income from 50 K to 90K or a 100K. And if we do that, then we’ll be back on track. And I think today it’s really important for folks to understand how great the distance is that we must travel to get people back whole to where they once were. One of the ways that we could get to collapsing inequality, or at least controlling it is one of my favorite ideas, what I would do is, I would index the minimum wage to the maximum wage, which is to say, I would index the minimum wage to the after tax income of the top 1%.
Binyamin Applebaum:
And, that’s a really nifty way of tying the fortunes of the entire country together. So if those hedge fund dudes in New York want to pay themselves 500 million bucks a year, or whatever it is good on them. The next year, the minimum wage would rise, a couple of $3 and everyone would be better off. And I think that, we’ve got to find a way to connect the fortunes of all Americans in ways that makes us all feel like… When the country does well, we all do well together.
David Goldstein:
Right. And while that may strike some listeners as unfeasible, either politically or technically, It’s important to point out that in a sense, the minimum wage was tied to the [crosstalk 00:27:07] incomes of the top earners for decades. That incomes rose at all levels of the distribution. And this is one of the things that RAND report points out from 1947 and 1975, the incomes broadly rose with GDP growth across all distributions. It’s only since 1975, that we severed incomes for 90% of Americans from the economy of the whole and allowed almost all of the benefits to be captured by those at the top. So, well, there was not an index that said that, we did not index the minimum wage to top CEO pay, in effect, that’s how the economy worked.
Nick Hanauer:
But finally Goldi, the thing that comes to me most forcefully as a consequence of that conversation with Binya is, the catastrophic failure of economics as a profession to be in a profession that purports to be a science, to be objective, to be fact-based and to watch a transformation around what has to be the simplest proposition in the field. Right? Which is what happens when companies are required to pay people a little bit more. Right? Like this incredibly simple observable thing to go from a world where people were absolutely convinced that there was, as Binya put it, a mechanical relationship between the amount you had to pay and the number of jobs that existed, to realizing that no such thing obtains.
Nick Hanauer:
And then in fact, you can pay people a lot more and not only won’t jobs disappear, but in fact, there may be more jobs. It’s just such a failure. This would be like physicists, still arguing over what happens when you drop a heavy rock and a light rock at the same time out of a tall building. Right? And people do not argue about that anymore. This issue around the minimum wage is that basic.
David Goldstein:
Yeah. And I would say Nick, that the failure goes even deeper. Some of the pushback we get from economist is that, oh, of course we understand this. We know that these are just models. And we know everything’s not actually an equilibrium system. And we’re just creating these models that help to get a better idea for how the economy works, if that’s true, what they have been absolutely oblivious to is the impact that they have on the public at large, on our policymakers, and on our elected officials. And often in the past, on our editorial lists. Because, they have told this story.
David Goldstein:
And even now that the consensus has changed, they continue to tell this story in the econ one book, which is as far as most people ever get in their economics training.
Nick Hanauer:
The thing is, and I know this sounds like we’re just being sourpusses, but-
David Goldstein:
And we are.
Nick Hanauer:
Okay, but here’s the thing, that proposition that, when wages rise jobs fall can be traced to at least a $25 trillion transfer of wealth from working people to capital enrich people. The degree to which that idea damaged the social political and economic fabric of our country is incalculable.
Nick Hanauer:
In fact, if you run this thought experiment of how someone in academia could harm this many millions of people, another way other than inventing a bio weapon, I can’t think of a thing. Right? Honestly, if you really were out to hurt tens of millions of innocent, hardworking people animating this proposition, that if we pay them more, it will harm them, has to be at the top of your list.
David Goldstein:
So, Nick, I’d say our suggestion to our listeners is to read the piece, pass it around, email it to your friends and email it to the editorial boards at your own local newspaper.
Nick Hanauer:
Exactly.
David Goldstein:
Any time you see them touting the old higher wages kills jobs bullshit.
Nick Hanauer:
Trickle-down myth. Absolutely.
Annie:
This is Annie.
Ashley:
And I’m Ashley. We’re producers here at Pitchfork Economics.
Annie:
We’re going to take a tour of editorial on the minimum wage from The New York Times opinion board over the last a 100 years. And remember, this is not meant to lambast The New York Times or the editorial board, but the board has always been an accurate reflection of consensus among economists. And interestingly, it’s a really great way to track the history of misbelief about the minimum wage in our country. So here we go, the first editorial about an American minimum wage appeared in 1913, and they wrote,
Ashley:
There are a few fairly certain effects that will follow a minimum wage, which are not generally recognized by the advocates of that humanely intended measure and which deserve careful attention.
Annie:
This piece contains themes, that would be common for the board throughout the next 50 years. Fears like the minimum wage would leave some workers who are currently employed without employment, including quote,
Ashley:
“The incompetent, the shiftless, the lazy and the shirks”.
Annie:
And other themes still popular today. Like the rights of an individual to work for any right that they want. The assertion that businesses will just break the law anyway, that lazy people will get paid to not work and that it will cost too much to administer. In 1937, the U.S. Supreme Court upheld the right of the State of Washington and subsequently other States to set a statewide minimum wage. And the country found itself in a national debate over a federal minimum wage. A piece from this year marks the first use of what would become a favorite theme of the board, which will sound familiar to a lot of people. What works in New York City may not work in Mississippi. In 1937 they wrote,
Ashley:
The danger of fixing a flat rate without special investigation is that it may disorganize certain industries. Cause bankruptcies and throw out of work the very persons it is designed to help. If a flat rate is dangerous in the state law, it would be immensely more so in any federal enactment.
Annie:
At that time, 17 States had minimum wage legislation, but only two or three had a flat blanket, minimum wage. The Fair Labor Standards Act in 1938 established a federal minimum wage. And in 1950, the board wrote,
Ashley:
None of the dire results predicted have materialized from the 1938 Act.
Annie:
And by 1955,
Ashley:
The 1950 raise had no marked effect on either unemployment or business mortality. In spite of the dire predications of opponents of the change.
Annie:
But economist widely, and therefore the boards still weren’t convinced about the merits of a minimum wage. In 1977, the board published back-to-back pieces claiming,
Ashley:
A higher minimum wage offers no remedy to the problem of low wages.
Annie:
And,
Ashley:
Some poor people would benefit at the expense of other poor people.
Annie:
In 1977, they wrote,
Ashley:
Since the depression, liberals have favored higher minimum wages while conservatives have resisted. But this debate has become sterile, whatever the merits of minimum wages is in the past, they make little economic sense today.
Annie:
In 1987. Saw probably our favorite headline, which is, The Right Minimum Wage, $0. Closely followed by another from 1987, Don’t Raise The Minimum Wage. Very clear. A quote from that piece,
Ashley:
“There’s Virtual consensus among economists that the minimum wage is an idea whose time has passed. The idea of using a minimum wage to overcome poverty is old, honorable, and fundamentally flawed. It’s time to put this hoary debate behind us, and find a better way to improve the lives of people who work very hard for very little”.
Annie:
Well, the hoary debate continued, but starting in the 1990s, the consensus changed. In 1993, economist David Card, and Alan Krueger published a landmark study, comparing fast food employment in New Jersey and Pennsylvania before and after a rise in New Jersey’s minimum wage in 1992. The study disproved the conventional wisdom at the time that raising wages kill jobs, they found that actually it didn’t. The board started countering claims of lost jobs due to minimum wage increases. By saying that the data clearly shows only a minimal impact on job losses that are always offset by large gains in spending. And as the economy improved the board called for higher wages to reflect the economic boom for the working class in 1996, they wrote,
Ashley:
There’s a strong case for raising the minimum wage by a modest amount. Will low paid workers lose their jobs, if employers must pay higher wages? Yes. But there is widespread agreement among economic studies that the impact would be very small. The benefits of a higher minimum wage would be substantial.
Annie:
So you can see consensus moving in the right direction here. Although some bad ideas still lingering around. Here’s something from 1999.
Ashley:
With the economy strong and the unemployment rate at its lowest in more than 25 years, Democrats in Congress are right to push for an increase in the minimum wage. An increase now will boost income for the poorest workers without the danger of creating more unemployment.
Annie:
By 2014, the country was deep into the fight for 15. And the board went so far as to call itself out for its past, iffy positions, and they ran a series of op-eds that made the case for higher wages. In 2014, they said,
Ashley:
People who work full-time, should not be poor.
Annie:
And in 2015,
Ashley:
It’s hard to overstate the extent to which work no longer results in a decent paycheck and a rising standard of living in this country. The portion of the economic pie that goes to working people is currently near the smallest on record, in data going back to 1947. Similarly, the gap between worker pay and labor productivity has widened since the 1970s. The best corrective is to raise the federal minimum wage.
Annie:
And most recently the board has called for a federal increase of the minimum wage to $15 per hour. And completed its journey towards truth with it’s gloriously spot on op-ed in November of this year, titled, let’s talk about higher wages. Here’s some of our favorite parts of that piece.
Ashley:
The nation needs a better story about the drivers of economic growth.
Annie:
Raising the wages of American workers, ought to be the priority of economic policy makers.
Ashley:
Higher wages can stoke the sputtering engine of economic growth.
Annie:
Workers who are paid more, can spend more. The rich, spend a smaller share of what they earn. And though they lend to the poor. The overall result is still less spending and consumption.
Ashley:
The nation’s laws, social norms and patterns of daily life, all have been revised in recent decades to facilitate the suppression of wage growth.
Annie:
But you don’t just have to take it from us. All of these pieces and more throughout the last 100 years are linked in the show notes. And of course, if you’re looking for pointers on how you can talk about the minimum wage, we recommend starting around 2015.
David Goldstein:
In the next episode of Pitchfork Economics, we get to talk about a super exciting and relevant topic, which is, Canceling Student Debt, with economist Fenaba Addo.
Annie:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate and review us wherever you get your podcasts. Find us on Twitter and Facebook @civicaction and Nick Hanauer. Follow our writing on Medium @civicskunkworks and peek behind the podcast scenes on Instagram @pitchforkeconomics. As always from our team at Civic Ventures, thanks for listening. See you next week.