Wednesday, January 22, 2014

If you prefer analysis of the minimum wage that doesn't try to address identification problems to analysis that does, this is the post for you...

Here (HT - Tyler Cowen).

Here's the featured graphic:


So my title is admittedly snarkier than a lot of the other minimum wage posts, but it's because I'm truly dumbfounded as to how this has taken off. I gather the author is a finance guy and that may explain some things. Not that I'm an expert on that, but it seems to me if you're in finance, identifying trends in data and forecasting from them can serve you well as long as nothing major changes structurally. That's the sort of situation where Friedman's brand of positivism that is so embattled actually makes sense.

But you just can't do that to understand the underlying causal mechanisms.

I've got a more detailed comment in Cowen's post to this effect, but if you eyeball his red lines (and as far as I know eyeballing is our only option at this point - I don't see the data anywhere), five of the seven red lines coincide with a recession. Teen employment goes down during a recession?!? Incredible! The two that don't occur in a recession both have increasing red lines, and the one red line that's increasing and during a recession is during a relatively mild recession in the otherwise high-growth 1960s.

So even looking casually at this we have a big, big problem.

Why is this so popular???


  1. For every complex problem there is an answer that is clear, simple, and wrong.

    H. L. Mencken

  2. Because it confirms someone's prejudices? (I haven't even looked closely enough at it to think about which side's prejudices it confirms)

  3. Well, we might conclude that minimum wage hikes cause recessions, looking at the timing!

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