Unconventional Wisdom
TYLER, GUS
Unconventional Wisdom_ Myth and Measurement: The New Economics of the Minimum Wage By David Card and Alan B. Knteger Princeton. 422pp. $29.95. Reviewed by Gus Tyler Assistant president,...
...Presidents, and their counterparts around the globe directly and indirectly involved in fashioning policy, similarly embraced Keynesianism...
...Indeed, it should be made compulsory reading for every member of Congress, even if he or she has to take a course in mathematics to learn how the interrelation of the deltas, gammas and epsilons justifies raising the Federal minimum wage in 1995 and beyond...
...In 1987 they wrote: "Minimum wages have two impacts...
...In the social sciences, the researcher usually has to take life as it comes, without a man-made control group...
...Franklin D. Roosevelt, for example, confessed he simply did not understand "that mathematician...
...Keynes' impact was literally world-shaking...
...For about three decades, from 1938 to 1968, many respected economists held that raising the minimum wage did not increase unemployment...
...Remarkably," say the authors, "regardless of the comparison used, the estimated employment effects of the minimum wage are almost identical...
...Keynes, who could write with grace and fluidity, explained in his classic that his target audience was the profession, the certified economists...
...For if a hike coincides with a recession, the figures could very well show a decline in employment, although the increased minimum was not the reason...
...Following the publication of General Theory in 1936, the erstwhile recurrent and assumedly inevitable depressions were tamed and tethered, deprived of making their customary ruinous reappearances...
...To reach them, he composed a rational public policy in the private idiom of their tribe...
...They conclude that lifting the minimum improves wages overall and...
...And they found them...
...While advancing their argument...
...Obviously agreeing that to address the profession is one of the best ways to influence the course of events, they write in the style of the econometrician...
...Ordinarily such indulgence would be inexcusable...
...Then, as conservatism and a string of Republican Presidents moved into the White House, the econometric guild reversed itself and decided that upping the minimum wage would be a disservice to workers at the bottom of the human heap...
...Namely, they set up a "control" group with which to compare the results in a group under "treatment...
...Their book is one long, deep, data-laden, tightly structured piece of research and reason that carefully proves its case...
...the authors seized the opportunity to apply their method...
...Numbers, charts, regressions, least squares, logarithms, and formula after formula whose Greek letters are embellished with subnumerals and supernumerals fill their pages...
...In addition, a double-check was done by setting up a second control group consisting of New Jersey restaurants that had been paying at least $5 an hour prior to the enactment of the law...
...But in this case the brilliant exercise—and it glistens—is justified by the cause it serves, as was the awesomely awkward academese of Keynes...
...Reviewed by Gus Tyler Assistant president, ILGWU THIS BOOK by two Princeton economics professors may do for the present-day controversy over the minimum wage what John Maynard Keynes' The General Tlie-oiyof Employment, Interest and Money did in its time for the argument about how to cope with depressions...
...David Card and Alan B. Krueger take the same tack in Myth and Measurement...
...Alan Blinder, often viewed as the "liberal" on the Federal Reserve Board, stated bluntly: "The primary consequence of the minimum wage law is not an increase in the incomes of the least skilled workers but a restriction of their employment opportunities...
...Enlightened economists who advised subsequent U.S...
...This led to the discovery of "questionable assumptions and research methods...
...The authors devote whole chapters to similar studies done in Texas, California, and finally the country as a whole...
...Before Apri 11 they surveyed 410 fast-food restaurants in New Jersey and neighboring Pennsylvania...
...When Michael S. Dukakis, in his 1988 bid for the White House, promised a raise, Stigler tagged the plank "despicable...
...Granted, the new strategies that enabled governments to curb laissez faire and introduce balanced economies were not always taken straight from the good Lord's text...
...Likewise, if there is a spurt in the economy, employment could improve independently...
...Of course, Myth and Measurement will not end the minimum wage debate any more than Aristotle's Politics ended the debate about the nature and role of politics...
...Nevertheless, FDR pursued Keynesian policies, even if they were shaped pragmatically out of the exigencies of the moment, because his "brain trusters" appreciated the importance of Keynes' formulation and codification of how the capitalist system works...
...Instead, they went to its source and actually "obtained and reanalyzed the data sets that were used in a number of [1980s] studies...
...They raise earnings for those who are employed, but may cause other people to lose their jobs...
...What the authors tackle is the current notion that raising the legal minimum wage brings on unemployment, especially among youth and minorities...
...Nor are Card and Krueger satisfied with merely issuing findings that dramatically contradict today's conventional wisdom...
...Card and Krueger examine this dogma head on...
...A fellow soul, Finis Welch, characterized a higher minimum as "one of the cruelest constructs of an often cruel society...
...All this was no accident...
...The higher the minimum wage, the greater will be the number of covered workers who are discharged," declared Nobel Prize-winner George J. Stigler...
...Again and again they show it just ain't so...
...New Jersey, it should be noted, is not the only case presented...
...We find that the rise in the New Jersey minimum wage seems to have increased employment at restaurants that were forced to raise pay to comply with the law...
...rather than causing a loss of jobs, in many circumstances adds to the number of people employed...
...Something akin to the methodology of the hard sciences is necessary to accurately assess the impact of a minimum wage change on employment...
...The authors enter the fray with a lethal weapon borrowed from the physical—or "hard"—sciences that is normally not available to the social sciences...
...Since parts of their work appeared previously in academic journals, the authors have already been challenged themselves...
...In the book, they respond to their critics with incredible diligence...
...In medicine, for instance, it is possible to randomly give hal f a particular population medication, and the other half a placebo...
...Card and Krueger, exhibiting impressive imagination, searched for situations where life might provide the desired control group...
...Even outright liberal economists like Robert Heilbroner and Lester C. Thurow were somewhat affected by the prevailing perceptions...
...But one dare not ignore Card and Krueger's masterful volume...
...They are herd creatures, uneasy about uttering any new sounds that strike a discordant note in the baa-baa of the blessed banalities...
...In effect, the Pennsylvania restaurants became the placebo group...
...Card and Krueger also unintentionally make a telling point about economists and aca-demia in general: The literati, no less than the illiterati, tend to behave like sheep moving with the flock...
...After the Legislature in New Jersey passed a bill raising the state's minimum wage from $4.25 to S5.05 an hour as of April 1992...
...In fact, their analysis of the material produced "results that are generally consistent with the findings of our own studies...
...Ten months later, the same establishments were resurveyed...
Vol. 78 • February 1995 • No. 2
