An Economic Falsehood by Bill Clinton

Following the death of the economist Alan Krueger, Bill Clinton recently wrote the following statement on twitter.com:

Alan Krueger was a brilliant economist for the public interest—from his research proving that raising the minimum wage doesn't increase unemployment, to his recent work showing that America's opioid epidemic has increased it. My thoughts are with his family. We lost him too soon.

— Bill Clinton (@BillClinton) March 18, 2019

Here, Bill Clinton used the death of one he claims to respect to further his own erroneous political viewpoint.

A simple thought process shows us the absurdity of the claim that minimum wage doesn’t increase unemployment. Suppose the government were to increase the minimum wage to $1,000,000 dollars per hour. There is not a firm in existence that could hire at that wage. Almost immediately, nearly the entire nation would be out of work. (Unemployment would not reach 100% because business owners need not pay themselves a minimum wage.)

Based on this thought experiment, it seems that Clinton’s statement is oxymoronic. Can it be that Krueger proved a fact that totally contradicts common sense?

According to Google Scholar, Krueger published one paper on minimum wage (currently cited 2953 times); it is entitled, “Minimum wages and employment: A case study of the fast food industry in New Jersey and Pennsylvania” [2]. Note that in the title itself, Krueger only claims to study a single natural experiment. And in the conclusion, Krueger states, “We find no evidence that the rise in New Jersey’s minimum wage reduced employment at fast-food restaurants in the state.” This is a very different statement than “Krueger proved raising minimum wage doesn’t increase unemployment”.

Whereas Krueger provided results for a single statistical analysis of a single business sector in exactly two states at one point in time, Clinton claims that he proved (way too strong a word to be used here) a far more general statement. In fact, if we dig into Krueger’s paper a little more, we see that much of the population he studied was already paid a wage higher than the new minimum wage. Thus, it seems reasonable that a rise of the minimum wage would not affect those businesses much (if at all).

I am not disputing the value of Krueger’s work; it seems that his work re-invigorated analyses of natural experiments [3,4]. And he was a titled professor at Princeton University, a very distinguished honor. I am disputing Clinton’s summary of his work, which is so erroneous that it must be called deceptive.

It seems that Clinton, who once disputed the meaning of the word is, will always Clinton.

[1] https://scholar.google.com/citations?user=5fY6_jMAAAAJ&hl=en&oi=sra

[2] Krueger, et al., “Minimum wages and employment: A case study of the fast food industry in New Jersey and Pennsylvania”, 1993

[3] Meyer, “Natural and Quasi-Experiments in Economics”

[4] Gladwell, Outliers