Bernie’s Labor Pains: Three Takeaways

Published July 25, 2019

Bernie Sanders is having trouble with his unionized–and apparently underpaid–labor force. Newsweek reports that the Sanders campaign “will limit the amount of time his organizers can work to guarantee that no one is making less than $15 per hour.” Fox News revels in the schadenfreude. I see three takeaways.

First, demand curves really do slope downward and supply curves really do slope upward, even in the labor market. For all the alleged chatter about the obsolescence of the “introductory economics” version of the labor market, this is pretty much exactly what that story predicts. Firms don’t wish to hire as much labor as workers wish to supply at what is apparently an above-market wage. Hence, we have non-price rationing of precious opportunities to work. Maybe my friend and AIER colleague Donald J. Boudreaux is right after all: introductory economics is “incredibly important.”

Second, a $15 per hour national minimum wage will not be a free lunch, even for the people we claim we want to help. If a commitment like this is going to work flawlessly anywhere, presumably, it should be in a presidential campaign staffed by people who share a vision of how the world does work and how the world should work. A new paper in the Quarterly Journal of Economics argues that higher minimum wages won’t do much to the low-wage labor market ($0 version here), but the team analyzing Seattle’s minimum wage experiment finds that a lot of the adjustments are more subtle. As he describes it on EconTalk, Jacob Vigdor points out how restaurants are moving away from true table service and toward “order at the counter, bus your own table” models. As I pointed out in an article last year, it’s no coincidence that I’m being told to clean my own table in high minimum wage states. Furthermore, there are a lot of hidden costs to higher minimum wages, like less-generous fringe benefits and stricter scheduling.

A higher minimum wage will, of course, mean higher wages and higher incomes for a lot of people, but it will also create a lot of losers: according to the Congressional Budget Office’s median estimate, 17 million workers would earn more under a $15 per hour minimum wage, “(b)ut 1.3 million other workers would become jobless.”

Third, this whole episode should make you more skeptical of socialism, even watered-down “democratic socialism.” I’m not a socialist for what I think are pretty good reasons. This episode reinforces my convictions. Sanders and his staff are struggling to manage an ideologically homogeneous group of people with similar worldviews, similar goals, similar mental models of how the world works and should work, and a very well-defined end goal of “elect Bernie Sanders to the presidency.” Suffice it to say this does not make me confident that they can be trusted to organize something as complex and mind-bogglingly diverse as the US economy where people pursue a multitude of goals and have a multitude of talents, dispositions, and ideas about how to define a life well-lived. Bryan Caplan makes a characteristically insightful point regarding socialism in a 2018 post on “Socialists Without a Plan“: “The socialists of today aren’t experienced logisticians who fail to see the disanalogies between running an organization and running a whole society. They’re dreamers who want to lead before they learn to follow.”

In this case, Bernie and his staffers should show us that they can run their own lives. Then maybe we’ll talk about putting them in charge of the lives of others.

[Originally Published at Forbes]