There is something about an election year that causes otherwise rational people to lose all economic sense. Take, for example, the issue of free trade. The opposition to free trade on both sides of the politial spectrum is baffling. Yet progressives seem particularly confused, seeming to hold two opposing views on trade at the same time.
“Have you ever wondered if you are a progressive?” asks economist Scot Sumner. “I’ve come up with a two-part test. If you believe in both of the following propositions, then you qualify as a American progressive, circa 2016.” His propositions are:
Proposition #1: Free trade with low wage countries like Mexico steals lots of jobs from American workers. There is no way a Mexican-American worker paid $7.25/hour in El Paso can compete with an actual Mexican worker making $3.50/hour in Ciudad Juarez. NAFTA led to a giant sucking sound of jobs flowing south across the Rio Grande.
Proposition #2: Free trade between Texas and California does not cost jobs. A Mexican-American worker making $15 hour in Fresno can easily compete with a Mexican-American worker making $7.25/hour in El Paso, because there are studies “proving” that lower minimum wages in one state do not steal jobs from neighboring states.
In other words, trade steals jobs when it occurs across international boundaries, but not when it occurs across domestic boundaries.
Eventually, though, the progressives will find they can’t deny economic reality. Sumner predicts that “the very same progressives that rely on the Card and Krueger study finding no employment effects from minimum wage differentials in neighboring states, will eventually demand a higher national minimum wage to prevent an ‘unfair competition’ in state minimum wage differentials.”
I fear he’s right. The $15 minimum wage movement is going to harm the poor in states like California, which will “require a federal solution” to restore national “wage equality.” Progressives will push for the minimum wage increases that hurt the poor in a handful of states to be spread across the country — thereby hurting low-skilled workers across the country.
No, it doesn’t make any sense. But that what happens when noble intentions are allowed to trump sound economic reasoning.