This post was written by Jacob Kohlhepp, a research associate at the National Center for Policy Analysis.
A few weeks ago, Paul Krugman gave a gushing review of Hillary Clinton’s vague economic plans in his biweekly New York Times column. Krugman does not even mention what specifically is good about the Hillary Plan. Yet he somehow latches on to the minimum wage debate, even though Clinton never said anything about a minimum wage. She only mentioned it after a reporter asked her directly, and her answer was actually skeptical of a national minimum wage hike to $15.
But Krugman trudges on, insisting that economists are certain that minimum wage hikes in the United States do not hurt employment. Like many other minimum wage proponents, he cites an old, controversial study as proof (the Card-Krueger study which has questionable methodology and is contradicted by a number of other studies). Yet, he fails to state the minimum wage hike examined in the study was modest at best. Nothing like the $15 behemoth progressives are trying for. And he fails to report inflation was many times higher during that hike than it is now. He effectively forgets the context and leaves out all of the contrary evidence.
But how he finishes his tirade really takes the cake. He cites the age-old Costco-Walmart comparison as his trump card. Degrading what he calls the “low-morale, high-turnover model” of Walmart and praising the “higher pay and better benefits” model of Costco, Krugman preaches that government meddling can help “encourage” firms to be more like Costco and less like Walmart.
However, a report that will be released later this year by the NCPA reveals areas that contain Costcos are not your average neighborhoods. In fact, Costcos are disproportionally located in higher income urban areas where rich customers can afford the steep membership fees and the more lavish customer service.
Our analysis reviews Costco and Walmart locations across Texas and Florida, finding that even controlling for population Costcos are all located in the upper income areas. Walmarts, for their part, seem to be located everywhere except the very poorest or the very richest neighborhoods.
So when living wage advocates say we should “encourage” firms to be more like Costco, we have to ask: do they want to eliminate the low price options that Walmart offers to those who cannot afford Costco’s large quantities and membership fee? Because as long as lower and middle income households exist, there will be a need for a low price retailer.
We hope that readers stay tuned for our study. Because economic reality is a lot different than living wage fantasy.