Michele Bachmann, Minnesota candidate for the 2012 Republican presidential nomination, has some controversial ideas about how to fix our economy, including a reconsideration or removal of the U.S. minimum wage laws.
Many politicians make well-intentioned plans all willy-nilly, frequently over extending their experience and knowledge into areas in which they are unqualified.
Bachmann has a Master of Laws degree and was a foster mother to 23 teenagers, a fact she touts proudly. A great mother? I’m sure, but she’s no economist.
Essentially, her position comes from neoclassical economic theory, which proposes a negative relationship between the cost of minimum wage and employment. And who wouldn’t make the intuitive connection? It makes sense that, as labor costs go up, businesses will hire fewer workers — making an already bleak unemployment rate even worse.
But it isn’t that simple.
In the May 2011 Journal of Economics, Luciano Fanti and Luca Gori, economists with the universities of Pisa and Genova, respectively, found that in contrast to neoclassical ideas, minimum wage can “promote economic growth and welfare despite the occurrence of employment.”
So, not only does recent econometric research show that minimum wages don’t negatively affect unemployment, they may in fact spur economic growth.
Occasionally, supporters of lower minimum wage laws will try to save face by maintaining that, even in the face of empirical evidence which shows minimum wage to be beneficial, the labor laws are compensated for by decreasing benefits — health care, retirement and the like.
The final nail in Bachmann’s well-intentioned but ignorant scheme to fix the economy comes to us from the October 2004 publication of Industrial and Labor Relations Review. In it, researchers examining Current Population Survey data from 1979-2000 found “no discernible effect of the minimum wage on fringe benefit generosity for low-skill economy.” I would tend to agree — unemployment is high and the public still seems generally concerned about the economy. Many investors feel the same after the last batch of economic reports were utterly disappointing, the Federal Reserve lowered its expectations for the economy slightly and concerns over several countries’ ability to pay debt has been called into serious question.
With plans like these, it’s doubtful Bachmann will “fix” the economy any time soon, even if she is elected.
Who knows? Maybe the Mayans saw Bachmann coming, and the world as we know it really will end in 2012.
Devin Graham is a 22-year-old economics senior from Prairieville. Follow him on Twitter @TDR_dgraham.
 
————
Contact Devin Graham at [email protected]