Ignorant Superstition

by Don Boudreaux on June 21, 2004

in Regulation

The target is too simple. Landing solid intellectual blows against it is easier than squashing a biscuit with a bowling ball. But, damn it!, there it is, arrogantly showing its face in public, just begging to be punched silly. Who can resist?

I’m talking about John Kerry’s call to raise the minimum-wage to $7.00.

Sen. Kerry apparently believes in magic. He must believe that the act of writing certain words on paper beneath a marble dome (“No employee in the U.S. shall be paid less than $7.00 per hour”) is a ritual sufficient, in his own words, to help “families make ends meet and move another step towards the American Dream.”

Kerry proposes that the legislated minimum wage reach $7.00 per hour in 2007. Why wait until then? If government can increase workers’ earnings by declaring in a statute that no worker shall be paid less than $7.00 per hour, why delay this move to greater prosperity?

Indeed, why an hourly minimum wage of only $7.00? Why not $17.00 per hour? Or $70 per hour?

“Don’t be silly!” my imaginary critical reader intones. “That won’t work.”

“But what’s so silly about proposing an even greater increase in the minimum wage?” I reply. “The existing minimum wage, and Kerry’s proposal, are premised on the notion that government can raise wages by fiat – by declaration – that, through the magic of a statute declaring a minimum wage, workers’ welfare will be improved. If this premise is correct, why stop at $7.00? Why not go to $70?”

“That’s ridiculous,” my critic retorts. “There’s a difference between a reasonable increase in the minimum wage and unreasonable increase. Raising the minimum wage to $70 per hour will clearly put a lot of workers out of jobs.”

Indeed.

Proposals, such as Kerry’s, to raise the minimum wage modestly will cause the rate of unemployment of low-skilled workers to be only modestly greater than it would be otherwise – an effect sufficiently modest that people who lose their jobs as a result, or who don’t get jobs, are unlikely to trace their misfortune to its source.

Government raising the minimum wage only modestly is much like a dishonest bank stealing only a few cents every month from each of its customers’ accounts. The ill effects of such thievery clearly aren’t as grim – and, hence, aren’t as glaring – as they would be if the bank stole a few hundred dollars every month from each account. The bank could conceivably get away with such small theft for years. But who would excuse the thievery on the grounds that its scale is modest and its victims unaware of it? Who would applaud this thievery when assured that, although some people are harmed (modestly!), some other people are made better off. The bank’s shareholders, after all, enjoy higher profits that improve their well-being.

Modest increases in the minimum wage enable those with faith in the superstition that government pronouncements largely achieve their publicly stated goals to wallow serenely in their ignorance, undisturbed by glaring evidence that their faith is hogwash. That’s why I propose a genuine test of this absurd faith: raise the minimum wage to $70 and see what happens.

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