This morning, the White House announced that it would nominate Alan Krueger to chair the President's Council of Economic Advisers. So who is this guy, and what does this mean?
Alan Krueger received his Ph.D. in economics from Harvard University and is currently a professor at Princeton University. He is technically a labor economist, and his research centers around topics such as the effects of minimum wage legislation, the impact of schooling on life outcomes, and the economics of terrorism. (He also coauthored a paper on the economics of the music industry, but that's probably only interesting to me.) In addition, Krueger has previously worked in government both as the chief economist at the Labor Department under President Clinton and more recently as the Assistant Secretary of the Treasury under President Obama.
Professor Krueger's work is pretty interesting and sometimes counter to traditional economic theory. For example, while economics 101 tells us that (under certain assumptions) minimum wage legislation causes employers to hire fewer workers and causes workers to want to work more, therefore resulting in a surplus of labor and increased unemployment, Kruger argues based on data that he collected with fellow professor David Card that there is not a clear relationship between increases in the minimum wage and decreased employment. (In fact, Card and Krueger conducted more than one study and even wrote a book about their findings.) More recently, Krueger studied the behavior of the long-term unemployed.
So what does the chair of the White House Council of Economic Advisers do? The Council of Economic Advisers, according to the White House, "is charged with offering the President objective economic advice on the formulation of both domestic and international economic policy. The Council bases its recommendations and analysis on economic research and empirical evidence, using the best data available to support the President in setting our nation's economic policy." Krueger, if confirmed, will oversee this council, which also includes economic advisers Katharine Abraham and Carl Shapiro as well as a number of staff economists and research assistants and a statistical office. Maybe, like Austan Goolsbee before him, he'll also go on the Daily Show to try to teach the world some economics.
Comments
Great – with no downside or unemployment linked to minimum wage – let’s make it $80,000/year and let the good times roll!! Wait…
I’m pretty sure that Krueger addresses that point in his papers- in other words, the effect that he and Card find obviously can’t be generalized into oblivion, since they only find it at existing low minimum-wage levels. (I think the minimum wage in the states in the papers was under $5 an hour at the time.)
@Indy, you are pretty stupid, right? Krueger’s analysis is based on data (empirically gathered evidence) that proves minimum wage increases do not reduce employment. Perhaps you ought to read the linked-to paper above before you start running your uneducated mouth?
You realize it’s impossible to prove anything. You can only disprove something. So what you really wanted to say is that Krueger’s “data” fails to correlate a relationship between minimum wage and unemployment.
Dude – you are an idiot. Just because this guys ’statistical’ study of a particular change in 1992 New Jersey of corporate fast food restaurants (hardly representive of the broader ‘market’) did not definitively correlate – that means exactly squat as ‘proof’ of anything. As EconGirl said – it is ECN 101 that higher minimum wages will produce less employment. A VERY basic law of economics states that the higher the price of something, the lower the quantity demanded. Somewhere, some kid didn’t get a job sweeping up at a mom and pop shop because it just wasn’t worth the $5/hr the state mandates they pay – even if the kid was willing to do it for $4 and the shop keeper was willing to pay $4. This is not only Economics 101 – it is plain common sense and logic. I have 3 degrees including an MS in finance, so I doubt you’re a whole lot more ‘educated’ than me; but even if you are a PHD – I reject the hubris of most macroeconomics that directly conflicts with logic and human nature. So suckit dickweed.
All that Obama knows is ZIRP and central economic planning through populist nonsense. Lets bring in some Austrian School to fix this mess. Krugman and Krueger, a recipe for more wars and more welfare, guns and butter. LBJ tried it and its time to end the madness.
@INDY +100!
Indy, ‘plain common sense’ is what everyone believes until it is empirically demonstrated to be wrong. Don’t worry about taking that holiday cruise to Hawaii; you won’t sail off the edge of the Earth.
The study WAS only on an elite set of fast food joints–all of which had nationwide reputations. It is also logical that if all fast food joints in a region raise their prices that (1) fast food firms will largely pass on the added cost of higher wages to customers, (2) customers are unlikely to travel far for fast food joints, (3) there are few lower-cost options for fast food joints outside of eating at home. Hence, the work of Kreuger and Card is tough to refute even from a theoretical perspective as long as the region is sufficiently large, like a nation or state (even the size of NJ). That said, the outcome for labor with respect to goods and services that are traded across boundaries (and their substitutes) of the regulating entity are unlikely to result in the same outcome. On the other hand, given the ever-decreasing role of the combination of manufacturing and producer services in our economy, the decline in employment due to a jacked-up minimum wage is likely to be miniscule, but still unemployment could rise significantly. This is because people who previously were not seeking work, because the wages offered did not meet their reservation wage (e.g., housewives and students), will now come out of the woodwork to join the labor force.
@Regional Economist–Now THAT was an interesting and thoughtful post from which many of us could take away a lesson or two. Thanks for your contribution to the discussion!
another blackjack economist would be my assumption and should be yours.
Kreuger is the same toad that helped get us into this mess! Working with Barack Hussein Obama on ridiculous programs like Porkulus and Cash for Clunkers. He penned a lefty paper to support the VAT, and doesn’t event recognize that a lower participation rate could have something to do with the baby boomer generation retiring, Gee what a novel concept.
With any more dolts like this in the Barack Hussein Obama administration DC will be the New Soviet Politboro!
There should be some decorum in our response to on-line feeds. calling the author ‘ stupid’ amounts to abuse of access. Let’s regulate ourselves to ensure decency.
Employees have a specific amout of their sales income available to use for employment. If the lowest wage is pre-set then they will take on fewer workers than if they were allowed to pay at a lower rate. It is simple logic. Of course when their production costs are lower per unit of goods made, then one would expect the sales to rise and allow more workers the chance to be employed.
To reduce production costs we need to look ate the three returns on production, ground-rent (on land sites), wages (for labor) and dividends (on capital investment). Only the former can be reduced without damaging the rest of the economy. Land monopolists do nothing to help progress and take from the system what the tax payers investment in infrastructure has already provided.
TAX LAND NOT PEOPLE; TAX TAKINGS NOT MAKINGS!