Minimum wage laws during a pandemic
by Tyler Cowen
Marginal Revolution
October 24, 2020 at 3:26 am
From Michael Strain at Bloomberg:
In July 2019, the nonpartisan Congressional Budget Office estimated that a $15 minimum wage would eliminate 1.3 million jobs. The CBO also forecast that such an increase would reduce business income, raise consumer prices, and slow the economy.
The U.S. economy will be very weak throughout 2021. The nation will need more business income, not less; more jobs, not fewer; and faster, not slower, economic growth. A $15 minimum wage would move the economy in the wrong direction across all these fronts.
I fully agree, and in fact would go further. On Twitter I wrote in response to Noah:
Surely in a pandemic these businesspeople are right and the accumulated non-pandemic research literature doesn’t apply so much, right? Pretty much all models imply we should cut the minimum wage, if only temporarily, for small business at the very least.
Put in whatever exotic assumptions you wish, a basic model will spit out a lower optimal minimum wage for 2020-21, again for small business at the very least. This is the advice that leading Democratic economists should be offering to Biden.
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