Policy Orthodoxies, the Minimum Wage, and the Challenge of Social Science
Levin-Waldman, Oren M., Journal of Economic Issues
It has long been an orthodoxy in economics that increases in the minimum wage will result in reductions in employment. Based on a strong theoretical construct with strong policy implications, this orthodoxy bas been buttressed by numerous studies showing that employment does decrease, particularly among the teen labor market. The policy implications are important because those opposed to minimum wage increases have a powerful ally in the orthodoxy. Instead of justifying their opposition on selfish and/or self-interest grounds, they need do no more than appeal to the orthodoxy on supposedly utilitarian grounds. And in the absence of strong evidence to the contrary, the orthodoxy not only achieves greater credibility, but it also serves as a powerful political tool. In recent years, however, new findings have emerged that do call into question the reigning orthodoxy. This, then, poses the following policy dilemma: What happens when new findings deeply rooted in social science methodology challenge a reigning orthodoxy just as deeply rooted in social science theory? And yet, this dilemma would appear to underscore a more critical question: To the extent that models and research do affect policy and the policy process, how is that process affected by new research? In very simplified form, under the orthodoxy, the policy maker when confronted with a question of what to do--particularly on the minimum wage--knew exactly what to do. The answer, after all, was dictated by the orthodoxy. But what does the policy maker do when confronted with new findings that effectively challenge this orthodoxy? This, of course, raises the larger question of just what the relationship is between social science and public policy. My concern in this paper is less with the merits of these recent findings than with the implications of such findings. Rather than presenting new findings, I intend to discuss the significance of new findings for the public policy process.
I argue that social science research that cal[s into question a reigning orthodoxy also opens up a whole array of public policy questions that ultimately have implications for public administration. By challenging an orthodoxy that has apparently been authoritative, that challenge effectively creates ambiguity. But contrary to the literature on decision making that holds ambiguity to be bad because it increases uncertainty (March 1988), I argue that greater ambiguity, particularly with regard to the minimum wage, ought to be regarded as a social good. It is a social good because it furthers the democratic process by forcing policy makers to respond and be accountable. Indeed, it forces them to in fact justify their policy actions in more coherent terms because the model that has for so long been dispositive now lacks the necessary authority to determine the policy outcome. No longer can a policy maker defer to the authority of the model; rather he or she must offer a reasoned rationale and justification for whatever policy outcomes are decided. Consequently, there are other directions for policy equally worthy of consideration. The policy maker, in other words, can no longer hide behind the authority of the model, which no doubt provides nice cover in a process laden with interest groups. For those who cling to the reigning orthodoxy, new data certainly are not going to alter their position because the orthodoxy is as inviolable as religious belief. But with new data, social science research has effectively provided conflicting results. Broadly speaking, the policy process is left open to experimentation and experimentation that may better capture the values of the political community.
The Minimum Wage Orthodoxy
The minimum wage orthodoxy is predicated on a neoclassical synthesis which maintains that in a competitive market, each worker receives the value of his or her marginal revenue product of labor (the amount of increase in the output that results from an increase in, say a unit of labor). …