More on the Minimum-Wage

by Don Boudreaux on January 5, 2007

in Work

Half Sigma writes, in a comment on this post on the minimum-wage:

One of these dishonest arguments [made by Russ and myself], that they repeat over and over, is
that minimum wage laws somehow HURT the low wage workers, which I don’t
buy. If the minimum wage rises by 40% but 1% of minimum wage employees
lose their jobs, that’s a darn good deal for the class.

"Dishonest" is a strong word.  I know of no one who denies that raising the minimum-wage helps some low-skilled workers.  I certainly do not deny this claim; nor does Russ.  The argument against the minimum-wage is precisely that it helps some low-wage workers at the expense of other such workers — an argument that Half Sigma (despite his protest to the contrary) does seem to buy.

We can argue about the relative numbers of "helped" versus "hurt" workers.  Unlike Half Sigma, I suspect that a 40 percent hike in the minimum-wage would cause more than one percent of low-skilled workers to suffer unemployment.   But this question is an empirical one — and one that I don’t now wish to challenge.  Let’s accept Half Sigma’s numbers as valid, for the sake of argument.

I would still oppose minimum-wage legislation, for at least two reasons.

First, the more general form of the argument against legislated minimum-wages is that employers do not idly absorb these costs; they react in ways that minimize their exposure to the costly mandate.  These reactions include not only hiring fewer hours of low-skilled labor, but also cutting back such workers’ non-wage benefits (including the pleasantness and the safety of the work environment).  Unless a serious case can be made that low-skilled workers generally don’t know their best interests or that employers of low-skilled workers enjoy monopsony power, no good reason exists to suppose that most workers who retain their jobs and whose wages rise as a direct result of minimum-wage legislation are better off at these higher wages.

Second, and more fundamentally, I don’t share Half Sigma’s ethic.  If I agreed that it’s desirable to raise the minimum-wage by 40 percent if doing so throws only one-percent of low-wage workers into unemployment, then I should also agree that annually taking $10,000 or so from each member of one-percent of the population of low-skilled workers and giving the proceeds to the other 99 percent of low-skilled workers is an acceptable policy if, for example, some generous private philanthropist pledged to magnify the resulting gains enjoyed by each of the members of
the 99 percent of the low-wage population who enjoy the redistribution
of incomes confiscated from the unfortunate and abused one-percent.  Such confiscation would, according to Half Sigma’s calculation, be "a darn good deal for the class."

Of course, I would oppose any such policy.  Honestly.


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