Correspondence with Prof. David Neumark of the University of California Irvine on the Minimum Wage Law

On May 12, 2017 21:05, “Walter Block” wrote:
May 12, 2017
Prof. David Neumark
Economics Department
University of California
Irvine, CA
[email protected]

Dear Prof. Neumark:

I have long been an adamant and bitter opponent of the minimum wage law, and a long time admirer of your work on this pernicious legislation, see below for some few of your contributions to the literature debunking its false claims. So, when I heard you were lecturing on the subject of poverty at next door Tulane University last week, I begot myself over there and heard your lecture. Please allow me to offer you some constructive criticisms of your presentation. You listed three public policies, the minimum wage law, the earned income tax credit and the negative income tax, and asked if any of them had helped reduce poverty. Why not add in, in future, a fourth “policy”? That is, laissez faire capitalism. It is my contention, is it not yours?, that this is the last best hope for radically reducing poverty. I expect that Adam Smith’s Wealth of Nations, making roughly this claim, would not exactly be your cup of tea, given your empirical orientation and its lack thereof, but here is one empirical study which makes this very claim:

Gwartney, James, Robert W. Lawson and Walter E. Block. 1996. Economic Freedom of the World, 1975-1995; Vancouver, B.C. Canada: the Fraser Institute (308 pages); http://www.amazon.ca/Economic-freedom-world-1975-1995-Gwartney/dp/0889751579/ref=sr_1_1?s=books&ie=UTF8&qid=1336605884&sr=1-1; http://www.fraserinstitute.ca/pdf/catalogue.pdf; isbn: 0-88975-157-9;
http://www.fraserinstitute.org/researchandpublications/publications/7094.aspx; http://www.fraserinstitute.org/research/economic-freedom-of-the-world-1975-1995

You said something else that rather perturbed me. You said that you wished that the minimum wage actually worked, and raised compensation for unskilled workers. I now hereby make you the following “offer”: “Come back to New Orleans for another visit, and wash my car. I’ll pay you $3 per hour.” You realize of course that were I serious about this “offer” I could go to jail for merely making it, let alone carrying through on it, and so could you, if you accepted it. Does not that bother you, that one or both of us could be imprisoned for engaging in, in the words of Robert Nozick, “a capitalist act between consenting adults”? It certainly troubles me. So, I ask you to withdraw your hope that so vicious a piece of legislation could have any beneficial effects. Wait, I take that back. The minimum wage law certainly benefits all those who relish astronomical unemployment rates for the unskilled.

Neumark, David and Wascher, William. 1992. “Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws.” Industrial and Labor Relations Review 46 (October), pp. 55-81.

Neumark, David and William Wascher. 1995. “Minimum wage effects on employment and school enrollment.” Journal of Business Economics and Statistics. Vol. 13, No. 2, pp. 199-207.

Neumark, David and Wascher, William. 2007. Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research David Neumark and William Wascher NBER Working Paper No. 12663 http://www.nber.org/papers/w12663.pdf

Neumark, David. 2014. “Employment effects of minimum wages When minimum wages are introduced or raised, are there fewer jobs? Global evidence says yes.” IZA World of Labor: 6, pp. 1-10; https://wol.iza.org/uploads/articles/6/pdfs/employment-effects-of-minimum-wages.pdf

Neumark, David. 2015. “The Effects of Minimum Wages on Employment.” FRBSF Economic Letter. http://www.frbsf.org/economic-research/publications/economic-letter/2015/december/effects-of-minimum-wage-on-employment/
I would be keenly interested in any response you choose to make to me about these suggestions of mine.

Best regards,

Walter

From: David Neumark [mailto:[email protected]]
Sent: Friday, May 12, 2017 2:20 PM
To: Walter Block
Subject: Re: reaction to Tulane lecture on min wage
Thanks Walter. I appreciate the comments. I’d say the differences are philosophical, not scientific. There is simply no reason to believe that free markets bring about the desired distribution of income (not that we all agree on what that is). So I think asking the question of what kinds of policies lead to what society deems as a more desirable distribution while of course minimizing distortions that reduce the size of the “pie” is a legitimate inquiry, and not at all at odds with the perspective that markets are efficient allocative mechanisms.

And by the way, you could hire me for $3 to wash your car (not that I’d accept!). From the FLSA:
To whom does the minimum wage apply?
The minimum wage law (the FLSA) applies to employees of enterprises that have annual gross volume of sales or business done of at least $500,000. It also applies to employees of smaller firms if the employees are engaged in interstate commerce or in the production of goods for commerce, such as employees who work in transportation or communications or who regularly use the mails or telephones for interstate communications. Other persons, such as guards, janitors, and maintenance employees who perform duties which are closely related and directly essential to such interstate activities are also covered by the FLSA. It also applies to employees of federal, state or local government agencies, hospitals and schools, and it generally applies to domestic workers.

On May 12, 2017 21:52, “Walter Block” wrote:

Dear David:

You spurn my offer? I’m shocked; I’m cast down. Ok, ok, I’ll raise it to $4. I know you’re holding out for higher pay. I just hope you don’t unionize. I know you’ll be a good worker for me based on the alacrity with which you respond to my offer.

I still think I’m in danger of criminal sanctions. The way the Supreme Court interprets interstate commerce… In any case, I do indeed “work in … communications (I give speeches all over the place) … (and I) regularly use the mails or telephones for interstate communications.” I’m toast. I withdraw my offer.

In your lecture at Tulane, you specifically mentioned “curing poverty,” or some such. To the best of recollection, you never once mentioned any “desired distribution of income.” So, I still think you’re logically obliged to mention free enterprise as an option along with those three government schemes.

May I please have your permission to share this communication with others?

Best regards, Walter

Sure. Nothing secret here.

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