Guardian dissing minimum wage?

The Guardian writes

The introduction of the national living wage was already causing fruit and vegetable producers, who do not receive EU subsidies, to move to lower cost countries, 

I do not need to check the Guardian’s position on the minimum wage. It is for it. In fact Polly Toynbee once went so far as to suggest a good argument for minimum wage was to deal with problems associated with immigration. 

Why then is the Guardian letting this negative opinion, attributed to salad grower Chris Mack, through it’s net? Because the rest of the article is Brexit scaremongering:

Mack said: “If there is a further issue around the availability of labour, moving your fields overseas will be almost be the only option.”

This is, of course, as powerful an argument for abolishing the minimum wage as it is for cancelling Brexit.  The silly Guardian have apparently missed Ashcroft polling making immigration the top Brexit issue for a tiny 17% of the population. Cheap salad is exactly the kind of issue likely to be on the mind of the 7% who ranked it last.

If you want some more reasons to abolish the minimum wage Sam Bowman brought  a whole collection with him in one of our videos.

Video: The State of the Minimum Wage debate

Our speaker Sam Bowman gave an energised and thorough review of the arguments over the minimum wage. This was not the first time he had tackled the issue so he came with a lot of detail. Starting with “Econ 101” the idea that if the minimum price of a good exceeds the market clearing price you get a surplus of the good, which for labour means unemployment. Sam expressed surprise that such a simple idea is so hotly disputed but he was not surprised, following Hayek, that the empirical evidence was unclear.

Sam believes that the argument for a minimum wage as a way of caring for the poor is not as strong as the argument for abolishing the minimum wage for the same reason. Sam seems to smuggle a moral premise into his “pure consequentialist” thinking, but I do agree with him (as an ethical objectivist) that ensuring the poor are not starving is a valid policy consideration. We also agree that “Econ 101” ultimately holds true, just not in the ways you might assume.

Sam talked about the work of Card and Kruger, who defended a minimum wage in an important and well-respected 1992 paper which opened up a debate that had previously centred on crude time-series regressions and found only the expected disemployment effect. The paper’s findings were supportive of a minimum wage but did not, however, show any explanation for why “Econ 101” does not apply. Later Arindrajit Dube (an Indian male, name pronounced “doo-bay”) used quite a sophisticated technique. He looked at adjacent counties that straddled a State boundary where different State minimum wage laws applied. He found no strong relationship between minimum wage and unemployment. Sam believes that the simple Econ 101 a priori conclusion might be outweighed by empirically observable chaos that defies explanation or quantification. This chimes nicely with Hayek’s observation that the progress of technology and commerce is impossible to predict for similar reasons.

However, according to a literature review (TL:DR) only 15% of the 33 best empirical studies found no effect on unemployment, and 85% do show a direct impact on employment (66% for all studies). However, if you were to listen to Left, they would have you believe that there is no, or only very poor, evidence for a direct impact. So we are off to a good start, despite the protestations of the Left, there is a clear “consensus” of “peer-reviewed” research that shows the unemployment effect. Were we operating to the epistemological standards of climate change propagandists we would be done here, but we are not.

What might outweigh the obvious impact on employer incentives?

Sam describes the arguments of Richard Murphy who believes that better evidence of the effect of minimum wage may be found in labour market participation rates. Simply, changing the price of labour may attract experienced vulnerable workers (such as retirees) into the market at the expense of less experienced vulnerable workers (the unproven young).

Sam also describes a new working paper that looks at over overall growth rate in employment. The claim, which has been challenged, is that employers face short-term disincentives, such as workforce morale issues, that cause them to simply stop hiring, or try to get more from existing workers (I would venture to add knowledge management issues to the list of possible disincentives).

There are also a large number of papers and good historical data that shows that the barrier to finding work at the beginning of people’s careers, while they are unproven and cannot show they are worth the minimum wage, has the effect of reducing earnings over the long-term. The short period of difficulty caused by minimum wage, while difficult to observe in the chaos, has a very clear effect on the acquisition of skills, career progression and earnings potential.

Reasons to be fearful

John Maynard Keynes argued that in a crisis, “sticky wages” can lead to unemployment. it is inconsistent at best for progressives who favour Keynes to argue in his favour about business cycle theory and also advocate for a minimum wage. Fixed wages either causes unemployment or they do not.

Chillingly, anti-black racists from South Africa and more recently anti-hispanic racists in California, as well as Guardian columnist Polly Toynbee with regards to Romanians, rightly observe that minimum wages can be used to exclude ethnically different and undervalued outsiders. This excercised the audience somewhat, as you might expect.

Basic Income Controversy

Controversially, Sam also tacked on an argument for legalised plunder of the wealthy (as Craig Biddle put it) that he borrowed from the Bleeding Hearts. He argued that a Citizens Basic Income or Negative Income Tax would help to allay fears that people would be left to die on very low wages if the law was to be abolished. His concern was to help the progression of policy in the right direction. The audience was not persuaded on that point, and nor was I.

Conclusion

Although he doesn’t mention them, Sam ends with another interesting nod to the success of climate alarmists. If you were, like an alarmist, to invoke the “precautionary principle” then you must conclude that raising or introducing the minimum wage is, empirically, such a unproven method of helping the poor that it is not a safe policy to persue. That is, that raising the minimum wage is not necessarily a priori harmful but that harm is empirically probable and best avoided. Sam adds that this is especially true if it is not your neck on the line but someone elses, as is the case for any responsible statesman.

Thursday Speaker: Sam Bowman

A lot of people will recognise the name Sam Bowman from his work at the ASI. He blogs there regularly, is popular on Twitter and makes the occasional media appearance. He has written on gay marriage for the Guardian, the living wage for Conservative Home and many times for City AM. A lot of you  will have met him at an ASI event, where he manages to present a mathematical puzzle by both working the whole room and being accessible, but also apparently having the time for a serious conversation with complete strangers.

Sam BowmanFrom one such conversation I know Sam is an ethical consequentialist, believing nothing has fundamental value one way or another except as determined by its consequences. There is at least a twenty minute talk in there about whether or not that view is valid on its own, and probably at least another 10 minutes about whether that view is compatible with my own view. That, however, would be something of a diversion from Thursday’s topic which is a review of the minimum wage debate, where it has got to and what the empirical evidence has to say about it.

Like Sam, I started off in a crappy job. I worked on the checkout in the Coop, Sam served french fries in MacDonalds. These are stages in your life that you simply have to go through, either because preparing for anything more is not yet possible, or in order to prove you are a hard worker and that you know how to get on in the workplace. It is people that do this and succeed that rise, and those that don’t stay where they are. How are employers to distinguish those that don’t, from those that were not permitted to try under a minimum wage law?

More recently, Sam appeared on the BBC World Service to debate Will Hutton, the writer and Oxford college principal. Predictably Sam was introduced as working for a right-leaning think tank and Hutton was introduced as an unlabelled economist. Predictably, the presenter interrupted Sam but Will got to ramble on in a relaxed manner for ages. Sam did very well though and managed, just for instance, to get out the idea that the disemployment effect is at least as serious a moral issue as low pay might be. He also told the World Service that a consensus of good empirical research notes a disemployment effect from the introduction of a minimum wage, something that Hutton seemed to dispute.

So I figured it would be a great idea to give Sam the chance to tell us all about this, uninterrupted, for a good 20 minutes, so that we can learn more about the empirical details.

Sam Bowman is speaking this Thursday 6th March at the Rose and Crown.

Upcoming meetings

I’ve been busily organising the speaker schedule for the next few months, and am keen to share the details of an exciting programme.

Minimum Wage with Sam Bowman

Sam Bowman

Sam Bowman is a well-known figure at the Adam Smith Institute and recently appeared as the “right-leaning think tank” bogeyman on a somewhat biased BBC World Service programme to debate the minimum wage with “principal of Hertford College in Oxford” Will Hutton. Despite the anchor woman’s best efforts Sam made it clear that the empirical evidence is stronger than some believe and that imposing a minimum is also a moral problem. This will be a great opportunity to hear his arguments in full.

March 6th at the Rose and Crown

Political Marketing on Social Media with Rob Waller

Rob Waller

Rob is the social media entrepreneur who invented the “Fakers App” which embarrassed Barack Obama (and host of other well-known figures) who all seemed to have a larger twitter following than they rightly should. His particular thing is making interesting use of data to produce better business outcomes. He’ll be explaining some of the basic (and not so basic) ways to use social media marketing and how they apply to the field of politics.

Rob also founded this Meetup, obviously, so remember to buy him a drink!

April 3rd at the Rose and Crown.

The Libertarians of the English Revolution 1647-1649 with Richard Carey

Richard Carey © Brian Micklethwait

Richard Carey © Brian Micklethwait

Richard Carey is a regular at the Rose and Crown, a Libertarian Home author, a passionate historian and a very smart guy. This talk has been trialed at Brian’s Fridays and I found it to be a fascinating and detailed account of the time, it’s epistemological fancies, the political debate and a fateful regicide.

May 1st at the Rose and Crown.

Summer Social

No speaker, but an opportunity to enjoy the sunshine in the beer garden with like-minded company. If you have any unused books or other literature that you are done with and wish to pass on, then bring them along to the Rose and Crown on June 5th.

 

As usual, all the speaker events will be video recorded and made available here, where the discussion can continue. I am also working on ways to make Q&As available. These are considerably more work to edit and it may involve changes to how the Q&As are run. I don’t like to mess with a winning formula but people have made it quite clear that the Q&As are interesting to them so a bit of experimenting will be going on.

The proposed National Minimum Wage increase

In an interview with the BBC George Osborne said that he would like to see above inflation increases in the National Minimum Wage (NMW), potentially increasing the rate for those aged 21 and over to £7/hour. Whether this was a pre-emptive strike or a panicky reaction ahead of Millipede Jr’s speech on the cost of living today is left up to the reader to decide based on their own particular biases.

The bare numbers (courtesy of Listen to Taxman) for someone doing a 37.5 hour week in the 2013/14 tax year are as follows:

image

Increasing the NMW to £7 would (in this tax year) make the employee £914.94 better off, the government £616.24 better off and the employer £1,531.18 worse off.*

Yet increasing the thresholds for Income Tax and all types of National Insurance to £12,304.50 would leave the employee with an extra £1,119.68 in their pocket, the employer with £635.97 per employee to spend on something else and a reduction in the amount taken by government of £1,755.65 – which would no doubt be offset by a reduction in the need to hand out quite so much in in-work benefits (and, potentially, reduce the admin overheads involved).

Not that it will happen though.

 

 

 

*Obviously this assumes that nobody loses their jobs because their labour isn’t worth the increased amount because at that point the employee and the government are both worse off…

 


This article was cross posted from Misanthrope Girl’s blog.

Conservative libertarian group seeks volunteers

Again, not everyone’s cup of tea maybe but a good source of experience for people wanting a serious political career of a broadly libertarian kind.

Conservatives for Liberty is an independent think tank and campaign group aimed at promoting libertarian, socially liberal and free market ideas amongst Conservatives in the UK. We believe capitalism, individualism, low taxation and minimal state interference are conducive to the greatest freedom, happiness and prosperity of mankind and seek to promote these values through the Conservative party, media and wider public.

We are looking to recruit further researchers to increase the size of our policy unit.

On account of minimum wage legislation the role offers zero pay, but is officially very flexible.

Sigh…

Debate over: minimum wage must exist

Disputes over the minimum wage are no longer a question of whether it should exist but rather at what level it should be set.

© Ewan-M

© Ewan-M

The Independent, last Tuesday, announced that there is no longer any debate about the need or legitimacy on the minimum wage. Meanwhile, for some, it remains a definitive example of how state intervention damages welfare of the very poorest, and helps to keep them poor. For others still, it is not high enough and deserves to be increased further. The Conservatives have kited a scheme to increase it in line with the profits of the company – as if there was a maximum moral amount of profit that entrepreneurs deserved for world-changing and life enhancing innovations. Finally, Hackney Council have joined in, calling for powers to be delegated to local authorities and information sharing to begin so people’s voluntary financial arrangements can be properly punished.

This debate is going in the wrong direction.