Why conventional wisdom is finally pushing for higher wages (with Binyamin Appelbaum)

Episode Summary

Executive Summary: The episode celebrates a New York Times editorial endorsing higher wages as a major shift in economic thinking, arguing that wage growth supports rather than harms growth. Hosts and guest Binya Applebaum discuss how economics once treated minimum wages as job-killers, why that view changed with empirical evidence, and why Democrats and policymakers should center wage growth as a core economic story and policy goal.

Main Topics: The New York Times’ shift on minimum wage policy: The hosts frame the Times editorial 'Let's Talk About Higher Wages' as a remarkable reversal from its 1987 position that the minimum wage should be zero, signaling a broader change in elite economic consensus. Wages as a driver of economic growth: The conversation argues that higher wages increase consumer spending, which boosts demand, supports businesses, and strengthens the overall economy rather than weakening it. How economics changed its view of the minimum wage: Binya Applebaum explains that the old theoretical model said wage floors distort markets and cost jobs, but real-world evidence—especially the New Jersey fast-food study—undermined that consensus. The role of storytelling in economic policy: A major theme is that conservatives have succeeded with a simple, misleading story about the economy, while Democrats need a clearer narrative centered on broad-based prosperity and wage growth. The limits and influence of economics as a profession: The speakers criticize economics for presenting abstract models as if they were physics, noting the profession’s failures had major policy consequences and often favored wealthy interests. Historical evolution of Times editorials on wages: The show traces a century of New York Times editorials, showing a progression from skepticism and opposition to support for minimum wage increases and higher wages.

Key Arguments: A strong economy requires strong income distribution so many people can spend and consume. Higher wages are not a drag on growth; they increase demand and create a virtuous cycle of business activity and hiring. The old consensus that any minimum wage increase kills jobs was based on elegant theory, not evidence. The New Jersey-Pennsylvania minimum wage study was a turning point because it tested theory against real-world data. The minimum wage debate is part of a broader pattern of labor-market rules being used to suppress wages. Economic policy has been shaped by narratives that often benefit the wealthy and powerful. Democrats need to stop framing themselves only as mitigators of harm and instead articulate how they improve economic performance for ordinary workers. The federal minimum wage erodes over time because it is fixed in nominal dollars while prices and wages rise. The editorial board sees median wage growth, not GDP alone, as a better measure of economic success. Voters should hold politicians accountable for policies that raise wages and improve workers’ bargaining power.

Data Points: Year of NYT editorial calling for zero minimum wage: 1987 - Referenced as the old editorial board position that the minimum wage should be eliminated. Year of first American minimum wage editorial cited: 1913 - In the historical tour of New York Times opinions on minimum wages. Year the Fair Labor Standards Act established a federal minimum wage: 1938 - Referenced in the historical recap of U.S. minimum wage policy. Year of New Jersey minimum wage study: 1992 - The David Card and Alan Krueger study examined New Jersey's wage increase. Publication year of landmark study: 1993 - The Card-Krueger paper challenging the job-killing minimum wage theory. Current federal minimum wage trend: Declines in purchasing power every year - Because the minimum wage is fixed in nominal terms, its real value erodes over time. Estimated wealth transfer from workers to capital: $25 trillion - Nick Hanauer cites this as the scale of harm caused by the mistaken minimum-wage dogma. Historical period of broad wage growth: 1947 to 1975 - RAND report period where incomes broadly rose with GDP across the distribution. Share of workers’ income near record low: Near the smallest on record - The 2015 NYT editorial says the portion of the economic pie going to workers was near a historic low. Year of NYT editorial 'The Right Minimum Wage, Zero Dollars': 1987 - Highlighted in the episode as a notable example of the earlier anti-minimum-wage stance. Proposed wage benchmark: $15 per hour - The board’s more recent call for a federal minimum wage increase.

Pivotal Quotes: "A strong economy begins with wage growth. It begins with workers having more money in their pockets." — Nick Hanauer: Opening argument for why the Times editorial matters and why wages should be central to economic policy. "Workers who are paid more can spend more. This is the fundamental law of capitalism." — Host discussion / Binya Applebaum-aligned framing: Used to explain the demand-side logic behind higher wages supporting growth. "The nation needs a better story about the drivers of economic growth." — New York Times editorial quoted in segment: Central line from 'Let's Talk About Higher Wages' summarizing the editorial’s thesis.

Implications: Listeners are urged to see wages as a growth policy, not just a fairness issue. The episode suggests future economic debates should prioritize median wage growth, stronger labor power, and narratives that challenge decades of anti-worker policy.