Why Do Economists Hate The Economy?

David Sirota, who has a great before-the-fact post-mortem on the Lieberman-Lamont primary today, has also posted yet another definitive account, from leading economists of all political stripes, that a raise of the minimum wage will not kill American jobs, a core talking point on the right for decades.

Prominent economists of all ideological persuasions long believed that raising the U.S. minimum wage would retard job growth, creating unintended hardship for those at the bottom of the ladder.

Today, that consensus is eroding, and a vigorous debate has developed as some argue that boosting the wage would pull millions out of poverty.

A moderate increase in the minimum wage won't raise unemployment among low-skilled workers, according to recent studies, many economists say. They are joined by some business executives who say they can live with that, especially if it's coupled with tax relief.

"My thinking on this has changed dramatically,'' says Alan Blinder, a former Federal Reserve vice chairman who teaches economics at Princeton University in Princeton, New Jersey. "The evidence appears to be against the simple-minded theory that a modest increase in the minimum wage causes substantial job loss.''

It's simply obvious that, in a service-based econoomy, the workers making the minimum wage can't be fired, and their added buying power will boost the local economy, helping those businesses with a higher wage cost.

"Workers' wages need to at least keep pace with inflation,'' says Andrew Puzder, chief executive officer of Carpinteria, California-based CKE Restaurants Inc., which owns the Hardee's and Carl's Jr. fast-food restaurant chains. Puzder says he supports a reasonable increase in the minimum wage along with some form of tax relief for small businesses.

In a Wells Fargo-Gallup poll taken in March, 46 percent of small-business owners said the minimum wage should be increased, and 86 percent said the wage had no effect on them.

"The wage has been left at such a low level for so many years now that inflation has eroded it,'' says Scott Anderson, a senior economist at San Francisco-based Wells Fargo & Co., the fifth-biggest U.S. bank. "It's not as onerous to employers as it once was.''

Of course, this won't stop Republicans from stamping their little feet and demanding that Paris Hilton gets millions of dollars in tax cuts before any waitress can get their extra 2 bucks an hour.

Lots of good economic surveys and statistical models in the article. Have a read.