At a Minimum, Please Answer these Questions

by Don Boudreaux on February 3, 2013

in Prices, Reality Is Not Optional, Seen and Unseen, Work

Here’s a letter to the editor of The Sunday Gazette (of Schenectady, NY):

Dear Editor:

L.D. Davidson calls on the state legislature to raise New York’s minimum-wage by 21 percent, from $7.25 to $8.75 (“Higher minimum wage would have big impact on New Yorkers,” Feb. 3).  Despite his essay’s title, Mr. Davidson denies that this measure will have much impact on workers’ prospects for employment.

I’ve some questions for Mr. Davidson and others who find his denial compelling.

Suppose your employer were to cut your wage by 21 percent.  Would you not respond negatively – say, by quitting your job or by working less diligently?  If you answer “yes,” why do you suppose that employers would not respond negatively to a forced 21 percent increase in the cost of employing low-skilled workers – say, by employing fewer such workers or by demanding a great deal more effort per hour from them?  Do you believe that employers are less responsive to economic incentives than you are?

Or suppose that the legislature, rather than raise the minimum-wage by 21 percent, were instead to require all owners and managers of businesses daily to spend 13 minutes (or 21 percent of an hour) hopping in place on one leg while blindfolded for each minimum-wage worker they employ.  Do you think that this legislated arbitrary increase in the cost of employing low-skilled workers might, just might, significantly reduce the employment of such workers?  If so, why do you dismiss the concern that raising the minimum-wage – which policy is no less a legislated arbitrary increase in the cost of employing low-skilled workers – might, just might, significantly reduce the employment of such workers?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

And here’s another recent post by Division of Labour’s Frank Stephenson on minimum-wage legislation.

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