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Living Wage Fight Heats Up As Business And Labor Interests Release Dueling Research
City Hall News
Chris Bragg

December 14, 2010
View the Original Article

The business-vs-labor war over the living wage bill is getting uglier with the release of a report questioning the credentials of a group of 650 economists whose support for raising the city’s wage standards is being considered by the City Council.

In late October, labor interests labeled as biased two of the researchers being paid $1 million by the city’s Economic Development Corporation to study the effects of the living wage bill.

In particular, the groups argued that one of the economists on the EDC-backed study, David Neumark of the University of California at Irvine, has a long pattern of releasing reports with bias against raising wage standards for the Washington, D.C.-based Employment Policies Institute, one of the myriad front groups set up by D.C. lobbyist Richard Berman.

Now, the business–backed Employment Policies Institute is hitting back, questioning the academic credentials of economists who disagree with the conclusions of Neumark’s past work. An advanced copy of the report was shared with City Hall, including nearly 1,200 pages of sourcing documents.

The report concerns a 2006 letter that was signed by 650 economists—including five Nobel laureates and six past presidents of the American Economics Association—stating that a modest increase in the minimum wage would not have “the adverse effects that critics have claimed.” The letter was cited by the labor-backed Fiscal Policy Institute and the National Employment Law Project, which put out the report on Neumark, as evidence that Neumark’s past work has been inaccurate.

But the pro-business Employment Policies Institute (EPI), which has funded Neumark’s work, argues that many of the people who signed the letter are unqualified to make this critique, noting that approximately 60 percent of the signatories were not PhD-certified labor economists, but instead specialized in fields ranging from Marxism and the Middle East to the economics of feminism. The report argues that these economists lack any real understanding into the living wage issue.

“An economist based at the Mayo Clinic that researches health care (as one of the signatories did) has little or no occasion to study—or remain current on the research for—the impact of a wage mandate on the labor markets,” the report states. “He or she might favor an increase in the minimum wage for ideological reasons, but the decision isn’t being made due to any particular expertise on the topic.”

The report also found 39 of the letter’s signatories had PhDs unrelated to economics or had no doctorates at all. One of the signatories, Billie Katnor, was an administrative support coordinator at the Chico School of Social Work at a California State University.

An earlier survey of labor economists done by the University of New Hampshire, which found 73 percent agreed that a mandated wage increase would decrease enter-level employment, is a more accurate representation of the academic consensus on living wage, the EPI report argues.

But James Parrot, the economist at the Fiscal Policy Institute who helped write the study critiquing Neumark, said the EPI’s effort was simply one of distraction.

“This is a pretty trite exercise,” Parrot wrote in an e-mail. “Why look any further than the list of 15 prominent economists? Six Nobel prize-winners (Peter Diamond won this year). Kenneth Arrow, Robert Solow, Joseph Stiglitz, William Baumol, etc. These are giants in the field.”

But Michael Saltsman, a research fellow at the EPI who compiled the group’s report, accused Parrot of trying to obscure the real issue, noting that Nobel Prize winners such as James Buchanan, Milton Friedman, George Stigler and James Heckman are opposed to minimum wage increases.

“That's not the point of their list,” Saltsman said. “They know their Nobel prize winners are easily trumped by other Nobel prize winners. The point was to put a big, impressive-sounding number of ‘experts’ out there, because the vast majority of economic research doesn't support their view.”

The living wage bill is gearing up to be the next major clash between progressives and the Bloomberg administration since the death of the paid sick leave bill.