What’s Wrong with Jamus Lim’s Economics (Part 1)
Pointing out the economic errors of economist and politician Jamus Lim
Jamus Lim of the Worker’s Party made waves during the recent General Elections. He is also known as a champion of the minimum wage in Singapore, having both advocated in on national television and political speeches. He’s apparently still big on this, as seen in the recent debates in the Singapore parliament.
My co-author and I have pointed out before why the minimum wage is a bad idea for Singapore, and as economic policy more generally. I find it necessary to rehash some of these points in a series of articles.
Bad understanding of the economic literature
In some of his social media posts, Jamus cites the famous Card & Krueger minimum wage study which finds that a wage hike in 1992 New Jersey led to a slight increase in employment.
For context to readers from a non-economic background, Card & Krueger is a landmark 1993 paper in the minimum wage literature and no discussion on the minimum wage policy is complete without reference to it.
Yet, popular as it may be, Card & Krueger has been heavily discredited by other economists and dozens of studies over the years.
If the Workers’ Party’s latest economist had bothered to consult the work other economists before him has done — the usual procedure in honest work — he would know that the study he confidently cites to the voting public is abound with measurement errors and irregularities.
For instance, dissect the Card & Krueger study and you will find shocking anomalies in its data. For example, one data point (see below picture) actually shows that there were zero full-time workers before the minimum wage. After the minimum wage was implemented, it increased to 35 full-time workers and all without any change in part-time workers.
Employers were ordered to pay its workers more, and employment shot up? What is the likelihood of that?
Moreover, instead of measuring official employment data that would have been typically released by government bureaus, Card and Krueger employed an unreliable method of surveying fast-food store managers by telephone, asking whether the managers were planning to or already hired or fired their workers.
The most prominent critique of Card & Krueger belongs to economists David Neumark and William Wascher, who replicated the study years later with the added advantage of using officially released payroll data. This study found that unemployment rose in the fast-food industry after the New Jersey minimum wage — directly contradicting Card and Krueger’s conclusions.
Their book, published by the MIT Press, comes to an unambiguous conclusion:
“A comprehensive review of evidence on the effect of minimum wages on employment, skills, wage and income distributions, and longer-term labor market outcomes concludes that the minimum wage is not a good policy tool.”
This is of course not the only piece of evidence in our favor, but its a very strong one that Jamus Lim seems to have seriously neglected.