Wednesday, March 4, 2015

Lost your syllogism building kit, Paul?

The Rochester economist Steven Landsburg once wrote that it is amazing how much economics Paul Krugman had to learn to win a Nobel Prize, and equally amazing how much economics he had to forget to be able to write his New York Times pieces. To which we'll add that he's lost a lot of his logician's skills too, if this latest article about Wal-Mart's announcement of wage increases is any evidence;
The retailer’s wage hike seems to reflect the same forces that led to the Great Compression, albeit in a much weaker form. Walmart is under political pressure over wages so low that a substantial number of employees are on food stamps and Medicaid. Meanwhile, workers are gaining clout thanks to an improving labor market, reflected in increasing willingness to quit bad jobs.
What’s interesting, however, is that these pressures don’t seem all that severe, at least so far — yet Walmart is ready to raise wages anyway. And its justification for the move echoes what critics of its low-wage policy have been saying for years: Paying workers better will lead to reduced turnover, better morale and higher productivity.
But those who click on that link to Wal-Mart's justification, will read that;
Walmart isn’t the only company wagering that higher pay will bring rewards. Last year, the Gap decided to increase its lowest wages to $10 an hour to attract better job candidates, which has already played out. IKEA also decided to increase average pay to $10.76 an hour. And earlier this year, insurance company Aetna announced that it would raise pay at the bottom of its wage scale to $16 an hour to reduce turnover and and improve performance.
 And the New York Times piece Paul linked to earlier mentioned that, Walmart has had significant trouble retaining employees in a job market where its competitors like Costco Wholesale offer better wages.

Which rather dilutes the conclusion that Paul comes to;
What this means, in turn, is that engineering a significant pay raise for tens of millions of Americans would almost surely be much easier than conventional wisdom suggests. Raise minimum wages by a substantial amount; make it easier for workers to organize, increasing their bargaining power; direct monetary and fiscal policy toward full employment, as opposed to keeping the economy depressed out of fear that we’ll suddenly turn into Weimar Germany. It’s not a hard list to implement — and if we did these things we could make major strides back toward the kind of society most of us want to live in.
The  invisible hand of the labor market led employers of low-skilled workers  (i.e., competition amongst the employers) to raise their wages, so we should impose a higher minimum wage by law.

Somehow that lacks the ring of validity.

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