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- Paul Constant is a writer at Civic Ventures, a cofounder of the Seattle Review of Books, and a frequent cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
- In this week’s episode of Pitchfork Economics, Hanauer and Goldstein spoke with Binyamin Appelbaum, the lead writer on business and economics for The New York Times, about the newspaper’s change in opinion on the importance of a minimum wage.
- Appelbaum says that although the NYT editorial board once sided with conventional wisdom that a minimum wage could be damaging to employers and jobs, research from the early 1990s on Pennsylvania (which did not raise minimum wage) and New Jersey (which did) showed that none of these presumed disastrous consequences took place.
- Now, the Times uses minimum wage as a “measuring stick” for strong economic growth and action taken by the White House and Congress, says Appelbaum.
- Visit Business Insider’s homepage for more stories.
We tend to think of conventional wisdom as something immovable and fixed in time. But of course that’s not true. At one point in American history, the pillars of society that spoke for conventional wisdom argued that child labor was good for society. The fact is that conventional wisdom is always shifting, but it moves so slowly that to progressives it always feels like something out of the distant past.
The New York Times editorial section often serves as the pulse of conventional wisdom in America. The nation’s paper of record is never too far ahead of the political mainstream, but it never trails too far behind, either. And where the Times goes, many of the most prominent thinkers – in politics, industry, and many other fields – are quick to follow.
At the end of November, the Times published an editorial titled “Let’s Talk About Higher Wages” that called directly on the incoming Biden Administration to consider a new marker for America’s economic health.
“We’d all be better off paying less attention to quarterly updates on the growth of the nation’s gross domestic product and focusing instead on the growth of workers’ paychecks,” wrote the editorial board. They continued, “Set aside, for the moment, the familiar arguments for higher wages: fairness, equality of opportunity, ensuring Americans can provide for their families. The argument here is that higher wages can stoke the sputtering engine of economic growth.”
This editorial marks a huge development in economic conventional wisdom.
Over the past century or so, The New York Times’ editorial board has held virtually every position imaginable on the minimum wage. In 1913, the paper accepted that a minimum wage was a “humanely intended measure” but argued that it could make life too easy for “the shiftless, the lazy, and the shirks.” In 1937, the Times argued that a federal minimum wage, which was on the cusp of adoption in Congress, could become “dangerously high” in certain states. The Times editorial board finally did an about-face in favor of the minimum wage in 1950, when they acknowledged that “None of the dire results predicted have materialized from the 1938 [minimum wage] Act” and supported a minimum wage as “protecting the worker from exploitation and assuring him a living wage.”
The Times continued with a largely pro-minimum-wage stance through the 1950s and 1960s (not coincidentally mirroring the largest period of economic growth for the American middle class in history) but in 1977 the paper argued that "Whatever the merits of minimum wages in the past, they make little economic sense today."
In 1987, the Times published two anti-minimum wage opinion editorials with the telling titles of "Don't raise the minimum wage" and - yikes - "The right minimum wage: $0.00". We recently discussed in this column the insanely high price of the past 40 years of trickle-down, anti-wage economic thinking: Some $50 trillion that used to go to the paychecks of working Americans has been diverted to the wealthiest 0.1%. Had wages continued to grow at the pace that we saw back when the Times supported higher wages in the 50s and 60s, the median American worker would be making around $45,000 more per year.
So it's incredibly exciting that the Times has come out so strongly in favor of raising America's wages. In this week's episode of "Pitchfork Economics," Nick Hanauer and David Goldstein spoke with Binyamin Appelbaum, the lead writer on business and economics for The New York Times, about the editorial board's sharp 180-degree turn on wages. Appelbaum acknowledges that "the transition at the Times really tracks in evolution in the economics profession among liberal thinkers."
Appelbaum says that in the 1980s, economists were enthralled by the idea that "the market figured out how much a person was worth, and that's how much you got paid."
A minimum wage, they believed, would introduce "distortions" into the market's power. By raising wages beyond what the market dictated, the government was killing jobs. The theory, Appelbaum says, "looked really great on a blackboard" in economics classes around the country.
And the trickle-down anti-minimum wage position "was not just something that Republican economists thought," Appelbaum added. "It was conventional among liberal economists, too, to believe that minimum wages didn't succeed in raising the welfare of workers."
That conventional wisdom held fast through the mid-1990s, Appelbaum explains, when "a pair of economists did something truly shocking. They went out and looked for a real-world example of a higher minimum wage and how it had worked out."
When New Jersey raised its minimum wage from $4.25 to $5.05 an hour in 1992, economists David Card and Alan B. Krueger compared restaurant wages and employment on both sides of the state line between New Jersey and Pennsylvania, which did not raise the wage. Appelbaum says that Card and Krueger's report (PDF) found that "in the real world, raising the minimum wage had not in fact caused all of these disastrous consequences."
This data-driven approach, Appelbaum explained, "kicked off a huge uproar in the economics community."
"People accused them of basically being terrible people and terrible economists," he said. And then a funny thing happened: "Over time, this finding has been replicated again, and again, and again."
Eventually, the conventional wisdom turned away from the idea of the harmful minimum wage. "The idea that any increase in the minimum wage, or even a fairly significant increase in the minimum wage, is going to put people out of work has just turned out not to be true in practice," Appelbaum said.
And now, Appelbaum said, "I don't think there are any economists left who think that there's this precise, mechanical connection where if you raise the minimum wage by any amount, you get negative consequences."
It's heartening, too, that the Times editorial doesn't just focus on the minimum wage.
It calls on the Biden Administration to create economic growth for all by broadly raising America's wages. Appelbaum believes that when economists and Democratic politicians talk about improving the economy, they focus too much on Wall Street.
"I absolutely would like to see median income treated in the way that GDP is now treated," Appelbaum said. "I think it's just a much healthier thing for us to focus on as a society."
That shift in thinking begins with a new economic narrative. "I think that Democrats can do a much better job of articulating a story about how the economy works," he said. "The beginning of that story is that a strong economy requires a distribution of income," which means "that many people are in a position to consume and to spend. So a strong economy begins with wage growth - with workers having more money in their pockets."
Appelbaum says the Times isn't going to shy away from this new stance on wages. "This is the measuring stick for the economy that we think is right for the Biden administration and for Congress," he said. "And I think we will continue to hold them to it."