Former Obama Administration Economist Flunks Econ 101 in Washington Post Op-Ed

In this weekend’s Washington Post, former Obama administration economist and political appointee Betsey Stevenson has an op-ed titled “Five Myths about the Minimum Wage.” Instead of refuting myths about the subject, though, Stevenson packs her piece full of misleading and outright false statements that aren’t fitting of an academic of her stature.

Stevenson’s missteps are numerous, and are responded to in detail below:

  • “[W]orkers who receive more than $30 per month in tips are required to be paid only $2.13 per hour.”

This plainly false statement shouldn’t have made it past the Post’s editors, as even the source they hyperlink to supports the fact instead of refutes it. Per the Labor Department, tipped employees’ hourly earnings must equal “at least the federal minimum wage” of $7.25. With tip income included, Census Bureau data shows that these employees average $13 an hour—and that’s just what they voluntarily report.

  • Although the minimum wage has been raised 22 times since it was established, those increases are needed to restore its inflation-eroded value back to its earlier real level.”

The federal minimum wage was established in 1938, and set at 25 cents an hour. A quick calculation using the Bureau of Labor Statistics’ inflation calculator shows that this value, adjusted for inflation, would be $4.12 today. That means today’s minimum wage of $7.25 is actually 75 percent greater than its historical inflation-adjusted value. It also means Stevenson is wrong.

  • “When economists have analyzed the data, many have found few, if any, negative effects of a minimum wage on employment.”

This is a classic use of the weasel word “many.” What Stevenson knows, but doesn’t bother to inform readers, is that “most”—in fact, the vast majority—of the most credible research on the minimum wage from the last two decades points to a loss of jobs following a minimum wage increase. And of the “many” studies she cites, “most” have been debunked as unreliable.

  • “Those working full-time for minimum wage earn about $15,000 per year.”

As a labor economist, Stevenson surely is aware of the Earned Income Tax Credit (EITC). So it’s surprising that she doesn’t offer it as a qualifier here. A single-parent minimum wage earner—who, incidentally, represents less than 10% of those covered by President Obama’s proposal—receives $5,200 in additional income each year due to the EITC. That puts their full-time minimum wage above the $9 an hour the President is calling for.

  • “The vast majority of the public supports raising the minimum wage from $7.25 to $9 per hour”

Here’s what Stevenson left out: Support for a higher minimum wage plummets when the public is informed of the consequences of the policy. For instance, when informed that a higher minimum wage could make it more difficult for less-skilled individuals to find work, support falls from the mid-70 percent range down to the low 40s. So much for the “vast majority.”

  • “[R]aising the minimum wage [will] reduce poverty”

 Even famous minimum wage proponents like David Card and Alan Krueger have acknowledged that raising the minimum wage is an imperfect way to reduce poverty. (President Obama’s former top economist also acknowledged this in a recent New York Times op-ed). One reason: So few people in poverty have a job. It’s not just a lesson for economists: The 28 states that raised their minimum wage between 2003 and 2007 experienced no reduction in poverty, either.

  • “[A]t most, 20 percent [of minimum wage earners] are teenagers”

Here, Stevenson is directly contradicted by data from the government Department she used to be the chief economist for. Labor Department data show that 24.1 percent of minimum wage earners are between the ages of 16 and 19, and 50.6 percent are between the ages of 16 and 24.  That’s why the Bureau of Labor Statistics says that minimum wage earners “tend to be young.”

  • The vast majority have household earnings below the median, which was $50,054 in 2011.”

If this statement seems confusing for readers of Stevenson’s op-ed, it should be: After telling readers that minimum wage earners bring in just $15,000 per year, she now uses a much higher number of $50,054 to measure their income. That’s because the majority of minimum wage earners either live with family or relatives, or have a spouse that also works. And their average family income is about $50,000 per year, according to Census Bureau data.

These are the facts about the minimum wage. They’re the facts that Stevenson conveniently ignores in favor of ideology. As for the employees who stand to lose their jobs if Stevenson’s logic prevails in Congress, ideology won’t pay the bills–and neither will misinformation.