In a recent post, Tyler Cowen discusses my recentpaper on minimum wages and poverty. Cowen acknowledges that “[my] paper, econometrically speaking, is a clear advance over [a 2010 paper by] Sabia and Burkhauser.” However, he is more persuaded by “facts” such as simulation results from Sabia and Burkhuaser’s paper that claims “[o]nly 11.3% of workers who will gain from an increase in the federal minimum wage to $9.50 per hour live in poor households.”
Cowen concludes that my paper “pays little heed to integrating econometric results with common sense facts and observations about the economy.”
I’m pleased that Cowen thinks my paper represents a clear econometric advance. But I strongly disagree that the econometrics are at odds with common sense facts. Simulation studies are not facts, and when we interpret the relationship between wages and poverty properly, the econometric results appear eminently sensible.
Let’s start with the…
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Utopia, you are standing in it! 
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