Is trickle-down economics science or scam?

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http://www.pbs.org/newshour/making-sense/economic-theory-science-scam/

Noah Smith, a smart financial writer with a very good blog, recently wrote an article on the $15 minimum wage for Bloomberg. The piece celebrated the fact that, finally, we’ll have some data on how the $15 minimum wage would affect jobs. Smith said he considered it a test because in theory, “a higher minimum wage should cause increased unemployment.”

The more I thought about it, the less sense this premise made. Smith’s article underscored two big things for me: first, the degree to which people see the evidence they want to see; second, how silly the idea of “economic theory” can be. Smith claims that we don’t know what the result of a $15 minimum wage will be. Will it kill jobs or not? But the truth is there’s abundant and overwhelming evidence that this theory is wrong and that higher minimum wages don’t hurt employment. The evidence is there; you just have to choose to see it.

Let’s just look in my own back yard for an example of that evidence. Washington state has had the highest minimum wage in the nation for several years—at $9.47, it’s a full 30 percent more than the federal minimum of $7.25. Washington’s unemployment rate of 5.5 percent isn’t the best in the country, but it’s not the worst, either. In fact, it perfectly matches the national rate. Seattle was until recently the fastest growing big city in the country. The first part of the $15 minimum wage rollout was successfully implemented in April, and unemployment in our county promptly plummeted to 3.3 percent.

An even more dramatic example of the goofiness of this so-called “economic theory” is the impact of the wages of tipped workers on the restaurant industry. In Washington, these workers earn at least $9.47 plus tips, a whopping 440 percent more than the federal tipped minimum of $2.13 plus tips. Despite the predictions of “economic theory,” and despite the warnings from the National Restaurant Association that eliminating the tip credit would cause food Armageddon, Seattle has one of the most robust restaurant scenes in the United States. Why? Because when restaurants pay restaurant workers enough so that even they can afford to eat in restaurants, it’s really good for the restaurant business. If economic “theory” were correct and if paying workers more resulted in higher unemployment, we would have no restaurants in Seattle.

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This was making the rounds on my social networks, but I didn't see it here yet. Nick Hanauer is a billionaire advocate for higher pay for wage workers, he was in Robert Reich's film Inequality for All.

[arcane1]

1. Thanks for posting!!

This popped up online earlier today and I meant to post it, but forgot

[Starry Messenger]

3. It's a handy link to have for the reactionary friend or relative on our lists.

My brother, who is generally socially liberalish, had a full-body freak-out on me last year about raising the minimum wage, and it causing unemployment. I wish I'd had something like this handy.

[arcane1]

6. I had a conversation much like that with my parents last year

We cut it short because none of us had enough info

[Starry Messenger]

7. Bookmark it!

Too bad we can't make this article into a holiday card somehow.

[Warpy]

2. After 35 years of it, is anyone really asking that question?

It was the biggest scam ever perpetrated on the people of this country.

We told them when the rich got the money, it wouldn't go anywhere else.

We were right and they were wrong and everybody's afraid to get rid of it.

[Starry Messenger]

5. They exist!

I couldn't believe it either, but last year I found a conservative trade-union website that was full-bore for trickle-down--there hain't be no jobs unless we make the boss rich! I swear it is a form of self-loathing.

[RoccoR5955]

4. Businesses will always say that raising the minimum wage is a bad idea.

And will kill jobs. That's because it eats into their greedy profits. It has been a long standing fact that raising the minimum wage actually creates jobs, because people have more money to spend. When we put more money into the economy we create more of a demand for goods, especially among those on the lower end of the economic spectrum. When there is more of a demand for goods, the economy grows. Therefore, plainly, raising the economy raises the local economy.

This is not economic theory that "they" are talking about, it is economic bovine fecal matter!

[Warpy]

8. Ever notice that they shut up within 6 months of an increase

and that none of them ever calls for a rollback (well, unless he's a libertarian and running for office, and then it's abolition, not t rollback)?

The truth is that all wage increases multiply as they go through the economy, something completely counterintuitive to the businessman who only sees dollars getting away from him in the beginning. Once the demand side gets a little stimulus, all business starts to improve, from the shoe store to the widget factory, beyond the money paid to the employees in a wage increase.

That's why places that raise the minimum wage have expanding businesses and low unemployment. Rising wages mean an improving economy.

[Starry Messenger]

9. I know that when I have money, I spend it.

The last few decades seem to have reversed the received wisdom on this fact.

[appalachiablue]

12. Businesses said the same thing about calls for ending child labor and personal abuse

of female employees- that they would just close up, go out of business and die. Their outrage was fake and only aimed to protect their profits and themselves. Obviously the owners survived progressive legislation against abuse of workers.


American humorist Will Rogers called it 'Trickle Up' during the Depression and Pres. Hoover's last years in office, 1932, just before FDR was elected. Will knew what the deal was, that putting more money in the hands of the wealthy would do nothing about the terrible economy. Giving it to the regular people for a while, before they had to hand most of it over to pay living expenses would have been better he said. So somehow after that in the early 1980s the stupid, tricky con was pulled out and used successfully during Reagan. I only learned this a few years ago and was very surprised by it.

[thelordofhell]

10. It's the science of scam

Big business is playing the USA like a fiddle while it's wage policies are burning it to the ground

[Starry Messenger]

11. Well put.