Customer Reviews

Myth and Measurement

5 star:		(2)
4 star:		(0)
3 star:		(0)
2 star:		(0)
1 star:		(1)

 

 

"Myth and Measurement: The New Economics of the Minimum Wage" is a comprehensive examination of the theoretical foundation and empirical evidence of minimum wage policy. The book consists of: New cross-sectional research, an examination of past research, further analysis of distributional issues, and a new theory of the minimum wage. The book overwhelming uses regression analysis to statistically support the author's positions.

Conventional neoclassical theory posits an increase in the minimum wage will increase the cost of labor, cause a deadweightloss, and increase unemployment. A few workers will benefit. Everyone else will be worse off. The best policy, using the neoclassical model, is to let the market naturally adjust wages.

Card and Krueger present several new studies that directly refute the notion that minimum wage laws must distort markets. They analyze past studies and find many statistical errors and shocking gaffes. When the authors correct for statistical errors, like autocorrelation and small sample sizes, past papers become statistically insignificant or show a positive impact on employment.

Low wage employers act as monopolistically competitive firms. They have market power over the wages they pay to employees. Moderate increases in the minimum wage lead to increasing real wages AND a marginal increase in employment. The minimum wage should no longer be looked at as a positive issue (i.e. efficiency.)

Minimum wage laws are a blunt redistributive policy. They marginally help low wage workers and the poor. Minimum wage laws are a poor substitute for more progressive welfare programs.

For those of us without formal economics training, Card and Krueger present an easy-to-read alternative view of the minimum wage controvery. They undermine powerfully the long held assumption that minimum wages decrease job opportunities for low wage workers, and elegantly descibe what poor workers have known for years.

I tried but this book didn't convince me. Common sense still prevails that an employer won't pay someone higher than he is worth, no matter what the law says. It simply means that he just won't hire him. As a businessman, I attest to this. I recommend Minimum Wages or any of the stuff written by Milton Friedman on minimum wage. Sorry for the short review.