I commend your attention . . .

To this piece by Nick Hanauer and Eric Beinhocker in The Atlantic.
 

For decades economists simply believed, based on no evidence, but only their assumptions, that equality and economic growth were incompatible – that any policies that redistribute income from the affluent to the less affluent will reduce overall economic activity. Hanuer and Beinhocker explore the history of this idea. They focus on the minimum wage. Since economists believed ”free markets” allocate resources “efficiently,” a corollary was that raising the minimum wage would inevitably reduce employment, based on the presumed “law” of supply and demand: make something more expensive, and consumers will buy less of it. This was assumed to apply to jobs and employers, i.e. employers are the buyers of jobs.

It turns out there is overwhelming empirical evidence that this assumption is false, but economists and policymakers have fiercely resisted the truth. Seattle raised its minimum wage to $15/hour in 2014, and contrary to the predictions of nearly all economists, there was no discernible loss of jobs and the economy remained strong. The same thing happened when many cities and states raised the minimum wage in subsequent years.

The subject has been much studied since, with not entirely consistent results. However, a very rigorous, well-designed study based on contiguous counties in states with different minimum wages established that minimum wage levels within the actually existing range have no substantial effect on employment. It is even possible that they are associated with slightly higher employment.(11) The authors concluded that studies based on time series analysis that sometimes had contrary results were biased by omitted variables, and this conclusion is now generally accepted. One highly plausible explanation is that employers who are forced to pay higher wages find that they have Wless labor turnover and more productive workers. As Hanauer and Beinhocker go on to say, during the era following WWII when marginal tax rates were much higher than they are now – about 70% and even much higher in the immediate post-war period, annual GDP growth averaged 3.8% annually. When Ronald Reagan became president in 1981, the top marginal tax rate fell sharply to below 40%, where it has remained ever since; but GDP growth slowed to an average of 2.6%. The promised benefits in greater prosperity never materialized, and in fact workers’ wages have stagnated. As they and many others argue, income redistribution generates greater prosperity because when people in the lower range of the income distribution have more money to spend, they generate more economic activity. 

 

For decades, economics has been the opposite of a science. The way it has been taught and practiced has been more akin to theology -- start with assumptions, whether taken from the Bible or the interests of the major donors to university economics departments, and work out how the world would be if those assumptions are true. Don't bother to check if it really is that way -- don't look through the telescope. That would be blasphemy.