Tag: Scott Sumner

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folly free trade & free markets general freedom national politics & policies too much government

A British Puzzle

White labor and minimum wages

Most folks think minimum wage laws are there to help the poor in particular and everybody in general. But economist Scott Sumner, exploring “Britain’s new minimum wage: Is there a hidden agenda?” finds Britain’s new Tory double whammy of decreasing welfare payments while hiking mandatory minimum wage something of a mystery:

Why would a Conservative government sharply increase the minimum wage, in a budget that in many other respects favored small government? The minimum wage is currently 6.50 pounds/​hour, and 9 pounds/​hour is almost $14/​hour in US terms. Also recall that average incomes in the UK are lower than in the US.

He finds a possible reason: to dissuade immigration. Migrants usually have low skills, in part because of language difficulties, so they cannot command high wages — market wages, of course, being defined by worker productivity.

Could the new minimum wage be there to influence migration without doing so directly?

Sumner goes on to discuss the racist origins of the minimum wage in America, Australia, and South Africa. The purpose was pretty clearly to hurt poor workers. Minimum wage laws were established to protect white workers from cheap competition by darker skinned folk.

Sumner’s postscript is interesting: “The [American] Democratic surge of interest in the minimum wage occurred soon after the GOP surge of interest in immigration restriction. Let’s see if the GOP jumps on the minimum wage bandwagon.”

Of course, for every advocate of a class-​based, favoritist policy who argues deceptively, there are dozens who are merely mistaken.

This is Common Sense. I’m Paul Jacob.

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White labor and minimum wages

 

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ideological culture

The Inequality Problem

Ah, the Paul Krugman Problem! How does Nobel Laureate economist-​cum-New York Times progressive-​blogger come to his conclusions?

The other day, the eminent Scott Sumner noted — in “The power of wishful thinking?” — that in the space of one year Krugman seemed to gain a great deal of certainty about how vital it is to reduce inequality.

Sumner quotes Krugman from a year ago, when he frankly admitted that he’d like to agree with Joe Stiglitz’s thesis about inequality, but just wasn’t able to persuade himself.

Unfortunately, Krugman hasn’t given us a lot of reason to follow his “lead,” his new-​found faith in Stiglitzian equality. Sumner cites a possible “inspiration” for Krugman’s new tune: Krugman’s employer, the New York Times, has, as editorial policy, shifted leftward on such issues. And then Sumner waxes philosophical:

Sometimes an economist will change his view on a single issue because of some new empirical study (although that actually doesn’t happen as much as you’d think, or as much as you might like). But what about when an economist suddenly swings sharply to the left or right on a whole range of unrelated issues?

Many people do go through radical conversions; you can find interesting conversion testimonies of a religious nature, if not so many in political economy.

As for me, the subject of inequality continues to fascinate, like picking at a scab.

I suspect that rising inequality is caused by the very institutions that Paul Krugman regards as bedrock: institutions that redistribute money from one group to another; institutions that regulate behavior for the benefit (we’re told) of the worse off; institutions altogether “progressive.”

Surely there would be more downward mobility for the rich and upward mobility for the poor in a freer society than in a more Krugman-​approved society.

This is Common Sense. I’m Paul Jacob.