by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Minimum wage and paid family leave are not only moral imperatives, says Obama, but good economics to boot. Employees, he tells us, are happier and therefore more productive. Minimum wage and paid medical leave, understand, actually benefit business. It’s just that dumb businessmen and women don’t realize it.
But what does it say that perhaps the two most high-profile leftwing economists once opposed the minimum wage and paid family and medical leave?
When Obamacare architect/economist Jonathan Gruber and the New York Times economist Paul Krugman actually practiced economics, they both opposed the minimum wage. In Gruber’s case, he also opposed government mandated for paid family and medical leave.
In 2011 — less than four years ago — Gruber gave an MIT lecture called “Applying Supply and Demand.” About the minimum wage, Gruber said: “Let’s say the government rolled in and set a minimum wage. … Workers want to supply more hours than firms want to hire. … You end up with excess supply. And we call that excess supply ‘unemployment.’” He also insisted that a higher minimum wage pressures an employer to turn to automation: “We have a downward sloping demand curve, and why is it downward sloping? Because the higher the wage, the fewer workers the firm wants to hire. It would rather use machines instead.”
As to paid leave, Gruber also argued against it. In 1994 Gruber wrote: “I study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans, raising the relative cost of insuring women of childbearing age. I find substantial shifting of the costs of these mandates to the wages of the targeted group.” In other words, Gruber said that an employer forced to pay for family leave will simply reduce the employee’s wages to offset the cost — not net benefit to the employee.
This brings us to the New York Times columnist/economist Paul Krugman, who currently supports a $15 minimum wage. He, too, has done a 180 on the issue.
In 1998, Krugman reviewed a book that supported the living wage, titled “The Living Wage: Building a Fair Economy.” But Krugman slammed the idea: “The living wage movement is simply a move to raise minimum wages through local action. So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment.”