Do Politicians Understand Economics?

Apparently not those who want to increase the minimum wage

Minimum wage laws are regarded by economists of all stripes as among the least efficient tools for boosting the welfare of those at the lower end of the earnings spectrum, inevitably harming many of those they are intended to help.

This leads some to conclude that politicians who champion increasing the minimum wage must be demagogues working for partisan advantage. In reality, most politicians simply don't understand economics. In fact, there is research to support this more generous view.

In 2011, scholars J. Brian O'Roark and William C. Wood published a study on the link between minimum wage votes by members of Congress and their formal educations. The study, "Determinants of Congressional Minimum Wage Support: The Role of Economic Education," concluded that "members who majored in economics as undergraduates were less likely to vote for the minimum wage increase than their colleagues. No other major had a consistent influence."

O'Roark and Wood call for "deference" to economists on this topic, writing that "the minimum wage debate is a particularly political one, but just as the opinions of doctors on medical issues are deserving of special consideration, we believe that the opinions of the most economically literate on the minimum wage should be carefully considered by policymakers and the public."

Another lens through which to examine this problem looks at what politicians do rather than what they say. Mackinac Center for Public Policy Research Associate Jarrett Skorup recently documented the apparent hypocrisy of some politicians who publicly call for increased minimum wages while also employing office interns at a wage of $0. 

Politicians are not the only hypocritical actors in this play. It is reminiscent of a California lawsuit filed several years ago by ACORN, a political agitprop group with strong ties to the Service Employees International Union. ACORN promoted not just minimum wage hikes, but even more burdensome "living wage" mandates.

The lawsuit sought to exempt ACORN, however, from paying its own members the wages it wanted mandated on everyone else. The group defended itself by stating the obvious case that other businesses could make as well. As ACORN lawyers wrote in their brief, "[T]he more that ACORN must pay each individual outreach worker … the fewer outreach workers it will be able to hire."

That is exactly the type of insight we would expect from someone with knowledge of the economic science. Like the congressmen studied by O'Roark and Wood, perhaps these champions of higher wage mandates for "thee but not me" had also taken college economics courses.

Minimum wage laws have been shown to eliminate job opportunities and cost many of the least skilled workers their jobs. Politicians who support increasing wage mandates may be ignorant of the economics at work here, or may simply be willing to sacrifice low-wage workers to gain political advantage. The public should correct them by rejecting these policies outright.