David Brooks, the CBO, and Conventional Economics Are Wrong

WA restaurant industry employment growth 1990s

If raising the minimum wage always costs jobs, you wouldn’t know it from history.

David Brooks’ latest column in the New York Times is annoying for the way it lazily accuses Hillary Clinton of advocating for something she’s not. She does not want government to tell companies how to “structure and manage themselves.” She wants government to do a better job of setting the rules by which companies fairly compete in the market.

But that’s not my biggest beef with Brooks’ column. No, the lazy assertion that really ticks me off is this:

Clinton displayed no awareness that most federal requirements involve difficult trade-offs. According to the Congressional Budget Office, raising the minimum wage to even $10.10 an hour would increase pay for millions of workers, but would cost roughly 500,000 jobs.

First of all, that’s not what the CBO said. It said raising the minimum wage “could” reduce employment, not “would.” Big difference. In fact, the CBO said the job losses could range from a high of one million to a low of near zero.

Second, the CBO’s models are clearly wrong.

How can I assert this with such confidence? Because despite the job losses that are always predicted by these neo-classical models, there is actually no empirical evidence to suggest that these job losses ever occur! Indeed, according to the U.S. Department of Labor, “A review of 64 studies on minimum wage increases found no discernable effect on employment.” And we’ve been raising the minimum wage for 80 years!

Call me crazy, but when the economic model says one thing and reality says something entirely different, unlike Brooks, I’m going with reality.

The real battle in 2016 isn’t between right and left, Republicans and Democrats, or Bush versus Clinton. The real battle is between economic paradigms—the old paradigm that gave us models that wrongly predict that higher wages leads to fewer jobs, and that failed to predict the economic calamity of the Great Recession, versus a new, evidence-based paradigm that more accurately describes the real economy.

The conventional economic models are simply wrong. And we shouldn’t be shy about saying so.

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Goldy
David "Goldy" Goldstein has written about politics for The Stranger, The Nation and the Huffington Post. He hosted “The David Goldstein Show” on Seattle’s news/talk 710-KIRO from 2006 through 2008, and has been pissing off readers at his blog HorsesAss.org for more than a decade.