Ivory Tower Economics

, Malcolm A. Kline, Leave a comment

Academic economists find that they can make whatever prognostications they like since they don’t have to live with the results. “Official motto of the White House economic team: Those who can, do. Those who can’t, fantasize in the classroom, fail in Washington and then return to the Ivy Tower to train the next generation of egghead economic saboteurs,” columnist Michelle Malkin notes. “Life is good for left-wing academics.”

“Everyone else pays dearly.” For the past two decades, economists in the Ivory Tower have been trying to overturn decades of research that shows that raising the minimum wage leads to an increase in teenage unemployment.

At the Center for American Progress (CAP) on June 7, 2011, a couple of economists from Berkeley showcased their efforts. Previous studies, they claim, left out significant variables.

Yet and still, in their critiques, they may have missed a few variables of their own. They did acknowledge one big one.

“In the last several years, the minimum wage has gone up and teen unemployment has gone up quite a bit but is that causal?” Michael Reich, Professor of Economics and Director of the Institute for Research on Labor and Employment, University of California, Berkeley, said at CAP. “We are in a recession.”

“The negative effects we were getting three years out from the minimum wage increase were the same as those two years before,” Sylvia Allegretto, Deputy Chair of the Center on Wage and Employment Dynamics, University of California, Berkeley said of previous studies that found a link between the wage hikes and unemployment. “They were erroneously and spuriously attained,” she argued.

She went on to assert that “demographic shifts to the south are not from the minimum wage.” Perhaps, but they are people voting with their feet out of localities where they have to join a union to work in certain businesses into so-called right-to-work states where they don’t.

Moreover, one variable neither mentions is the manner in which unemployment is undercounted, according to those who have helped tabulate the official numbers. The undercounting of the total number of unemployed could have a residual effect on the total number of those out of work, pushing it higher.

In an upcoming Accuracy in Media special report, Richard Thornburgh notes that “reports surfaced in February 2011 that unemployment ‘dropped’ from 9.4 percent to 9.0 percent, and 196,000 jobs were added to the American economy for hardworking individuals.” Economist Paul Craig Roberts asks, “How could the [unemployment] rate decrease when January only saw a reported increase in payroll employment of 36,000 jobs when some 150,000 new jobs are needed to be created each month just to stay even with population growth?”

Malcolm A. Kline is the Executive Director of Accuracy in Academia.

If you would like to comment on this article, e-mail mal.kline@academia.org