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Cooks, cashiers and other minimum wage earners join anti-Trump activists on a march for an increase in the minimum wage during a “March on McDonald’s” in Chicago, Illinois, U.S., May 23, 2017. REUTERS/Frank Polich - RTX37B1T
Future Development

Future Development Reads: Economists captured, how to rebut anti-immigration positions, minimum-wage wars

As if economists aren’t pilloried enough in the media, business economist Luigi Zingales discusses the possibility that economists are captured, in the same way that regulators are captured. Since data is proprietary, economists may cater to industry or government entities that give them access to data.  They may also seek popularity among government or business officials because that lends credibility to their work. To mitigate the risks, he proposes a data policy to regulate the use of data; and the naming and shaming of academics who take unreasonable positions in the media or expert testimony. Relatedly, Pakistani nuclear physicist Pervez Hoodbhoy laments Pakistan’s “professor mafia” where teaching standards have declined while research quality has not improved—because the government started rewarding universities for the number of publications (without controlling for quality).  

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One of the things economists tend to do is rebut arguments against immigration by pointing out the economic benefits, as well as the evidence that immigrants don’t drain national treasuries, commit more crimes than natives, etc. Helen Dempster and Karen Hargrave from the Overseas Development Institute point out that such “myth-busting” may be counterproductive. Rather, it is important to understand the emotions behind these anti-immigrant positions and tailor the counter-arguments accordingly.

Another issue on which economists used to be united was the minimum wage: if it were binding, an increase would hurt employment. Since the seminal work of economists David Card and Alan Krueger, this proposition has been questioned and, in some cases, even reversed. Seattle’s recent embrace of higher minimum wages has generated what Financial Times economics commentator Martin Sandbu calls “the minimum wage wars.” One study showed significant decline in wages of low-wage workers. However, the study’s methodology is being questioned on several fronts to the point where the emerging consensus seems to be that the effects were marginal. Sandbu concludes, “If this is what the nasty effects of aggressive minimum wage rises look like, they are rather an encouragement to do more and more widely.”

This blog was first launched in September 2013 by the World Bank in an effort to hold governments more accountable to poor people and offer solutions to the most prominent development challenges. Continuing this goal, Future Development was re-launched in January 2015 at brookings.edu.

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