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Letters from the Editor

This inaugurates a new feature of Hunger Notes.  The editor of Hunger Notes, Lane Vanderslice, as an individual, writes a number of letters each year to the United States government and other organizations in support of poor people. From time to time Hunger Notes will publish these, when they appear particularly relevant.

 As an economist, Vanderslice  recently signed on to a letter by economists supporting an increase in the minimum wage.  As a result of that letter, he received a letter from Professor Daniel Klein of George Mason University asking him to provide his reasons for signing on to the economists' letter.  The letter and Vanderslice's response appear below.

Dear Professor Vanderslice,

 
This is a follow-up regarding “Reasons for supporting the minimum wage.”  I welcome your participation in the questionnaire, but if not, please respond with the word  “declining”.  The original email is as follows:

I am a Professor of Economics at George Mason University.  I write in reference to the “Raise the Minimum Wage” statement organized by the Economic Policy Institute and signed by 659 economists, including you.  This message contains a questionnaire of nine questions specific to the minimum wage statement.  I intend to write up the results for publication.  The article may appear in Econ Journal Watch, an online journal of which I am editor.

  
The write-up will be confined to the following: (1) summarizing the data of previous surveys that asked economists about the minimum wage (showing that economists are rather divided); (2) presenting the EPI statement; (3) presenting this questionnaire letter verbatim; (4) summarizing the results of this questionnaire (quoting some responses); (5) linking to an Excel file containing the names of all signatories and their responses in full (the questionnaire is not anonymous).  I will refrain from commenting on the results.  Hence, the “last word” in this installment of the conversation will go to the questionnaire responses provided by the 659 economists.
 
I myself oppose the minimum wage.  But please be assured that there are no “traps” being set here.  This questionnaire project is nothing but an elicitation of the reasons for your support of an increase in the minimum wage.
 
The minimum wage is one of those dividers within the profession.  Conversing in this manner could help illuminate differences in interpretation and judgment, and possibly resolve some of the disagreement.
 
“Confirming”/“Declining”: If you cannot at this moment complete the questionnaire but think you might, I will be very grateful if you could respond and write simply “confirming.”  That way I will not send any follow-up emails or hardcopy.  If you decide not to complete the questionnaire, please respond “declining.”
 
The questionnaire follows below.
 
Thank you for your attention.
 
Respectfully,
 
Daniel Klein
Professor of Economics, George Mason University
Editor, Econ Journal Watch
 
QUESTIONNAIRE OF THE 659 ECONOMISTS SUPPORTING AN INCREASE IN THE MINIMUM WAGE
 
The Questionnaire
 
Please provide your name: Lane Vanderslice
 
SECTION 1: MECHANISMS
The fourth paragraph of the statement says that you believe an increase in the federal minimum wage to $7.25 will bring net benefits to workers and to the overall economy.  I’d like to ask you about the mechanisms you see at work, generating the benefits.  Consider two broad categories of mechanisms, first labor-market mechanisms, and second, broad socio-political mechanisms.
 
Q1: Please indicate your view of the following statement: An increase in the federal minimum wage to $7.25 would generate net benefits for workers and the overall economy through its effects on labor-market mechanisms. 
  1. [ x] I agree with that statement.
  2. [ ] I disagree with that statement.
 I would also say that "labor market mechanisms" is not defined here and may well be a  narrow view of view of what labor market mechanisms are.  For example would you consider the firing of the air traffic controllers by the Reagan administration a labor market mechanism? Or ordinary--and large--political action by corporations with one purpose of these contributions influencing the labor market?
 

If you responded B, skip the next two questions and go directly to Q4.

 
Q2 (only for those who responded A, agree, above): Kindly identify the beneficial labor-market mechanisms (it’s OK to approve more than one):
  1. [ x] Equalizing an imbalance in bargaining skills (i.e., bargaining experience, articulateness, confidence)
  2. [x ] Inducing employers with monopsony power to increase employment by their firm.
  3. [ x] Inducing a transfer from employers to (generally less well off) workers, albeit with possible small disemployment effects.
  4. [ ] Coordinating the low-wage labor market by making it common knowledge that jobs pay at least $7.25.
  5. [x ] Other, please specify: First, the labor market is influenced by political action and subsequent laws, enforcement or lack thereof, administrative decisions, and the climate of opinion to a great degree.  This does not appear to be included in your understanding of labor market economics. . Secondly, and probably even more importantly, economics does not understand very well (or even acknowledge) coercion. "Your money or your life" is a free market transaction. I either give him the money or he shoots me. I freely give up my money. This is not considered in economics as a free market transaction simply because economics doesn’t consider this type of transaction, but it is a free market transaction, albeit a coerced one. Similarly when we get down to people at the bottom of the income distribution, the transaction that we present to them, “root hog or die” may involve a degree of coercion unworthy of a democratic, well-to-do, society. (I believe that it does involve such a degree of coercion.)
Q3 (again, only for those who responded A, agree, to Q1): For each mechanism that you indicated belief in in the previous question, if it’s not too much trouble, kindly indicate one or two sources of information (e.g. publications) that you feel support that belief:
  1. Recommended source on the bargaining-skills mechanism:
  2. Recommended source on the monopsony mechanism:
  3. Recommended source on induced-transfer mechanism:
  4. Recommended source on the coordination mechanism:
  5. Recommended source on other mechanisms specified:
 
Q4: Regardless of how you responded to the previous questions, please indicate your view of the following statement: An increase in the federal minimum wage to $7.25 would generate net benefits for workers and the overall economy through its effects on broad socio-political mechanisms, such as those involving the character of the polity. 
  1. [ x] I agree with that statement.
  2. [ ] I disagree with that statement.
 
Q5: If you agreed with the previous statement (in Q4), kindly tell us how you think about those socio-political mechanisms (a few words, or, you are welcome to elaborate and to cite recommended sources):

You are at George Mason, in an economics department that is supposed to study the interaction between economics and politics.  Thus I somewhat surprised that you think socio-political mechanisms are not an integral part of the labor market process.  This interaction is fundamental.  Government establishes (or doesn't ) 'rules of the game' for labor markets and there is a continual struggle within the U.S. government administrative and legislative framework to define and enforce workers and employer's rights and obligations by both employers, workers and other interested parties.  A lot of effort and money is spent in doing this!

Also see my answer to section 3.

 
SECTION 2: POSSIBLE NEGATIVE ECONOMIC CONSEQUENCES OF INCREASING THE MINIMUM WAGE TO $7.25
 
Q6: Virtually every policy action has at least some “winners” and some “losers.”  The following is a list of six possible negative consequences of the proposed increase in the minimum wage.  Please mark each of these with one of the following three symbols:
s = significant economic drawback
m = minor economic drawback
n = not a substantive consequence (that is, the claim is false)
  1. [m ] Because they cannot legally compete by lowering their price below $7.25, some individuals will not get employed (or will work fewer hours), regrettable because they miss out on income or work experience.  Minor because the "writ does not run" very far with respect to enforcement of the minimum wage.  Teenagers, for example, will have plenty of less than minimum wage work activities.
  2. [ m] Because they cannot legally compete by lowering their price below $7.25, some individuals who do work will do so under otherwise less favorable conditions (such as fewer perks, less recognition or consideration, less training or instruction, harder work, etc.)  There will be an adjustment on all sides. Given that the minimum wage has not been adjusted for umpteen years, why have you not done a survey of how everyone has benefited from the failure to increase the minimum wage!
  3. [ ?] Because of the increase to $7.25, some workers will face a flatter time-profile of wage increases.  See the answer to B
  4. [m ] Because of the increase to $7.25, some workers will work illegally. Possibly.  I don't know what the minimum wage legislation will look like, including if there will be allowances for the public (e.g. babysitting or lawn mowing), small businesses, part-time employment, and teen-age employment.  There are always gray areas and minimal enforcement for smaller actors for minimum wage legislation, as far as I can see.  (I am not an expert on minimum wage legislation and its effects.)
  5. [m ] Because of the increase to $7.25, employers will enjoy less producer surplus.  See answer to F
  6. [ m] Because of the increase to $7.25 and higher costs of production, consumer well-being will decline (because of higher prices, lower quality, fewer options).  Certainly any real increase in income of low wage workers will have to come out of producers' or consumers' well being (after partially compensating market adjustments of course).  Given that those who will suffer (consumers, producers, shareholders etc.) have much higher incomes, and that the marginal utility of income declines as income increases, I think that the benefit to poor workers from an increase in the minimum wage--small though it may be--far outweighs the harm to the rest of us.
 
SECTION 3: THE MINIMUM WAGE AND LIBERTY
 
In one manner of speaking, liberty is freedom from political or legal restrictions on one’s property or freedom of association.  Subscribers to this definition are apt to say that the minimum wage law is coercive because it (along with concomitant enforcement) threatens physical aggression against people for engaging in certain voluntary, consensual acts (namely, employing people at sub-minimum wages).  (Notice that even subscribers to this definition of liberty recognize that it does not by itself carry a policy recommendation; values other than liberty exist and might conflict with it.)
 
Q7: Please indicate which of the following options best fits your view of this semantic issue:
  1. [ ] I agree that that definition of liberty is the primary definition of liberty, and in that sense the minimum wage law is coercive.
  2. [ ] I give some weight to that definition of liberty, but not primary weight; the minimum wage law is only coercive in a sense.
  3. [ ] I give little to no weight to that definition of liberty; the minimum wage law is not coercive in any significant sense.
  4. [ x] Other [please specify]:  Please see below

"Liberty is freedom from political or legal restrictions on one’s property or freedom of association."  While I understand and appreciate this idea, I don't think it really focuses on how freedom is arrived at and what it means.  Absent political and legal restrictions, anybody can do anything.  Kill, rob, and conquer, as well as produce goods, raise a family, and tend one's garden. Unfortunately, without a political structure, killing, robbing and conquering is likely to predominate. Hobbes described the 'war of all against all.'  Liberty as we know it is part of a political framework, including a government which expends considerable resources in defending that framework (as well as undertaking other activities). The essential role of government in establishing our liberties does not seem to be clearly understood in the quotation above.  George Mason did not  wish Virginia to ratify the Constitution because it lacked a bill of rights, which we now have. The bill of rights--amendments to the Constitution-- along with other key aspects of American life, establishes the framework of what is described as freedom above.  I want to emphasize two things:

Our political structure gives us freedoms of association and property rights.  Government--the political structure--is not the oppressor--it is what gives us these freedoms.  (This is not to say that governments cannot oppress people.)

As I understand that  our political structure and our active participation in it is what enables us to have these freedoms, I ask--what freedom can the political structure provide the lowest wage workers?  One of the freedoms is freedom from want,  and an increase in the minimum wage is a (long overdue) response toward providing this freedom.

 
Q8: If you responded either B or C to the previous question, please fill in A or B below:
  1. [ ] To me, the primary meaning of liberty is [fill in]:
  2. [ ] To me, in such political/legal discourse, “liberty” is not particularly meaningful at all.
 
GENERAL FEEDBACK
Q9: If you have general remarks about the minimum wage issue or this questionnaire, please provide them here:
 
 
Thank you for completing the questionnaire. 
 

 

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