It’s Opposite Day!
Answer this question as quickly as you can — don’t think about it: If Fester raises the price of his lemonade, will you buy more of it, or less? Yeah, that’s what I thought.
Incredibly, Professor Alan Krueger thinks just the opposite, at least when it comes to hiring labor. Professor who, you ask? You know, President Øbama’s proposed chairman of the Council of Economic Advisors — the administration’s chief economist. Yeah, that guy! But here’s the problem, see. As Spengler points out, Krueger hasn’t the foggiest idea how jobs are actually created:
Back in 1994, after New Jersey raised its minimum wage to $5.05 an hour from $4.25, Krueger (with economist David Card) published a paper claiming that the higher cost of labor led to more rather than less hiring at New Jersey fast food restaurants. Demand curves, as Perry observes, slope downward on this planet (if something costs more, people buy less of it, including labor). But on Planet Krueger, demand curves slope upward, by magic.
Card and Krueger proudly announced the repeal of the most fundamental law of economics: “Our empirical findings challenge the prediction that a rise in the minimum [wage] reduces employment. Relative to stores in Pennsylvania, fast food restaurants increased employment by 13 percent.” Except they didn’t. Their data, gathered by telephone survey, turned out to be “so bad that no credible conclusions can be drawn,” another study concluded. Other economists used actual payroll data instead of a phone survey and found just the opposite: the state-mandated pay hike reduced employment.
Read the whole article here.
I mean, it’s common sense, right? Not to the good Professor K. In his world, every day is opposite day: up is down, hot is cold, and higher labor costs mean more jobs. Yet this appears to be lost on President Øbama. According to him, Krueger will bring “a wealth of knowledge to the challenge of creating jobs and promoting economic growth.”
It’s almost like he doesn’t know what he’s doing.