Paul Krugman used to be an accomplished economist who spoke his mind openly and honestly. Unfortunately, he sticks mostly to Democratic Party talking points these days. He occasionally strays from the reservation, though, like back in August when he acknowledged that the high minimum wage in France may be depressing youth employment there:
Let’s start with jobs. France has low labor force participation by the relatively old, thanks to generous retirement programs, and by the young, partly because generous aid means that few need to work while in school, partly perhaps because a high minimum wage and other factors discourage youth employment.
Krugman’s comment about France’s minimum wage law didn’t receive much attention at the time. But that has changed during the past few days after the blogger bluecravat called attention to Krugman’s post.
Of course, Krugman’s statement about France is at odds with his position vis-a-vis the effects of the minimum wage in the U.S. Here’s Krugman in December 2013, calling for a higher minimum wage:
Still, even if international competition isn’t an issue, can we really help workers simply by legislating a higher wage? Doesn’t that violate the law of supply and demand? Won’t the market gods smite us with their invisible hand? The answer is that we have a lot of evidence on what happens when you raise the minimum wage. And the evidence is overwhelmingly positive: hiking the minimum wage has little or no adverse effect on employment, while significantly increasing workers’ earnings.
More discussion of Krugman’s flip-flop at CafeHayak.com:
Of course, it could be that France’s minimum wage is too high compared to the one that Krugman advocates for the U.S. Krugman supports Pres. Obama’s call for a $10.10 hourly minimum wage. So how does the employment-discouraging minimum wage in France compare to the allegedly prosperity-enhancing, non-employment-discouraging minimum wage that Krugman, Obama, et al., support for the U.S.? According to Bluecravat, France’s current minimum wage, when adjusted for purchasing-power parity, is $9.30 per hour, a rate that is lower than the minimum-wage rate advocated by Krugman, Obama, et al.
One can quibble about how best to translate France’s minimum-wage into some U.S. dollar equivalent. Perhaps France’s minimum wage, on some ‘better’ translation, is in fact higher than $10.10 per hour. The larger point is that if a policy of forced wage setting gets it wrong (as Krugman seems to believe might be true of France) the result is unemployment of people who can least afford to be unemployed.
Back when he was in the academic world, Krugman readily acknowledged that minimum wage laws depress employment. Via Benjamin Powell of the Independent Institute:
[B]efore we embrace the policy prescription of Krugman the pundit, let’s ask the opinion of Krugman the economist. In his 1998 review of a book on living wages he wrote: “So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment.”
Krugman the economist should know. He co-authors an Econ 101 textbook. The 2008 edition clearly states, “when the minimum wage is above the equilibrium wage rate, some people who are willing to work–that is, sell labor–cannot find buyers–that is, employers–willing to give them jobs.”
In short, Krugman has been all over the map. It’s not the first time. It won’t be the last.
Correction: Benjamin Powell is with the Independent Institute, not the Independence Institute. We corrected the error, above, and apologize to Mr. Powell and our readers for the mistake.